During the pandemic, many wealthy citizens flocked from expensive coastal markets in New York and California to tax-friendly enclaves in Texas and Florida. Financial firms moved too, taking trillions of wealth with them.
In the last three years, New York and California each lost firms that managed approximately $1 trillion worth of wealth to different pastures, Bloomberg reported. On a surface level, that means jobs and people have shifted. Dig deeper and the impact on real estate and adjacent fields becomes clearer, from the commercial property market to municipal tax revenues.
Florida was most likely to grab firms flocking south from New York. In the last three years, 158 wealth management companies left New York, 56 of them going to the Sunshine State. That made up more than half of Florida’s incoming financial firms in that span, a cadre that included Icahn Capital Management and Cathie Wood’s ARK Investment Management; Florida also snagged Ken Griffin’s Citadel from Chicago.
California companies, meanwhile, largely fled to Texas, appreciative of the lower cost of living. Other states to reel in the 370 investment companies that have been mobile between 2020 and March 2023 include North Carolina and Tennessee, each adding managers of $600 billion in assets.
The advantages of these states vary, but Florida and Texas do share a major asset in common: lower taxes. Sun Belt states also provide opportunity for warmer weather and a chance to snag luxurious estates at cheaper prices. In turn, these financial firms have booms with them, particularly in the housing markets.
There is a flip side for these companies. California and New York are often seen as “liberal” hubs, while Texas and Florida often find themselves in the news for political decisions on the other side of the spectrum, such as those involving women’s rights to an abortion. Managers — and their employees — must have a certain degree of comfort to navigate much different political and social waters than before.
It’s all relative. Even with the large losses from New York, the Big Apple remains the king of asset management, boasting firms with $25.6 trillion assets under management, or 10 times the volume of Florida companies. California companies have $15.7 trillion assets under management.
— Holden Walter-Warner