David Lucca, of Rhoads Grunden Lucca Capital Management in Lancaster (PA), is bullish on the stock market. Although the market is going through some short-term volatility, things should smooth out in October and finish the year strong, he predicts.

Lucca pointed out that the market has a history of being bearish in every decade year for the last century. "Every year that ended in a zero, there’s always been a major correction. The reason why I’m bullish is because we’ve had it on March 14, and it lasted until August. We’re now going into normally the most difficult season, September and October, but we should be in an upswing from the end of October until April," he said.

However, even in the current bear climate, the goal of the firm is to beat inflation by 10 percent, even in the most conservative positions.

Although the Dow Jones Industrials are down two percent for the year, the portfolios of Lucca’s firm are up nine percent.

"We’ve had the single worst bear market since 1987, and being up nine percent, that’s not bad," Lucca said.

"The approach advocated by much of the financial press to buy and hold through thick and thin is not always best, he said.

"You can’t be successful long-term if you lose money," Lucca said. "If you’re driving down the highway and you see a pileup, you don’t drive into it and say that’s what happens when you drive. You find a way to steer around it and keep going."

There’s a lot behind Lucca’s investment philosophy. In 1980, after obtaining a bachelor’s degree in recreation and parks from Penn State University, Lucca became a missionary at Montana State University with the Campus Crusade for Christ.

While living in Montana between 1980 and 1983, Lucca took a course on investing that was taught by a Certified Financial Planner (CFP). It was an epiphany for Lucca.

"I didn’t know anything about financial management," he said. "I found out that I loved it, particularly the investing part."

He left Montana and attended the Dallas Theological Seminary in Texas, where he earned a master of arts in Biblical Studies.

"I didn’t intend to become a pastor," Lucca said. "I had some questions that I wanted to resolve in my own mind."

After obtaining a graduate degree from the seminary, Lucca earned his CFP designation.

For a while, he worked with a CPA in Dallas, doing what he called "financial autopsies" to find out how investing strategies worked or failed. It was another epiphany for him.

"I saw people taken advantage of," he said with a passion in his voice. "They were locked into limited partnerships which later went bankrupt. I saw people sold annuities when annuities were not suited for them." He said he had a problem with the commission system because of its "inherent conflict of interests."

"It really opened my eyes to the abuses in the investment field," Lucca recalled. "The commission environment didn’t lend itself to giving good financial advice. I became convinced that there had to be a better way."

He went to work for Dallas/Rhoads/ Associates as vice president in 1988. Over the next two years, he worked with the company president to turn the firm into a fee-only money management company. Their goal was to eliminate the conflicts of the commission environment and be, as Lucca says, "on the same side of the table as our client."

The firm was renamed Rhoads Grunden Lucca Capital Management in 1996, with a single office in Dallas.

John Rhoads, managing partner of the Dallas office, has worked in the financial services field for 35 years. The third principal, Ricky Grunden, has 26 years to his credit.

"From the moment I first laid eyes on him, I knew he’d be a big contributor to our future," Grunden said of Lucca. "He’s responsible for much of the innovation for us. Without Dave’s insight and, what’s the word? Purity – I don’t think it would have happened. He had a lot of unique ideas. Both John (Rhoads) and I were substantial commission brokers in the Dallas-Fort Worth area. We always tried to get Dave to get his security license and he’d refuse. It was foreign to me because it was the way everybody did business. It was pretty much planting the seed that’s grown into a $100 million venture."

The firm currently has $120 million under management, a growth of 25% from 1999.

America’s Best Timers ranked the firm’s portfolio on its day-to-day performance as one of the best nationwide.

But even though Rhoads Grunden Lucca Capital Management was doing well, Lucca felt that as his children approached middle school age, they needed a change. Lucca’s own grandfather had meant a lot to him, and Lucca resolved that his children would have the chance to know their grandparents well. So, he and his wife, Jan, took out a map and drew a circle outlining the perimeter of a half-day’s drive from his parents’ home in southern New Jersey.

Lucca said the manufacturing based of the area, as well as its vibrant economy, were two major reasons for locating his firm’s East Coast Office in Lancaster.

"My partners didn’t want to stand in the way of my dream," Lucca said. "In a way, it was good for the firm." One example he gave was that the move accelerated the company’s use of technology. "We make the best use of technology to stay in synch."

Ricky Grunden agrees. "We e-mail each other a lot. We meet by phone every Tuesday and Thursday mornings to discuss investment decisions. But we still see each other at least three times a year. Dave has many clients in the Dallas area and he comes down here to meet with them. Plus, we have our annual client meeting in March."

For the first time in the two years that the East Coast Office has been open, Lucca is adding personnel. The firm has eight employees currently: six in Dallas and two in Lancaster. Most administrative work is run through the Texas office. Lucca has hired a strategic assistant to help him manage the Pennsylvania office and keep building a local client base. The firm has clients in 18 states and three foreign countries and is "adding clients all the time," Lucca says.

Rhoads Grunden Lucca is looking to expand its range of clients. Initially, the firm focused on the executive suite, but it has since begun expanding that to reach out to small business owners and non-executive retirees from the corporate world. Two groups for whom the East Coast Office is developing special programs are auctioneers and airline pilots.

The company is also attracting additional clients, as well as better serving existing clients, with its website, rglnet.com. The site has a wide range of information written in "plain language" that normally isn’t found on the web, and it seems to be working with investors, according to Lucca.

Recently, he said, a gentleman looked up the firm on the web after hearing about it from a friend. "He read our website from ‘cover to cover’ and was pre-sold on our company before even meeting us. He came to the first meeting ready to give us two million dollars to invest for him. That didn’t used to happen. A prospective client would come in, sit down and talk with us, take the information home, read it, and then decide whether to hire us. Having all of our information available on the web has had a real impact on the company, and we see that happening more and more often."

In addition to information about the firm and how it invests, the website includes various calculators that are available to any web surfer. Plans call for the site to add a way for clients to see the status of their accounts on a round-the-clock basis.

When someone is looking for a financial advisor, Lucca said, the single most important thing he or she seeks is someone they can trust.

"We have a firm commitment," he said. "We will do what’s best for the clients, even if it means sending them somewhere else. We will do whatever is best for the client, and they know that."

The biggest question he gets, Lucca said, is "If something happens to me, will you take care of my wife?"

"It all comes down to trust."

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Copyright Central Penn Business Journal, 2000.

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