Advisors ‘Following the Money’ to New, Underserved Markets

One year ago, fed up with California’s politics and taxes, advisor John Graves decided to look elsewhere to live and work.

Graves grew up in the South, his wife, Sharon, in the Midwest. “Our quest turned into a ‘Where do you want to fly this month, honey?’,” says Graves, managing principal of The Renaissance Group, an advisory practice in Ventura, Calif., with $560 million in assets under management. Graves, 65, is an adventure traveler who has visited more than 84 countries. No surprise then that he conducted his search for The Next Best Place with vigor.

Suburban Virginia outside of Washington, D.C.? Too much traffic. Maryland, with the nation’s highest percentage of millionaires per capita, had a mosquito problem. Florida? Hot and muggy—plus it’s overserved by financial advisors. Texas? Hot and dry. Alabama had an attractive cost of living but, again, the weather. Coastal South Carolina was lovely, only it didn’t have an abundance of underserved high-net-worth households.

Ultimately, Graves settled on Raleigh, N.C., which he likes because of its affordable cost of living, diverse political makeup and an underserviced high-net-worth market in the Raleigh suburbs. He is currently looking to buy an advisory business there—although he will continue to service his 89 clients in California through Skype and quarterly visits. His California staff will also remain in place.

Graves, it turns out, is at the forefront of a trend that represents a potential industry game changer: the shift of finance jobs from traditional financial centers like New York City, Chicago, San Francisco and Los Angeles to places like Raleigh. In a survey last year of the “Best Cities for Jobs in Finance Industries,” Richmond, Va., and Pittsburgh placed first and second, respectively, among the 66 largest metro areas in the country. Raleigh ranked 49th, three spots above New York City.

Futurist Joel Kotkin, executive editor of NewGeography.com and a co-author of the survey, says the financial services industry appears to be undergoing a “profound” geographic shift away from traditional money centers. What’s driving it? Cost-cutting by firms and the growth of educated workforces in many smaller metropolitan areas. The linguistic skills of a largely Mormon workforce in Salt Lake City, for example, have attracted the presence of big financial firms that need employees who speak Lithuanian, Chinese and Tagalog. Salt Lake City ranked 12th in the survey.

A parallel trend that Kotkin says will grow legs over the next decade is the migration of young adults and aging baby boomers to so-called “second-tier” cities.

For young adults, the move is all about getting more bang for their employment buck. As Kotkin puts it: “If you make $110,000 a year in Salt Lake City, you live really well. If you make $110,000 a year in San Francisco, you live in a closet.” Boomers, meanwhile, are looking to preserve their nest egg.

“If we all had endless money we could all live in Manhattan or Boulder but most of us have to make other choices. How would Columbus, Ohio, be? Maybe I don’t want to live in a dying Rust Belt city but how would a restored neighborhood in Richmond be or a leafy suburb outside St. Louis? That begins to become a value proposition,” says Kotkin.

“The firms are going to have to follow where the aging boomers are going. That’s a population that will start to move even more as cohorts get larger and they are going to wind up in all sorts of unexpected places. If you are an advisor serving the 1% or the 0.5%, you’re going to be fine in New York, San Francisco and the Gold Coast of Chicago,” he adds. “But the real contest is going to play out elsewhere.”

Geographic Strategies

A number of firms, large and small, have begun to develop geographic strategies to help them grow their business. The big reveal: Opportunity exists, literally, all over the map.

Tash Elwyn, president of Raymond James & Associates’ Private Client Group, looked at that map and here’s what he saw: the West Coast, where 22% of the industry’s assets under management are held. Here’s what he didn’t see: a sufficient RJ&A presence.

Just under two years ago, the St. Petersburg, Fla.-based broker-dealer began its push westward in earnest, opening new branches in California, Washington and, most recently, Oregon. The firm is also considering Tulsa, Baltimore and Boston as possible expansion sites.

“Geography absolutely is a big piece of the puzzle in terms of how we develop our growth strategy,” Elwyn said. “There are definitely different markets in the country in which Raymond James & Associates is either not yet in or has not yet developed a market as fully as we believe we are capable of.”

When it enters a new market, RJ&A doesn’t open a branch that looks cookie-cutter corporate. It really does go native.

As an example, when the Portland, Ore., office opened in October, the local advisory team decided to forego a traditional downtown high-rise in favor of office digs in a restored brewery in the city’s jumping Pearl District. The neighborhood has become a destination for restaurants, high-end retail, galleries and tech companies. RJ&A was one of the first national wealth management firms to move into the neighborhood.

Elwyn observes: “Local knowledge is imperative. Our managers and advisors can give us guidance we need about not just what communities to be in, but where in those communities to be. Far be it for us in St. Petersburg, Fla. to make the decision about whether to be in town or in the suburbs, on the top floor or the bottom floor. Every community has its own flavor.”

Two other firms—the well-established Argent Financial Group and relative newcomer Fusion Wealth Management—could not be more different but both are investing in serious geography plays.

Argent, a southern heavyweight headquartered in Ruston, La., has just short of $6 billion in assets under management. By contrast, the three-year-old Fusion, based in Phoenix, manages $56 million in assets. Yet both are “following the money” to places like Ohio, Texas, Tennessee and Kentucky.