Name: Katy Zhao
Firm: Morgan Stanley Wealth Management
Location: Pasadena, California
AUM: $2.5 billion
Forbes Rankings: Best-In-State Wealth Advisors, Top Next-Gen Wealth Advisors, Top Next-Gen Wealth Advisors Best-In-State
Background: Zhao, 35, has been interested in business much of her life, inspired to become a financial advisor after watching her mother be taken advantage of because of her lack of financial education.
Born in Beijing, her family immigrated to the U.S. when she was only two years old. She started her career at Morgan Stanley in the wealth management analyst program as a research analyst working with now Lisa Shalett, who now serves chief investment officer of wealth management. In 2014, she developed the sustainable impact portfolio, the first ESG model portfolio at the firm and was on the Forbes Under 30 list for that work. It was during this time that she met fellow Forbes/SHOOK Top Advisor Alan Whitman, her current managing director.
Investment Philosophy/Strategy: Her team manages portfolios independently with a strategy “dictated by investments that have the best risk-adjusted upside, regardless of the asset class.”
MORE FOR YOU
They also conduct their own due diligence on individual holdings, not outsourcing decisions to mutual fund managers or other third parties that charge fees, mostly eschewing the use of mutual funds or ETFs.
“We prefer to be the decision-makers at the end of the day and take responsibility for the decisions that we make for our clients,” Zhao adds. “Money isn’t made by hitting home runs, wealth is built through consistency and discipline.”
With her background in sustainable investing, Zhao incorporates ESG factors into her investment philosophy and says it has helped her become a much smarter investor.
Competitive Edge: Zhao finds that her investing background is popular with clients, the majority of which are not invested in fossil fuels but rather in sustainable companies. She will look at factors such as sustainability practices, community standards and board diversity, among others, finding that screening often highlights higher quality companies.
“That’s something that is deeply embedded in what we do because I used to do that for the firm,” she explains.
As recent political turmoil has ensued, she has had clients looking to further enshrine LGBTQ rights and abortion rights in their portfolio. Zhao also sees her diversity as an advantage, as a woman of color.
“My investment discipline, background and our team approach to investing and research should speak for itself, but being a woman of color sometimes puts people at ease,” she adds. “I’ve been very fortunate, I have never been at a disadvantage because I’m an Asian woman.”
Biggest Challenge: Helping clients keep their emotions in check is a major challenge for Zhao and her team.
This is especially true for major life-changing events that can impact finances including death, divorce or new births.
“It’s really important for our clients and for us to make sure that our clients feel like they’re getting the best advice in a way that is very easy and easy to understand,” she says.
Mentors: Zhao has several investment mentors including Oaktree Capital Management founder Howard Marks and famous billionaire investor Stanley Druckenmiller as well as her aforementioned partner Whitman.
Investment Outlook: Zhao sees the market in the midst of a deleveraging cycle that will continue “for some time.” For that reason she has her clients positioned defensively until valuations move to a lower level.
“During these deleveraging cycles, it’s important to take our clients and reevaluate their holdings and strategy to make sure that there are proper risk controls in place,” she says, adding that articulating their expectations of a continued challenging market in the near future is important to prevent clients from panicking when they see volatility.
What Keeps You Up at Night: Zhao worries that for her generation there is a perception of investments based on social media that showcases overnight double or triple-digit returns, leading to a misunderstanding of investing. She sees her job as helping clients cut through that noise.
Favorite Book/Movie: Outside of her reading about investments, she mentions “Untamed” a memoir by Glennon Doyle, as one of her favorite reads.