Gary Swearingen: Why a Firm With a Weird Name Is Thriving
SC3F Wealth Management Group, in Charleston, Ill., gives back to its community. One example is the $750,000 it is donating to help build four new schools. It feels good to give back, says managing partner Gary Swearingen, and it’s also good for business. “We’ve always been charitably inclined,” he says, “and we look at that as a way to give back, but also to be in front of potential clients.”
The philanthropy has helped the business, which operates within Wells Fargo’s independent advisor channel, to grow to $2.8 billion of assets. Speaking with Barron’s Advisor, Swearingen, who personally manages $600 million, reveals how he has shifted client portfolios in this volatile environment. He argues that independent firms are splitting into two very different categories. And he explains why his business’ hard-to-pronounce name is actually a competitive advantage.
Your business is based in Charleston, Ill. On a map, it doesn’t look like it’s super close to any big metro area. That’s right. I call it the trifecta. We’re two hours from St. Louis, we’re two hours from Indianapolis, so we’re right in the middle of the two big cities there, and we’re three hours south of Chicago.
Do clients travel all that way to see you in person? Yes. We are very focused on in-person meetings, and we do Zoom for those clients who are outside of our area. When we formed our independent company, we decided that [any advisor] who joins us had a requirement of 80% meetings each year be in-person or Zoom. We try to get 100% but it’s difficult to get every client in.
When did the business form and when and why did you move to independence? I started in 1998 with A.G. Edwards and Sons. I was a banker prior to that, but banking just wasn’t my desire. It took me 10 calls every Friday to convince the A.G. Edwards branch manager in Charleston that I was a good fit to be an investment broker. After four interviews and a test I was finally hired. A competing firm at the same time did not hire me and said I would work out better in an operations position. After four or five years, we broke off from the Champaign, Ill., office as our own office under A.G. Edwards, and I was invited to become a branch manager of the Charleston office. In 2015 I began as complex manager and then was promoted to market manager with Wells Fargo Advisors.
Fast-forward to 2020, when you decided to move to Wells Fargo’s independent channel, FiNet. What was that process like? That turned out to be an amazing year to do it, because the clients were home, no one was out traveling or busy, so they were very easy to access and have the conversations. So our transition went quickly and smoothly. Once we became independent, a few other teams, like the Peoria team and the Chicago team member, called me, because they had previously reported to me, and said, “We want to be a part of your team, because we enjoyed working with you as a manager.” So we opened it up to select team members within the market to join our local Charleston team. And that’s how we got to where we are today.
The name of your business, SC3F Wealth Management Group, is a mouthful. How did you come up with it? We considered a tremendous number of names. Prairieland Wealth Management was a leader. Corn and Beans was a name we joked about since out one window of our office is corn and out another is beans. We finally landed on SC3F Wealth Management to try and have people always guessing what it means. The name comes from the partners’ initials: Swearingen, Chris Considine, Craig Cunningham and Dan Cunningham, and Joseph Fearday. I designed our logo, and it represents the rising stock market with bear market claws slashing through it.
Are you set up such that advisors own their book of business, or are relationships shared? We’re a little bit unique in that we have our individual book of business, but we also have a group book of institutional business. When you drill down to the retail client business, for example, Brianna and I have our dedicated clients. The way we look at that is: God forbid if part of our team were to break off from SC3F, we believe that that team owns that client and deserves to take that client with them. Hopefully that never happens, but that’s the way we view it. When we go to institutional clients, we go as one big team, with the right team members involved. For institutional clients, we don’t have where Gary owns the client, or Dan or Chris owns the client.
What has your growth curve been? Our growth has been extremely strong. We incepted as a firm in September 2020 and our growth from bringing in new assets has averaged around 16%. When I was a market manager, the team members who met with every one of their clients every year for a detailed, in-depth review outperformed the team members within the market who did not. So when I formed this company, once again, I made that the requirement. I continue to see strong referral business come in as a result.
What’s your marketing strategy? Our marketing dollars and our time are spent in the community. I have a monthly calendar of all the community events, and as a partnership we decide where our hearts are focused on helping within the community. Typically those areas are the police and fire, the local hospital, and theater. One of the biggest things we’ve been doing is committing a lot of capital, about $750,000 to help build four new schools that are each within a 45-mile radius of our Charleston office. So we have a focus on being in front of the community at all times. So whenever people wonder who they should see for financial advice, our crazy name is always in front of them. We have a mandate of giving 1% of our revenue away every year to charity. So we’ve always been charitably inclined, and we look at that as a way to give back, but also to be in front of potential clients. Beyond the networking, growth is driven by the referrals we get from spending time with every one of our clients.
