Taking portfolio construction to the next level
Taking portfolio construction to the next level
Kent Zeigler • Saint Paul, MN
Zeigler Financial Services • LPL Financial LLC
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My two sisters and I were raised in the Minneapolis–St. Paul area by wonderful parents. My mother and father, like many others of their generation, were profoundly influenced by growing up during the Depression. My father had a good job with the federal government in systems design, and we were firmly middle class. But the attitude in our home was to be frugal about money and conserve what you earn. I learned some great lessons about money management and living within a budget from my parents.
I was able to complete an undergraduate degree in accounting and an MBA in accounting and finance in five years. That was a big plus financially for our family. Although I worked to help pay for my education, I was also able to squeeze in two trips abroad, traveling as inexpensively as possible. Shortly after getting my MBA, I accepted a position with a major national accounting firm.
I worked initially as a junior auditor and spent some time in the tax division. After about two and a half years, I left to become an assistant controller for a retail hardware chain and held that position for five years. I eventually decided that I wanted to run my own business and saw financial services as an attractive opportunity to do so.
I started primarily as a tax preparer and provided broad tax guidance to clients. As I became licensed in the insurance and investment areas, my practice evolved over the years to where it is now, offering holistic financial planning, retirement-income planning, and wealth-management services. I have always been an independent financial advisor and view that as a substantial benefit to clients, having the ability to offer access to suitable financial products and services from many different providers.
Several core beliefs have remained consistent for me as I’ve worked with clients over the years. I have always tried to remain humble and listen closely to my clients’ needs, putting their interests and their objectives first. To do that well in our business, I think an advisor needs to be willing to grow and adapt, be intellectually curious, and stay on top of a changing financial environment. What new theories, products, or services may benefit clients? How can risk be effectively managed in today’s complicated investment climate? I have always been a bit of a maverick, and I am not afraid of being an early adopter in any given financial or investment area, provided that I have satisfactorily completed extensive due diligence.
As I look back over my 30-year career as a financial advisor, I take some pride in the fact that I was more or less at the forefront of accountants and tax preparers getting into comprehensive financial services. My first broker-dealer created an advertising feature for an accounting trade journal that talked about my experience offering additional services to my tax clients—how well it was working and how it could work for other accountants. I believe having that tax competency has been a distinguishing factor for my practice and provides value to clients in many areas of their financial and investment planning.
The primary focus of my business is working with clients in or near retirement. I have two sets of clients: long-term clients who have been with me for 10 to 30 years and those who are relatively new. My long-term clients and I have a strong and enduring relationship, and I understand their financial and investment objectives very well. For newer clients, the process of discovery and information gathering is critically important. Their investment planning should be guided by their overall objectives, time lines, risk profile, family situation, legacy planning goals, asset inventory, and potential income streams in retirement.
Risk management plays a large role in constructing client portfolio recommendations. My philosophy does not align with a “buy and hold” approach simply because, as it is often said, “The market historically has gone up more than it has gone down.” While true, that does little good to help future or current retirees grow and conserve their capital through full market cycles.
I spend a lot of time with clients, especially newer ones, on education about the concepts of the sequence of returns and the mathematics of portfolio gains and losses. For people who are not investment professionals, these ideas are usually new. I believe they are two of the most powerful concepts that drive investment and retirement-income planning. My investment presentations usually revolve around “managing to the drawdown.” What that means is constructing diversified investment portfolios that have the potential to achieve competitive returns while mitigating risks from steep market declines.
I take a rigorous approach to developing customized investment portfolios for clients and will analyze many different strategic combinations before presenting recommendations. I also like to supplement this work with a macro view of the markets, and I closely follow Elliot Wave analysis when doing my own assessment of overall market direction and trends.
I started using third-party managers some time ago. To the best of my knowledge, I believe this was near when independent advisors started being able to readily offer what I will call institutional-strength strategies from money managers to their clients. The types of managers I use have seen remarkable advances in technology, modeling techniques, and overall strategic development capabilities over the past two decades.
One investment manager that I work with currently has a robust offering of strategies that cover different asset classes and strategy approaches. The ability to diversify using different active investment strategies for my clients is very attractive, and I consider it a value-added service that can differentiate my practice. Based on my experience, few clients have been exposed to this type of investment thinking. I think it takes modern portfolio theory to the next level.
