DALLAS — Read this story and more North Texas business news from our partners at the Dallas Business Journal
Scott Wood still vividly remembers the culture shock he experienced when he moved to New York in 1989 to begin his financial career after graduating from Baylor University.
He smiles as he reminisces about an old boss at Chase Manhattan Bank who thought everybody in Texas rode horses and raised cattle.
“If you were from Texas and you were in New York, you were just kind of considered dumb,” Wood said. “People didn't respect people from Texas and that has completely changed over the last 30 years.”
Today, Wood leads True North Advisors LLC as CEO. He and Mark Gehlbach founded the Dallas-based registered investment advisory firm in 2000 and have grown it to more than $3.3 billion in assets under management. And now the "dumb guy" from Texas more and more frequently finds his firm competing for business with wealth managers who have expanded or moved to DFW from New York or other places around the U.S.
In recent years, Dallas-Forth Worth has grown to become the second-largest hub for financial workers in the country. The moniker "Wall Street of the South" has been bandied about recently, although DFW actually surpassed the Los Angeles metro during the pandemic in December 2020 in that hierarchy. Dallas-Fort Worth had about 384,500 financial activities jobs as of November, according to data from the U.S. Bureau of Labor Statistics.
New York still has more than double with 809,000-plus. But since the end of 2019, DFW has added 59,200 financial jobs. The growth has occurred at banks, wealth management firms, private equity shops and corporations, through both organic growth and relocation. Titans of finance such as Goldman Sachs Group Inc. and Wells Fargo & Co. are building large campuses in North Texas that they plan to fill with thousands of employees, pointing toward future growth.
Companies have flocked to the Metroplex for several reasons, including the surging population, a business-friendly environment in Texas and the availability — and cost — of labor. The average financial and investment analyst in DFW was making around $102,000 per year as of May 2022, almost 30% less than in New York, according to federal data.
"Right now the smart money is on Dallas, Texas — a land of genuine opportunity where attracting big business is frankly becoming business as usual," Dallas Mayor Eric Johnson said at the groundbreaking of the Goldman Sachs campus last year.
Wealth management in particular has been a sweet spot for North Texas, as it feeds off the success of the vast sea of middle market companies for which DFW is known. How the fortunes created by those companies is nurtured will play a large role in this region's economic evolution, from startup funding to philanthropy.
Fisher Investments, a wealth advisor with $236 billion under management, last year moved its headquarters to Plano from Washington state after a court ruling in the latter upheld a capital gains tax on wealthy residents.
Naj Srinivas, a spokesman for Fisher, said in a statement the move has gone well for the company so far and expressed a positive outlook for 2024.
“We’re very pleased with our Texas headquarters move,” Srinivas said. “Texas is simply more business and employee friendly, which is why it continues to attract so many businesses, like ours. In 2023, our firm continued firing on all cylinders in terms of clients served and AUM growth globally. We expect the new bull market to continue in 2024 and deliver good-to-great returns for investors.”
For Wood and True North Advisors, the influx of firms means more competition for clients and assets. While Wood admitted the space has become more crowded, he said he welcomes the competition. Firms still need to differentiate themselves, he said, and True North has the benefit of having built up its reputation in DFW for almost a quarter of a century.
“As competition continues to come in, we've got to stay sharp and continue to improve and grow and build what we're doing,” Wood said.
Registered investment advisers, or RIAs, like True North have become a bigger part of the wealth management industry in recent years in Texas and abroad. The number of independent RIA firms has grown at a compound annual rate of 2.4% over the past decade, while the number of advisers at independent RIAs has grown 5.2% over the same period, according to Cerulli Associates, a wealth and asset management research consulting firm.
Other parts of the industry have stayed flat or declined in the same time, according to Cerulli. By 2027, Cerulli projects RIAs will control nearly one-third of intermediary asset market share.
That means big broker-dealer wirehouses, such as Morgan Stanley, UBS and Bank of America Merrill Lynch, still control the majority of assets and often have advantages in terms of scale and tech budgets. But "the flexibility and higher payout percentages of independence is appealing to many advisors," Andrew Blake, an associate director at Cerulli, said in a statement.
Carter Tolleson, CEO of Tolleson Wealth Management, a Dallas-based RIA with $8 billion in assets under management, also said he relishes the competition from bigger companies coming to Dallas. While a company like Goldman Sachs “will always have that mystique” around its brand, Tolleson believes his firm has built up a strong reputation since getting its start in 1997.
Tolleson said the key for his firm is to “stay in your 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 uncommon in the RIA world.
“We've kind of flipped the model on its head a little bit,” Tolleson said. “As opposed to being bankers that manage money, we're wealth managers that have banking as a service line. But that that's ended up being a really important piece of our business because it also allowed us to open a trust company.”
Tolleson said he does not really even compete as much with the broker-dealers anymore, and more often than not finds himself competing against other RIAs. He believes his firm has an advantage because he said many other RIAs are not truly independent because they have received private equity investments.
“They've gone from independence to they’re now being controlled by a greater force,” Tolleson said. “What they're looking at is not client service and not service offering. They’re bottom line oriented.”
True North recently received minority investments from Wealth Partners Capital Group LLC and HGGC LLC to support growth through mergers and acquisitions of other RIAs in the coming months and years. While the wealth management industry has grown tremendously in DFW, Wood and Gehlbach said the region lacks a dominant market share leader like in other parts of the country. That's a testament to the breadth of the financial scene, as well as a major opportunity for wealth advisors.
“There should be multiple market-dominating firms, and we would love to do that,” Gehlbach said.
Acquisitions will not only help True North grow assets and revenue, but also bring new talent to the firm. Gehlbach and Wood said competition for advisers is the biggest challenge facing the wealth management industry as firms continue to open shop and grow in Texas.
“That's probably the limiting factor is the talent,” Wood said. “Texas has everything else.”
Gehlbach said he thinks more talent will develop as local colleges and universities create dedicated programs for financial planning and wealth management degrees. He also said smaller firms will have opportunities to attract talent from the financial giants when they bring their employees to Texas from other parts of the country.
Tolleson, Gehlbach and Wood all said they expect the wealth management industry to continue growing in the year to come as the economy in North Texas continues to expand and the region solidifies its reputation as the nation's No. 2 financial hub — and, perhaps one day, vying for the top spot.