Who are your typical retail clients, and what’s on their minds these days? On average, we serve $2.5 million- to $3.5 million-dollar clients across the firm. As far as conversations we’re having with clients, a common one is about politics. The questions from those who support the current administration are completely different from the questions from detractors of it. One conversation might be about helping them understand what the impact on markets might be based on tariff policy. With those who support the administration, the conversation is more about opportunity based on what’s happening with the same policies. So some of my conversations are more about comforting and hand-holding, and others are about showing what opportunities are available. This happens every election, and the conversations flip depending on who’s in office. Beyond politics, I would say the No. 2 concern from all the clients are the tariffs. What do they mean from an inflationary perspective? What do they mean from an economic and portfolio perspective? And the last question I often get has to do with interest rates and how to navigate their impact. A lot of conversations are around their children getting ready to buy homes for the first time, with home prices escalated and interest rates higher.
What are you telling clients about tariffs’ impact on various areas of the market? My conversation with them is: One, nobody knows what President Trump is really thinking and where he sits. But I believe we have to be prepared for tariffs no matter what. They’re going to be different across industries. We have to focus on some of these sector tariffs, like the automobile industry, the steel industry, and navigate more cautiously in those sectors President Trump is focused on, where it seems like he’s probably not going to back down. On the other tariffs, I believe that some will stick. China especially is going to be very sticky. And some of that stickiness is ultimately going to lead to inflationary pressures, which may delay interest rates being decreased. The good news is that the longer interest rates are not lowered is a positive, not a negative, for fixed-income exposure within portfolios. Because we can continue to receive higher interest rate payments from fixed income than we’ve seen for a long time. So even though we’d love to see interest rates come down in the grand scheme of things, we’re also enjoying the higher income coming off our bonds.
What portfolio changes have you made recently? At the end of last year we decreased our growth exposure substantially, and we parked that cash in short-term fixed income. As the market has given us the opportunity we’ve stepped into more value-oriented stocks, typically higher-dividend, aristocrat-type positions. We believe there’s opportunity in some of the energy sectors, such as pipelines. In this environment we also see opportunity in some of the staples.
We’re more cautious about discretionary, and the main reason is the auto tariffs. In addition, the consumer is really struggling right now, with their debt growing. Generally we’re very cautious in the near term. We’re focused on value-oriented stocks, less on growth-oriented stocks. We do believe longer term, like everyone else, that there’s a huge opportunity in robotics and in artificial intelligence. We love fixed income in this rate environment, and we have really increased our exposure to mortgage-backed securities. We believe that fixed income as an asset class will perform as strongly as equities over the next year.
What’s your thesis for MBS? From historical standards agency mortgage-backed securities look cheap, and their spreads are historically wide. In addition, banks typically favor MBS in a cutting-interest-rate environment. Furthermore, agency MBS typically are very defensive during times of concern or distress. Lastly, their yield is very attractive compared to Treasuries. I believe high quality is a good place to be in the fixed-income market currently.
Which wealth management trends are you watching closely? There are two definitive types of firms right now in the independent RIA space. I always refer to us as a legacy firm, one that I hope will still be around in 100 years. And there are firms that I’ve seen in the past five years that only care about plugging in new team members to grow as quickly as they can, to create as valuable an Ebitda [or earnings before interest, taxes, depreciation, and amortization] as possible, so they can then be sold off to a private-equity firm. I struggle with that, because to me that’s not a firm, that’s a broker-dealer or a wirehouse. I can tell you every name of the kids of my 14 advisors and 16 support team members, and that we call each other family. I can tell you that if I were to die today, my wife could interview every one of our advisors, and I have full confidence and trust in all of them. And even friends of mine, who are also the lead managers of their firms, don’t seem to care about that. To me it’s just craziness that their long-term goal is all about wealth. So I see this great divide continuing in the next five years, of capital-growth firms versus legacy-growth firms.
The positive trend I see is all the independent RIAs that are becoming family offices. Seeing that growth in helping the client in all aspects of their life is really rewarding. It’s the best part of my day when a client calls me up and says, “Gary, should I buy this car? Does it fit with my whole plan?” We’re talking multibillionaires who can just write a check for that car.
Any hobbies or interests that help you unwind and recharge outside of work? Yes, I’ve been the St. Anthony [high school] bass fishing coach for eight years, and my younger daughter is graduating. That’s been a hobby that’s really helped me unwind: being on the lake, helping teach young adults an activity that’s not being on their phone or sitting in front of the TV. It’s been fantastic.
Thanks, Gary.
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