In recent years, Dallas-Forth Worth has grown to become the second largest center for financial workers in the country.
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Scott Wood vividly remembers the culture shock he experienced when he moved to New York in 1989 to begin a career in finance after graduating from Baylor University.
He smiled as he remembered his old boss at Chase Manhattan Bank, who thought everyone in Texas rode horses and herded cattle.
“If you were from Texas and you were in New York, people would think you were a little crazy,” Wood said. “People didn't respect people from Texas, but that's completely changed in the last 30 years.”
Mr. Wood currently leads True North Advisors LLC as CEO. He and Mark Gehrbach founded the Dallas-based registered investment advisory firm in 2000, which he has grown to more than $3.3 billion in assets under management. And now, the “stupid guy” from Texas increasingly finds his firm competing for business with asset managers who have expanded or relocated to DFW from New York and other parts of the country. It became so.
In recent years, Dallas-Forth Worth has grown to become the second largest center for financial workers in the country. Although the nickname “Wall Street of the South” has been bandied about recently, DFW actually surpassed metro Los Angeles in that tier during the pandemic in December 2020. Dallas-Fort Worth had about 384,500 financial jobs as of November, according to data from the U.S. Bureau of Labor Statistics.
Related: List of new fund managers highlights DFW's broad and deep capital pool
New York state still has more than double the number of people, at more than 809,000. But since the end of 2019, DFW has added 59,200 finance-related jobs. Growth in banks, asset management firms, private equity shops and corporations is occurring through both internal growth and transfers. Financial giants such as Goldman Sachs Group and Wells Fargo are building large campuses in North Texas that will house thousands of employees and look to future growth. .
Companies flock to the metroplex for a number of reasons, including its rapidly growing population, Texas' business-friendly environment, and labor availability and costs. The average financial and investment analyst in DFW will earn about $102,000 a year as of May 2022, about 30% less than in New York, according to federal data.
At a groundbreaking ceremony for the Goldman Sachs campus last year, Dallas Mayor Eric Johnson said, “The smart money is now in Dallas, Texas. Frankly, attracting big companies is becoming the norm. “It's a land of real opportunity.”
Wealth management, in particular, is a great fit for North Texas as it thrives on the success of the vast array of middle market companies that DFW is known for. How the wealth generated by these companies is cultivated will play a major role in the region's economic development, from start-up capital to philanthropy.
Fisher Investments, a $236 billion wealth advisor, moved its headquarters from Washington state to Plano last year after a court ruling upheld capital gains taxes on wealthy residents.
Fisher spokesperson Naji Srinivas said in a statement that the move has worked well for the company so far and offered a positive outlook for 2024.
“We are very pleased with the move of our Texas headquarters,” said Srinivas. “Texas is simply a business- and employee-friendly state, which is why we continue to attract so many companies like ours. We continued to do our best in terms of asset growth. We expect the new bull market to continue into 2024 and deliver significant returns to investors.”
For Wood Advisors and True North Advisors, the influx of companies means more competition for clients and assets. Wood acknowledged that the space is more crowded, but said he welcomes the competition. He said companies still need to differentiate themselves and True North has the advantage of having built a reputation in DFW for almost a quarter of a century.
“As competition continues, we have to stay sharp and continue to improve and grow and build on what we do,” Wood said.
Registered investment advisors (RIAs) like True North have become a large part of the wealth management industry in Texas and beyond in recent years. The number of independent RIA firms has grown at an average annual rate of 2.4% over the past decade, and the number of independent RIA advisors has grown by 5.2% over the same period, according to asset management research and consulting firm Cerulli Associates. Hard.
Other parts of the industry have been flat or in decline over the same period, Cerulli said. Cerulli predicts that by 2027, RIAs will control nearly one-third of the brokerage assets market share.
This means that large broker-dealer wirehouses such as Morgan Stanley, UBS, and Bank of America Merrill Lynch still control the majority of assets and often have scale and technology budget advantages. means. But Cerulli associate director Andrew Blake said in a statement that “the flexibility of independence and high dividend yields are attractive to many advisors.”
Carter Tolleson, CEO of Tolleson Wealth Management, a Dallas-based RIA with $8 billion in assets under management, said he also enjoys the competition from the big companies coming to Dallas. While companies like Goldman Sachs “always have that mystique” around their brands, Tolleson believes his company has built a strong reputation since its founding in 1997.
Tolleson said the key for his company is to “stay in its lane” and focus on being a one-stop shop for ultra-high-net-worth clients. Tolleson Wealth Management has its own private bank, which is unusual in the RIA world.
“We kind of flipped the model a little bit,” Tolleson said. “We are wealth managers whose service line is banking, as opposed to bankers who manage money. But it also allowed us to set up a trust company, so that ended up being our business. It has become a very important part of the business.”
Mr. Tolleson said he competed less with broker-dealers and more with other RIAs. He believes his firm has an advantage, saying many other RIAs are not truly independent because they receive private equity investments.
“They went from independence to now being controlled by a larger power,” Tolleson said. “They're not focused on customer service or service delivery. They're focused on the bottom line.”
True North recently received a minority investment from Wealth Partners Capital Group LLC and HGGC LLC to support growth through mergers and acquisitions with other RIAs in the coming months and years. Wood and Gehrbach said the wealth management industry is growing significantly in DFW, but the region doesn't have a dominant market share leader like other parts of the country. While this is evidence of the breadth of the financial scene, it also represents a huge opportunity for wealth advisors.
“There's going to be more than one company that dominates the market, and that's what we want to do,” Gehrbach said.
The acquisition will not only help True North grow its assets and revenues, but will also bring new talent to the company. Gerbach and Wood said competition for advisors is the biggest challenge facing the wealth management industry as companies continue to open and grow in Texas.
“Probably the limiting factor is talent,” Wood said. “Texas has everything else.”
Gehrbach said he believes more talent will be developed by local universities creating dedicated programs for degrees in financial planning and wealth management. He also said small businesses will have an opportunity to attract talent from financial giants if they bring employees to Texas from other parts of the country.
Tolleson, Gehrbach and Wood all believe the wealth management industry will continue to grow next year as North Texas' economy continues to expand and the region solidifies its reputation as the nation's second-largest financial hub. He said he expected it to continue. , vying for the top spot.
