Florida’s population is booming, and so are the number of financial advisors who call the state home.
The ranks of registered investment advisory firms headquartered in Florida expanded to 737 last year from 567 in 2019, an increase of 170, according to a new report by the Investment Adviser Association, an industry trade group, and NRS, a compliance and regulatory consulting firm.
Florida’s growth outpaced that of every other state, according to IAA. Texas, the nation’s second most populous state, notched an increase of 112 registered investment advisory firms over the same two-year period. New York lost 62 RIAs, though still has the most of any state with 2,450, according to the IAA report.
Financial advisors are particularly attracted to Florida because of its rapid growth. The state’s population rose to 21.5 million in 2020 from 18.8 million a decade earlier, a 14% increase, according to data from the U.S. Census Bureau. The U.S. population rose 7.4% over the same period.
While Florida has long been popular with retirees due to its warm weather, increasing numbers of wealthy Americans are also moving to the state, which has no income tax. That’s also a big draw for many financial advisors who are high earners. Plus, with more clients willing to use Zoom, it’s easier for advisors to move their practice across state lines without losing clients.
“These advisors tend to operate where their potential clients live, and the trend of people moving to the South is well documented in the U.S. census data,” John Gebauer, president of NRS, said in a statement. “In addition, larger investment advisors are less anchored to the New York financial centers due to technological advances that allow for efficient operations from any place, especially as these firms consider relocating to states with lower tax burdens.”
Double-digit growth. Overall, 2021 was a banner year for RIAs. Assets managed by SEC-registered investment advisors increased by 16.7% year over year to $128 trillion due in part to economic growth and positive market conditions last year, according to the IAA report, which relied upon data from RIAs’ SEC filings. The number of SEC-registered investment advisory firms grew by 6.7% to 14,806.
The RIA sector’s overall growth reflects shifting client and advisor preferences toward fee-based, fiduciary advice. Since the financial crisis, thousands of advisors have left traditional brokerage firms to open independent RIAs.
In each of the past eight years, the number of RIAs has increased, according to the IAA report. At the same time, the broker-dealer industry has been shrinking amid industry consolidation, according to data from industry self-regulator Finra.
While large RIAs have notched much of the asset growth, most firms are small, according to the IAA report. Two-thirds of RIAs employ 50 or fewer people and manage less than $1 billion in assets, the report states. About 80% of RIAs had just one or two offices.
“With the vast majority of firms employing 50 or fewer people, it’s clear small businesses serving individual investors are the backbone of the investment adviser community,” IAA Chief Executive Officer Karen Barr said in a statement.
Overall, the South was the region with the biggest increase in RIAs in recent years, according to the IAA report. After Florida and Texas, California and Connecticut reported the biggest upticks of RIAs, with 73 and 52 firms, respectively, according to the IAA report.
“The rapid transition to a work-from-home environment during the pandemic clearly facilitated the shift away from traditional financial centers,” the IAA report states. “At this point, it is unclear whether the shift is largely a function of the pandemic or whether the pandemic merely accelerated an existing trend.”
Sunny Florida. Advisors, meanwhile, aren’t the only ones decamping for Florida. In recent years, hedge funds and other financial services companies have been relocating to the state in droves. Billionaire Ken Griffin is moving his hedge-fund firm Citadel from Chicago to Miami, joining a slew of financial services companies that call the city home.
Dynasty Financial Partners, which provides asset management and back office services to RIAs, relocated in 2019 from New York to St. Petersburg. Cathie Wood’s ARK Invest made a similar move last year. St. Petersburg has long been home to
Raymond James Financial
one of the largest wealth management firms in the nation with more than 9,000 advisors and client assets under administration of $1.26 trillion as of the first quarter.
Of course, Florida has a long history of booms and busts. The state’s population may not keep growing at the same pace it has been over the past decade. Real estate prices are soaring, forcing some retirees and even some native Floridians to think twice about buying a home in Florida.
Write to Andrew Welsch at [email protected]