Leaving New York

Is it reasonable to guess that a large percentage of investment banks and private equity/hedge funds will move to Florida? The benefits seem to be tremendous for example, no state income tax on employees and a less strict tax environment as a whole. Also, sunny South Florida is a whole lot better than new york city, imo. For someone that wants to work in Florida as soon as possible and move out of New York, this makes me very hopeful it will be possible. Thoughts?

https://www.bloomberg.com/news/articles/2020-10-2…

Comments (36)

 
Oct 22, 2020 - 11:07am

Don't see it happening "as soon as possible", at least not for the bigger players. 

I think a more likely scenario is the continued shift of BO, MO to low COL cities and maybe the adoption of a hybrid schedule where some employees shift between WFH and the office.

Reduces office space, saves money, and increases employee satisfaction. 

Edit: would also add the following article. Lot of people been saying NYC is done and will never "go back to what it was". Apparently new data may suggest otherwise. https://www.crainsnewyork.com/economy/new-york-among-top-cities-relocators-during-pandemic

 
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  • Associate 1 in IB-M&A
Oct 22, 2020 - 11:47am

Waiting on comments, so this got long, but I think it's a multi-faceted and interesting issue. 

 

Nope - absolutely not.

 

This is such a dumb take propagated by suburban car dealership owners and Fox News hosts - both of whom who have a econ major's level of understanding about the finance industry.  It get's non-target frat bros (I should know, I was one) all spun up about nothing. 

 

First of all, corporate tax in FL is ~4.5, it's 6.5 in NY - not that big of a difference - but the cell-phone-clip dads of the world don't think like that. They only see the 8% difference in state-level income tax and so they harp on this dumb fantasy that we're gonna abandon NYC. Why? Because they see Jim "buy Lehman" Cramer harp on it in front of a stock ticker. They say GE "moved" for taxes - except GE really didn't. GE moved like 1000 people from CT to Boston for a new HQ: hardly the same thing. To boot, GE is a fundamentally different business than finance, the former's HQ not needing the proximity to operations the latter does. 

 

The bulge brackets own their buildings here. They employ 10s of thousands of people here. A move would be astronomically expensive. Are decision makers going to effectuate a risky move which will cost 100s of millions of dollars in direct cost and risk losing the number one wall street resource (talent) in order to personally save themselves ~$1mm in tax?  A move like that could (and probably would) crater a career if and when it goes terribly? NO! They're just gonna pay themselves more 

 

Finance is an industry based on PEOPLE. On meetings. It's why every bank is champing at the bit to get back in the office. Every major corporation has some sort of office here in NYC precisely because it gives them access to the meetings through which they raise capital. This is the international meeting place. It's why BofA, the only non-NYC-bourne BB opened it's IB HQ here. Why would a bank go and put themselves at a disadvantage?

 

Now, let's talk about smaller PE/HF firms. Since the banks are here, the major PE players will also mostly stay here because of the proximity factor. I could see some HFs and Asset managers which don't employ high frequency strategies and don't need to meet with banks for deal-flow moving down there. The fact is though, those guys too have their edge because they can "hear the trading floor" so to speak. When you're meeting and chatting with people in the markets every day, it gives you the color to do your job well. 

 

Not to mention, let's dispense with this fiction that South Florida is some perfect utopia you can just move to. Miami does not have the infrastructure NYC does, not even close. It can't support the finance industry as-is right now and frankly, I think it would struggle to support one of the big 5 bulge banks. This phenomenon of "why don't they move?" can also be seen in London/Dublin right now. It would seem obvious that post-brexit, large UK banks would move/open a major branch in the only other major english-speaking city in the EU, but Dublin is just too small and doesn't have the infra or housing stock to support it. Hence, small offices in Paris/Frankfurt/Madrid have been the move most firms have made. 

 

Now, if NY actually implements some sort of trading-tax? Totally different ballgame. But no matter what the IG memes tell you, Cuomo is a huge friend to the street. He knows where the money comes from and I believe that the power brokers in Albany do as well. Also, can states constitutionally tax a trade, given that it is probably interstate given most brokers are registered in DE? Idk, not a lawyer and I digress: A trading tax is far more likely to occur at the national level. (BTW, this would be a massive boon for advisory/tax lawyers as we look to figure out new financing structures)

 

So,- I think a few funds, especially some of the dumb-money that has popped up over the past 11 years where every MD thinks he can be an effective GP because the market has gone straight up for a decade, will move. They'll open an office and get interviewed by Maria and they'll do okay. I think someone like Stevie Cohen may move as well given he's just managing his own money. But by-and-large, no, the finance industry will not move to Florida. 

 
Controversial
Oct 22, 2020 - 2:51pm

Lol your comments are all based on the hear and now. In business it's about forecasting the future. The way NY trends politically will inevitably have a huge push on it's busienss enviornment. That 8% tax you talk about? It will only get higher. That trade tax? it'll come sooner rather than later.

 

These r famous last words by an arrogant new yorker lol

 
  • Prospect in IB - Gen
Oct 22, 2020 - 7:21pm

New York has been a thing for hundreds of years. Rome and London have been a thing for thousands. Humans have been living in cities since Catalhoyuk almost ten thousand years ago. That's hundreds upon hundreds of generations. COVID-19 isn't going to be the thing that ends cities. This is the most over blown thing in history.

 
Oct 22, 2020 - 8:35pm

I actually think come Spring 2021 NYC will be a much better place to live than pre-2020, bc housing costs will semi-permanently go down. Too much real estate in the city was owned by investors and international heiresses who rarely (if ever) actually stayed in it.

The only significant move in terms of FO jobs is perhaps more HFs going to Greenwich/Stamford (especially those with more senior employees).

 
  • Prospect in IB - Gen
Oct 22, 2020 - 8:36pm

I don't think you'll have a mass exodus of the large banks at all from New York City. It would take tens of years to build up the infrastructure in another area. However, could definitely see more of the funds (both PE and Hedge Funds) leave NYC for more tax "friendly" states.

 

Example: Elliott Management just announced that they are leaving NYChttps://www.nytimes.com/2020/10/22/nyregion/paul-singer-florida.html

 
  • Associate 1 in PE - LBOs
Oct 23, 2020 - 10:00am

Another reason why this move will never happen is that while some finance professionals would prefer to live in Florida, the vast majority of us - myself included - would rather leave the industry that have to live in Florida. That state is trash. I don't give a shit about taxes. I will never leave NYC, the most interesting city in the world.

 
  • Analyst 1 in RE - Comm
Oct 24, 2020 - 12:40pm

It's hype, NYC is the finance capital of the world.  Miami is an international city as well, I love it, but it's a vacation/retirement city, and the surrounding area sucks, not a long-term place. 

Plus hurricanes are a threat every year in Florida. 

 

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