Meet the Avengers

Tom Swift and Arthur McCord are building a base of what might be termed "middle-net-worth" clients.

The superheroes that populated the pages of vintage Marvel comics had a few basic problems to tackle; providing sound financial advice was not one. And the financial services industry hasn't generally been a haven for political organizers with a yen for comic book justice.

Don't tell that to the Financial Avengers, also known as Tom Swift and Arthur McCord. These advisors have vowed to protect truth, justice and the American way of investing — even for those without much money and sometimes facing life-threatening diseases. At a time when the broker/dealer mantra is “high net worth,” Swift and McCord are building a base of what might be termed “middle-net-worth” clients. Their San Francisco-based firm, the Financial Avengers, manages about $15 million for 200 clients, with accounts generally ranging in size from $15,000 to about $350,000.

Their clientele is unique. Some are gay and HIV-positive, and others come from different oft-overlooked minority groups. One prerequisite for signing up with the Avengers is a sense of humor. Swift and McCord have run seminars featuring drag queens as entertainment. They create nicknames for all their clients and counter Wall Street's casual Friday trend with “high-fashion” Fridays.

The Avengers aren't naïve. They know they need $200,000 accounts to balance those $20,000 portfolios. And they're not social workers. They reckon their style — no minimum investment, free initial consultations, mandated savings plans for smaller clients and regular updates — will ultimately reap big profits. Admittedly, it's tough. They run a lean operation — it's just the two of them — and Swift says they're continually struggling with their model, wondering whether a more aggressive fee structure will be needed down the road. (Currently, they charge a 1.25 percent management fee, with other charges for transactional business.)

Their secret weapon? Staunch loyalty from appreciative customers, who might otherwise have to settle for the low-maintenance approach of banks or call centers. “Firms larger than me and Financial Avengers — like Merrill Lynch — have tried and failed to make money with smaller account balances,” says Kermit Johns, president of Christopher Street Financial, a New York-based gay and lesbian securities firm that serves as the Avengers' broker/dealer. “On the other hand, since these are disenfranchised people, there's a great deal of loyalty.”

Originally, the firm's mission was to help HIV-positive folks — like Swift and McCord — who, because of new drugs, were given an extended lease on life. Then, the Avengers started adding different types of investors with less than $250,000 in investable assets, attempting to fill a vacuum created when the large firms shifted their focus higher in the stratosphere. “It leaves an awful big piece of the pie for the people not competing for big dollars,” says McCord.

That principle may either be the height of ideological nobility or career suicide. But so far, the Avengers, who started up in 2000 just before the beginning of this grinding bear market, seem to like living against the grain.

“One of the constant refrains we get is, ‘I only have $35,000,’ or ‘I only have $5,000,’” says Swift. “At what point did the qualifier ‘only’ enter the lexicon of people who deal with people like us? I think it's because we in our industry make people feel like if you don't have a million or more we're not interested in dealing with you.”

The genesis of the firm dates back to 1996 when Swift, whose career was in nonprofit political organizing, found he was HIV-positive, and as he put it, “emptied my bank account and literally burnt every bridge behind me.” He left Washington for the West Coast to enjoy his last years as he prepared to die.

But later that year, protease inhibitors were developed, prolonging the lives of many HIV-positive people. Instead of two years, Swift was looking at 20 or 30, and before long found himself writing a business plan, deducing that there was probably a large population in San Francisco with a similar profile.

He was right and tapped into this market when he started working at Horton Investment Advisory Group, a small boutique that agreed to pay for his securities licenses. “I didn't count on how successful my mini-marketing idea would be,” Swift, 39, says. “Most of my assumptions were correct. These were people whose assets were in cash, they needed a lot of help, and had no experience in financial planning.”

The financial community wasn't exactly embracing his client base, HIV-positive gay men planning a life they didn't think they'd have. But Swift stuck with it. Along the way, he asked McCord, a friend and fellow political organizer who'd recently moved from the nation's capital, to work with him at Horton. McCord, 37, a former linguistic specialist for the Navy who speaks five languages, was brought on as an investment assistant. He liked the work, until he got a pink slip instead of a bonus just days before Christmas 1997.

Swift remained at Horton, but the two discussed forming a business together. McCord moved on to TCI, the cable giant (later acquired by AT&T) for two years. They finally partnered in 2000. But the two didn't want to go with a staid name along the lines of Swift and McCord Inc.

“There was a Marvel comic called the Avengers, and it was a mix of people, all doing good for everyone, for people mistreated,” McCord says. “And I said, ‘Financial Avengers,’ and Tom said, ‘That's it!’” McCord, realizing he'd created a monster, said he initially wanted to take it back but “it sort of stuck.”

At first, the pair was concerned about the aggressive and somewhat negative connotation of the “Avengers” name. But the moniker works, says McCord. His personal goal was building trust with African-American clients, who can be suspicious of financial institutions. For them, “there's absolutely something to avenge,” he says.

Swift and McCord cultivated a relationship with a client who then pointed Yvonne Lewis their way. Lewis, 50, and a single mother of five, saw her fortunes change after selling her mother's house in Pacific Heights for $1 million. She found a consultation with Swift and McCord like “talking to a couple of friends” and they assisted her in purchasing a new house in Hayward, outside San Francisco. They currently handle her investments and savings accounts.

She's comfortable with them, despite the market's recent travails, because of their frequent contact. “The market's gone down considerably, and they told me how much I had lost, and let me know so it wouldn't be a big surprise, and they changed some things around,” she says. “Usually every three months I see them and they go over what's happening.”

The Avengers' education process would simultaneously please financial advisors, comic book geeks and RuPaul. After lengthy consultations where financial goals are established, clients are given a code name, and they receive occasional “Avenger Dispatches” from “Captain Avenger” (Swift) and “The Oracle” (McCord) when they achieve particular goals. Generally, clients with smaller accounts are going to be served with mutual funds; the larger accounts may involve individual stocks. Swift often evokes Warren Buffett's name when describing his investment style; he stays away from companies he doesn't understand, and prefers large-cap, growth-oriented stocks, lately in the pharmaceutical, utility and technology industries.

But drag queen events are his idea. Trained in theater at Northwestern, Swift employs drag queens, show tunes and “The Price is Right” style quizzes in seminars. A frequent first question: What's the cumulative total cost of Swift's HIV medication? Answer: about $28,000 so far.

The extravaganzas may not play in Peoria, but they get high marks for entertainment value. Christopher Street Financial's Johns, who admits his own firm is more buttoned-up, laughed when asked about the seminars. “They're different,” he says. “He does these things with boys with platinum wigs. We're complete opposites.”

It may be trite to say the Avengers' mantra is providing solid customer service, but they believe most major firms, possibly with the exception of Edward Jones, have lost that focus when dealing with the mass market. Janet Gallin, 60, (code name: Wonder Woman) agrees: “One of my previous institutions made a major mistake on an end-of-year report, and I kept getting a [service rep] saying, ‘Well, that's what it is,’” she says. “I don't like chirpy voices; you always know you're being yanked when you get a chirpy voice.”

They say they're comfortable handling accounts through a consultative, fee-based approach; only about 10 percent of their revenue are through transactions. “Fee-based is the engine,” he says. “All of the add-ons become profit.” Ultimately, Swift says he envisions the firm opening other offices and adding an accounting component to the business to diversify the financial services offered to clients.

But for now, it's just Swift and McCord working tirelessly. They haven't quite achieved Swift's goal of “saving the world, one client at a time,” but they're holding firm in their belief that industry is erring by concentrating just on bulging pockets. “People want to be hand-held; they want someone to guide them through this journey of financial planning,” says Swift.

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