Reflection on the Wealth Management Landscape

by Walter Christopherson

As I start my 44^th year in the business and look ahead to the 55^th anniversary of Linscomb Wealth, it felt like a good time to reflect on several key changes (generally for the better) that have occurred in the wealth management and financial planning industry.

Starting with a law license and a CPA designation, I was fortunate to begin my career in Financial Planning with one of the then “Big 8” accounting firms – from where I was hired away by one of the founders of the College of Financial Planning, who taught me a great deal in a very short time. I am thankful for that experience and the perspective it gave me, both then and now.

What began as a product-centric sales industry has transformed into a client-centric, advice-driven profession. This evolution was fueled by the realization that the product-centric model was broken, and what I believe more often than not, did not look out for what was in the best interests of the client. Linscomb Wealth founder Dan Linscomb realized this early-on, and saw an opportunity, making him a true visionary in the field of wealth management.

Prior to the 1980s, the financial services landscape was more fragmented than it is today. Individuals seeking financial help had to consult a stockbroker for investments, an insurance agent for protection, and a separate professional for tax advice (to name a few). These advisors were primarily “product salespeople”, earning commissions from the sale of specific financial products like stocks, bonds, and insurance policies. This model often created a conflict of interest, as the advisor’s income was directly tied to the products they sold, not to the client’s overall financial well-being.

The evolution of our industry, particularly for those firms following the fiduciary business model, was fueled by the evolution of fee based as opposed to commission driven compensation models, and professional standards that evolved as the CFP® designation came into being, beginning with the CFP Board that was founded in 1985 to serve the public interest by promoting the value of professional, competent, and ethical financial planning services as represented by those who have attained the CFP® certification.

The Tax Reform Act of 1986 was another pivotal moment in the evolution of financial planning, as it simplified the tax code and eliminated many of the tax shelters that had been popular in the 1970s and early 1980s. This change caused many tax shelter salespeople who weren’t truly practicing financial planning to leave the industry, paving the way for a more genuine advice-based profession.

The creation of the IRA by Congress, which became available to the public in January 1975, also led to the rise of mutual funds which began to shift the focus from individual stock-picking to managed portfolios. However, the commission-based model persisted through the 1990s. And the high inflation of the 70s and early 80s made the certificate of deposit (CDs) the ideal candidate for risk adverse investors looking for high returns especially given poor stock market performance during the 1970s.

The advent of the internet in the 1990s and the subsequent digital revolution profoundly changed the industry. Online discount brokers, such as Charles Schwab, empowered individual investors to buy and sell securities at a fraction of the cost, threatening the traditional brokerage model. As information became more accessible, clients began demanding more value from their advisors than simple transaction execution. When Linscomb Wealth began fee only asset management, Schwab Institutional (offering custodial services to firms like Linscomb Wealth) did not exist. We would meet clients at the Houston Galleria retail Schwab branch to open accounts – a unique approach at the time.

By the 2000s, a major shift began towards “fee-based and fee-only compensation models”. Instead of commissions, advisors created a structure that better aligned the advisor’s interests with the client’s, incentivizing long-term growth and preservation of wealth. It reinforced the advisor’s role as a trusted partner rather than a salesperson. The growth of independent registered investment advisors (RIAs), who operate under a “fiduciary standard” requiring them to act in their clients’ best interests, further cemented this change. Fortunately, our firm was an early adopter with at least a 15-year head start.

In the 21st century, technology has become an indispensable part of the business. Advisors are able demonstrate their value beyond just managing portfolios. Today, wealth management firms, such as Linscomb Wealth, use sophisticated software for portfolio analysis, financial planning, and client relationship management (CRM), allowing advisors to engage clients more effectively with more time for strategy and communication.

In the early 80s before I joined Linscomb Wealth, my prior firm had two full-time programmers and a huge mainframe computer that we were using to write and develop such software.  It was a herculean effort, but you can imagine how much more efficient it was as opposed to only using a 10 key adding machine and lines of handwritten accounting paper. We went through a lot of pencils and Monte Carlo analysis was not a reality until technology finally made it possible.

The scope of financial planning has broadened significantly during my career. What was once confined to a product-centric business now encompasses a holistic view of a client’s financial life, including retirement planning, tax strategies, estate planning, risk management, and college savings. Modern wealth management as practiced by Linscomb Wealth is about helping clients achieve their life goals and navigate complex financial decisions.

Our firm is all about the great people and team we have today, and is now defined by a focus on providing comprehensive, personalized advice that is adaptable to a client’s evolving needs throughout their life as symbolized by our motto of “great service to clients and great service to each other.”  I feel very fortunate and privileged to work in this industry and spend my career serving others so they can meet their long-term financial goals while mentoring successive generations in what is a very personally rewarding profession.