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June 27, 2012 at 09:24 AM
Surveys of business-friendly places frequently put Texas on top, and many businesses—manufacturers in particular—are indeed relocating to the Lone Star State. But is it sensible for retail-oriented financial advisors to make such a move?
Tax-weary advisors in places like New York, Chicago or Los Angeles may dream about Florida or Texas – especially after reading on AdvisorOne that Miami and several Texas cities are among the Top 10 wealth zones with fewest advisors (although – surprise, surprise – so are Chicago and L.A.).
But according to L.A.-based CPA Steve Frankiel, who specializes in helping clients make domicile decisions, for most people taxes are simply not the primary motivation for a move of that magnitude.
“The main drivers are access to referrals and clients as well as family issues,” Frankiel told AdvisorOne in a phone interview. “I’ve only seen 2 people move [because of taxes] in 30 years,” he added.
It’s not that such a move won’t save the advisor money. By moving from California to Texas or Florida, an advisor “would save income taxes on net business earnings and forgo the benefit of the deduction of state income taxes,” Frankiel said. So an advisor earning $200,000 would on balance save roughly 7% of his income, or $14,000.
An advisor may save even more than that if he’s fleeing a city that imposes income taxes or gross receipts taxes. An L.A.-based business pays roughly $5 for every $1,000 earned, he says.
