(excerpt)
David Kudla
…It doesn't take Kudla long to get to know new clients. With a niche in the automotive industry, he can be certain that his new clients have much in common with the 3,000 clients he already serves.
"When a GM, Ford, or Chrysler employee walks in the door, we know everything about them," says Kudla, 50. True, each client's goals and specific circumstances are different, but they share pension programs, early-retirement offers, and employee benefits.
Having clients with so much in common enables Kudla and his team of 11 advisors to provide a high level of service with a much lower minimum account size than competing advisory firms.
"One of our goals is to be the personal chief financial officer for our clients," he says. "We provide them with advice and solutions for any aspect of their financial life."
Providing that level of service isn't cheap. But Mainstay is able to pull it off because its uniform client base allows the firm to work efficiently. For one thing, Kudla and his team are able to apply much of the same guidance to large percentages of their clients.
Technology plays a role, as well. The firm uses proprietary software to track clients' workplace retirement savings accounts, for instance. Those workplace accounts are a major business for Mainstay, accounting for about half of the firm's $1.5 billion of assets under management. In fact, Kudla got his start managing the retirement accounts of automotive-industry clients.
Kudla, who worked as an engineer in the auto industry before becoming an advisor, saw that his counterparts lacked professional advice for their 401(k), 403(b), and other workplace retirement accounts.
"These employees and executives and line workers were being asked to be their own pension-fund managers," he says. "And they were ill-equipped to do that."
Managing 401(k) assets involves greater regulatory scrutiny, but Kudla quickly decided that it was simply "the cost of doing business in that space."
Kudla practices tactical asset allocation, rotating through sectors and using stocks, bonds, cash, commodities, and alternative investments. He's critical of conventional buy-and-hold investing, which he calls "buy and hope."
"Markets today are so volatile, they're changing so much, that to take a more active approach does have a lot of meaning," he says. "Our allocation will look very different in six months or one year."
One thing hasn't changed lately. Kudla likes financial stocks, just as he did a year ago when they were out of favor; he sees the combination of rising long-term interest rates and low short-term rates creating increasing bank earnings from interest spreads. He's a fan of biotech and consumer discretionary stocks, as well.
Kudla is avoiding Treasuries and fixed-income investments that are sensitive to changes in interest rates. Better options include floating-rate bank-loan funds and convertibles, he says.
Five years after the crash, many of Mainstay's clients remain wary of the market, Kudla says, and his team spends a lot of time educating clients about why the other shoe isn't about to drop. Indeed, he says his portfolios have been up 40% over the past year because he has embraced the rally.
"The past year's been about having a lot of conviction, being invested, and taking advantage of what the financial markets have provided," he says. …
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