Wall Street financial services firms are moving out of the Big Apple and relocating to the Sun Belt—a region of the United States generally considered stretching across the Southeast and Southwest—and taking nearly $1 trillion in assets under management with them, according to Bloomberg.
The flight out of New York has been underway since before the pandemic. Wall Street executives previously relocated thousands of jobs to states outside of New York, in an effort to cut costs.
About 158 financial institutions, managing $993 billion in assets, have established and aggressively staffed hubs in Florida, North Carolina, Tennessee, Texas and other less expensive locations, according to data from 17,000 corporate filings compiled by Bloomberg.
The Mass Exodus
Following the leads of other major financial services firms, such as Credit Suisse, Goldman Sachs, Morgan Stanley, Barclays, UBS, Citigroup, AllianceBernstein and more, relocating to lower-cost areas, Wells Fargo is pouring investment into a two-tower, 850,000-square-foot campus in Irving, Texas. It’s expected to house thousands of employees upon its completion in 2025.
During the pandemic, the absence of a state income tax, plus warm weather and business-friendly incentives, notably prompted hedge fund billionaires and native New Yorkers Paul Singer and Carl Icahn to relocate their respective businesses to Florida.
Ken Moelis, the CEO of his eponymous investment bank Moelis, told Bloomberg in 2020 that his bankers wanted to leave New York City for the Sunshine State. In response to their request, Moelis replied, “We’re a talent business. I want to attract, I want to motivate and I want to retain the greatest talent in the world. And if that talent wants to do it in Florida, that’s where we’ll support them.”
In 2021, ARK Investment Management CEO Cathie Wood moved her firm to St. Petersburg, Florida, where she felt the region’s “talent, innovative spirit and quality of life” would accelerate her company’s “growth initiatives.”
That same year, a survey by the Partnership for New York City of “major employers” found that nearly a quarter of financial services firms plan to reduce their New York City workforce within five years’ time.
The Sun Belt’s Appeal
Although New York still reigns supreme in asset management, Florida and Texas have seen rapid and immense job growth in the financial sector that is significantly outpacing the rest of the U.S.
“The Sun Belt is continuing to change—no longer just a place of traditional industries like oil and gas, no longer just focused on tourism, or just focusing on the retirement community,” said Amy Liu, the interim president of the Brookings Institution and an urban policy researcher.
For companies, real estate, labor costs and taxes are significantly cheaper compared to New York City. Organizations can cast a wider net for talent by establishing hubs in new regions, like Charlotte, Nashville, Dallas or Palm Beach. Due to technological advances, employees no longer need to be tied to physical trading floors. Moving closer to certain customer bases also improves a firm’s ability to serve those demographics.
For workers, warmer weather, lower costs of living, lower density and no personal state income tax in states like Texas and Florida are certainly a draw.
What This Means For New York
The departure of Wall Street firms from the Big Apple could have severe ramifications for the city and the state of New York. Last year, financial institutions paid $5.4 billion in state taxes and accounted for 24% of all personal income tax collections, according to a report by the New York State Comptroller Thomas DiNapoli.
New York City and its home state could lose billions more in tax revenue if this trend continues. The absence of Wall Street firms will also hurt the city’s ecosystem of surrounding businesses. There will be fewer highly paid financial services workers to frequent local restaurants, bars, gyms, clubs, nail salons, barber and hair salons, retail shops, Broadway shows and event venues.
As a result, the city will have to cut back on municipal services. This means less hiring and accelerated job cuts to police officers, firefighters, sanitation workers, mass transit personnel, nurses and teachers.
Source: Forbes