In using strategy-based diversification, one has the opportunity to seek an acceptable anticipated rate of return while identifying a strategy combination with a historic level of drawdowns that is suitable for a client’s specific risk profile. It can include concepts such as different investment time frames and employing algorithms that can react to changing market conditions. The more tactical strategies of this type can use tools such as leverage, inverse positioning, alternatives, and adjusting market exposure, including going to 100% cash. While there are no guarantees, I believe this is a thoroughly modern and sophisticated investment approach that can enhance the probabilities for favorable client investment outcomes over the long term.
I often draw the analogy for clients that using a passive investment approach, with no opportunity for portfolio adjustments based on market conditions, is like a pilot flying directly into a storm rather than around it. Actively managed investment strategies, I think, make a lot of sense for clients who need to be concerned with both returns and risk. The strategy combinations I use tend to lean more toward the conservative side, given the retirement objectives of most of my clients, but can still offer growth potential. Using this type of approach, clients will ideally face a smoother investment ride during their retirement years. One of the keys to making this all work well for clients is to effectively share expectations. We are not looking for market-beating returns in a roaring bull market. On the flip side, we are definitely striving to mitigate steep market losses that accompany full-blown bear markets.
If current clients were to refer you to a friend, what ideally might they say about working with you?
I would hope they say they received value and service that exceeded their expectations—that I was available to them not only for in-depth consultations but also when they just want to give me a quick call with a specific question. I hope they would say I am trustworthy, collaborative, have a deep understanding of my profession, and work diligently to help them meet their overall financial objectives.
Identifying ‘success factors’ for my advisory practice
Kent Zeigler is the founder and president of Zeigler Financial Services, located in Saint Paul, Minnesota. Mr. Zeigler works with clients in a financial advisory capacity and provides tax strategies for many clients. He has been an independent financial advisor for over 30 years and says his client base has grown steadily over the years, primarily through organic referrals from current clients. He attributes his firm’s success to several factors, including the following:
- Placing client needs at the forefront and forging relationships based on mutual trust and collaboration.
- Emphasizing risk management across financial, investment, and retirement-income planning.
- Offering clients an “institutional-strength” investment approach that incorporates modern, sophisticated principles of strategic diversification and active management.
- Spending a significant amount of time on client education about risk mitigation within retirement planning, including issues such as the sequence of returns.
- Using his experience and capabilities to seek tax efficiency in clients’ financial planning.
- Remaining “intellectually curious” and seeking state-of-the-art product and service solutions for clients.
- Making personalized service a differentiating attribute for his firm; making himself available to clients “24/7, 365 days a year.”
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Kent Zeigler is the founder and president of Zeigler Financial Services, located in Saint Paul, Minnesota. Mr. Zeigler works with clients in a financial advisory capacity and provides tax strategies for many clients.
Mr. Zeigler was raised in the Minneapolis–St. Paul area. His father was a systems designer for the Department of Agriculture and his mother was a homemaker. Mr. Zeigler says his parents grew up in difficult economic times and passed on “valuable lessons about managing money and budgeting.” He enjoyed many sports growing up and had the unique experience of joining the volunteer Civil Air Patrol, earning his pilot’s license while in high school.
After “hitchhiking with a friend to Alaska the summer after high school,” Mr. Zeigler attended Drake University in Des Moines, Iowa. He majored in accounting and took associated business courses. He says he worked during breaks and summers to help pay for college but also had the opportunity to travel “on a tight budget” to Asia and Europe. Graduating in three and a half years, Mr. Zeigler then earned an MBA in accounting and finance at the University of Colorado.
Mr. Zeigler started his business career with Peat Marwick as a junior auditor and later worked in the tax area. He also worked for five years for a Midwest retail hardware chain as an assistant controller. He then decided to start his own financial-services firm, focusing initially on tax preparation. He acquired his licenses for securities and insurance and “gradually shifted the firm’s emphasis to providing holistic financial guidance to individuals and families.”
Mr. Zeigler is married and has two daughters and four grandchildren. He enjoys spending time with his family and traveling with his wife. He is an active volunteer in his community and at his church. The City of Saint Paul recognized him with “Kent Zeigler Day” in 2017 for his volunteer work.
Disclosure: Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. Zeigler Financial Services is a separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not protect against market risk. Asset allocation does not ensure a profit or protect against a loss. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Photography by Marla Klein