Financial services exodus from high-tax locales gains steam

The lockdown has shown firms that they're not tied to one location

A weekend tweet from Jeffrey Gundlach saying that “Realtors in low tax, well governed states should give me a call” might reflect a moment of glib frustration over events in Gundlach’s home state of California. But for some advisers, the idea of pulling up stakes is becoming a reality.

Vance Barse, founder of Your Dedicated Fiduciary, just completed a move from San Diego to Dallas, and cites a long and specific list of positives about his new location.

“It’s easier to find childcare, substantially lower cost of living, better quality of life, and we find the community here is much more consistent with our family’s core values,” he said. “We love this country, and you can be an American patriot in Dallas and not be labeled a protectionist or isolationist, and that was not the case in suburban San Diego.”

Barse said it wasn’t any single issue that drove him to relocate, but “all those reasons together.”

“I just remember turning on the TV and seeing buildings next to my office in San Diego getting completely destroyed by rioters and asking myself if this is where I want to raise my kids,” he added.

DoubleLine’s Gundlach did not respond to a request for comment for this story, but his tweet seeking a realtor was deleted by Monday morning.

Like most of the financial services industry in 2020, Barse has learned to adapt and embrace virtual communications to the point where your home base barely matters. But because he still believes in the value of in-person meetings whenever possible, he maintains offices in both Dallas and San Diego.

A migration away from certain states and municipalities is becoming increasingly common across the financial services industry.

Eighteen months ago, AllianceBernstein announced that it was moving its headquarters to Nashville, Tennessee, from New York City; earlier this year, it followed up on that with an announcement that it plans to add 200 more jobs in its new hub in Music City, where there are no state income taxes.

Charles Schwab Corp. is gradually migrating its business to Texas from California, and Dynasty Financial last year relocated from New York City to St. Petersburg, Florida, where there are no state income taxes.

“The real estate footprint expansion will now allow us to invest more aggressively in people, resources and tools to better serve our growing client base,” Shirl Penney, Dynasty president and chief executive, said at the time the move was announced.

For advisers like Robert Braglia, president of American Financial & Tax Strategies, the justifications for leaving traditional hubs of finance are starting to far outweigh the benefits of sticking around.

“I’m in New York City, where the taxes keep going up and the quality of life keeps going down,” Braglia said. “We used to have live music at 1,000 locations, but now two-thirds of the restaurants are closed and government’s reaction to the pandemic has brought out problems like no-bail policies and tolerance for violent demonstrations. When I see them cutting funding for and demonizing the police and then assigning 27 police officers to guard a political statement written in the street, I figure the world is upside down.”

Braglia, who has lived in New York for 43 years, plans to spend a month in Florida this winter “to see if I like it as much as I think I will.”

The flip side of the exodus out of high-tax states is the potential the migration will take a toll on low-tax states like Florida, Texas, and Tennessee.

According to one report, Florida is now seeing 1,000 new residents arrive each day as individuals and businesses realize through the forced virtual reality of a global pandemic that they are no longer tied to places like New Jersey, which recently added a new tax on high earners.

Thomas Balcom, founder of 1650 Wealth Management in Lauderdale-by-the-Sea, Florida, is ready to give up the lower taxes in exchange for less congestion.

“It’s getting overcrowded down here in Florida and that’s why I’m thinking of moving to the Carolinas,” he said. “We’ve realized over the past six months we can do just about everything remotely.”