The History of Linden Thomas & Company
Stephen L. Thomas began his career some 37 years ago, when he was offered a client investment training program internship with the prestigious EF Hutton firm in Washington, DC. Little did he know that the journey he would take – from green wealth manager to working with Wall Street firms – would lead him to founding one of the industry’s top wealth management firms serving high net worth investors.
Here’s what that journey looked like:
Stephen L. Thomas - The Road Less Traveled
EF Hutton - Journey Begins
Our roots begin with Linden Thomas & Company's founder, Stephen L. Thomas, who began his career in Washington, DC with EF Hutton in 1987. At the time, the Washington, DC Hutton office was the largest in the country with a large asset management consulting team. This gave Thomas his first exposure to the importance of efficient portfolio construction and its benefit to investors and their portfolio results. Impressed by its importance, Thomas believed that portfolio construction was academically sound, and clearly benefits individual investors if applied correctly.
Shearson Lehman/Consulting Practice Established
In the early years of Thomas' career at EF Hutton, Hutton was acquired by Shearson Lehman. While EF Hutton's consulting division focused on consulting, Lehman focused more on stockbrokers' cross-selling products and services, where advisors were encouraged to sell products that didn't always meet the client's needs directly. Thomas, disenchanted with this focus on product selling, approached management at Smith Barney to get their blessing to develop a consulting team.
Thomas was willing to personally invest in both technology and analysts to support an independent consulting practice. This would give his clients a non-biased approach focusing on building efficient portfolios that maximize portfolio results.
Shearson Lehman/Smith Barney Merger
After the merger of Smith Barney/Shearson, it became clear that Thomas's idea of giving independent consulting advice would conflict with the product-selling focus of Smith Barney. Instead of turning away from his beliefs, Thomas found another firm that felt the novel idea of putting clients' needs first had merit.
After several meetings and much due diligence, Thomas and his team left Smith Barney to join Prudential Securities. During his time at Prudential, Thomas and his team lead the way in developing an institutional consulting practice that established Thomas as one of the nation's top-ranked advisors. Ranked at number two out of 7,000 advisors worldwide, Thomas and his team developed several disciplined focuses, such as the Efficient Portfolio Theory, which helped establish what we see today.
As a team focused on putting clients' needs first, the core belief established was as follows: "What is good for our clients is good for us."
Their eight principles of investing were:
- Client's needs come first
- Client planning is important, but results are the engine that ensures we meet clients' expectations
- Education on how to achieve goals is essential
- Full transparency is a must
- Understanding risk is key
- Efficient portfolio construction
- Minimize cost and taxes
- Ongoing monitoring
With each of these goals as the foundation of excellence, Thomas and his team prospered.
Prudential/First Union Merger -
All journeys have a twist in the road
Five years into Thomas's team relationship, Prudential was purchased by First Union. Thomas and his team were informed that First Union would no longer support independent investment practices. Instead, each advisor would be required to introduce clients to products like their proprietary funds and annuities. Because Thomas and his team felt strongly that selling products were not in the clients' best interest, he decided to go another route.
He felt that the only way to do what is best for his clients was to begin due diligence of other Wall Street firms that would allow a team approach where portfolios could be built without the focus of large firms pushing products. Through many negotiations with Merrill Lynch, the world's largest Wall Street firm at the time, Thomas was assured that his approach be embraced and encouraged if he would move his team to the new firm.
Merrill Lynch - The straw that broke the camel's back!
During his time at Merrill Lynch, Thomas and his consulting team continued to advance their technology and ideas about client-focused results. At that time, Merrill Lynch was one of the two largest firms on Wall Street, and Thomas and his team soon became ranked as one of the firm's top 20 advisors worldwide out of 17,000. But the dream of building one of the leading client-focused investment teams at one of the largest investment firms ended when Merrill Lynch rolled out a new program called Total Merrill, which would focus on the firm cross-selling to distribute products and bank services.
At this point, Thomas had had enough of investment firms that had little focus on clients' needs but were focused on a culture of selling. A reality set in that most of the investment firms' advisors were happy just selling what was put in front of them with little, to no, regard for creating an investment team that focused on efficiencies. Thomas felt that a truly independent team focused on client results could only be achieved if you owned the investment firm. So, through a lot of thought and prayer, Thomas resigned his post at Merrill Lynch and began the road to start a truly independent asset management firm that would give his clients direct access to world-class portfolio management with the principal focus being academics and efficient portfolio theory.
Linden Thomas & Company: Two Hurdles
The first hurdle to becoming an independent investment firm is that you must first break away from the retail investment houses. Large firms don't allow this because it conflicts with their business models. Thomas had to find a means to make the migration to independent advisory practice and then begin to construct the parts to file with both the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), establishing Linden Thomas & Company as an independent investment advisor brokerage firm with their own independent registration. This would then open a door to total independence in two key areas: client consulting and planning and providing client direct access to tailored portfolio management.
The second hurdle was to become a self-registered, independent broker-dealer. It began in the fall of 2008 when Thomas and his team left Merrill Lynch and joined the independent channel of First Clearing (Wells Fargo's Independent Advisor Investment Services). Once there, Thomas spent the next several years ranked as Wells Fargo's Independent Advisor Channel's top advisor, which gave him and his team most of the freedom needed to begin putting together a multi-tier support and asset management team. While doing so, Thomas also built out back-office technology to make the final step to becoming a fully registered, investment brokerage firm.
The road less traveled
After several years as an independent advisory firm, Thomas filed with both the SEC and FINRA to become an independent broker-dealer. Most of the industry's financial advisors are either employed by an investment house or bank, or call themselves independent advisors, but don't actually own the investment broker-dealer. This ultimately restricts flexibility in building a client-focused investment firm.
"Seldom would people in my industry do what we have done because it's just too big of a commitment in both time and cost! Real excellence is not achieved unless you have real dedication. Our desire to give our clients the best outweighs our desire to achieve personal wealth."
~ Stephen L Thomas
"As an independent investment firm, we have a very bright future. While the road that brought us here hasn't been easy, all of the challenges ultimately are blessings and give me a bigger desire for us to build the best investment firm in the industry."
~ Stephen L Thomas
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