Near-Shoring: Wall Street Jobs In Every Corner of The United States

Posted by on February 22nd, 2013

Wall Street, like the Yankees and Subways, will forever be synonymous with New York.   As the country expanded and lush pastures became bustling cities, Wall Street also expanded.

Boston, Chicago and San Francisco became major cities and hubs of financial institutions. In each of these cities you will find the presence of leading hedge funds, investment banks and brokerage firms. This should not be surprising to anyone considering they offer a wide variety of industries and amenities.  But would you ever think of midsize metropolitan areas such as Salt Lake City, St. Louis or Jacksonville as viable cities in the world of finance? Maybe you should start.

There has been a growing trend of migration from larger traditional financial hubs to smaller markets, and this is mainly attributed to the cost consciousness of the institutions. In addition, government has become ever more present in rules and regulation on Wall Street, hampering these institutions’ revenues. Despite the thousands of layoffs, companies need workers and salaries do not come cheap in New York, Chicago or San Francisco because of the high cost of living. In January 2013, the average month’s rent for a one-bedroom apartment in San Francisco was $1,845 and it was $2,568 in New York. This is an astonishing price to pay for shelter that you do not own at the end of the day.

Institutions may not always be able to create “new” revenue but they can find a city where the taxes, real estate, and cost of living are less expensive. The same financial architects and thrifty accountants that created new revenue by ways of derivatives and proprietary trading in years of the past are now finding inventive ways to add to the bottom line through cost reduction and tax efficiency. Yes, it may be cheaper to move these jobs off-shore but out of fear of ridicule by the public they have decided to keep them at home, as they should.  Some call this phenomenon “near-shoring.” A dollar in St. Louis can be stretched longer than a dollar in New York.  While the high salary jobs remain in large metropolitan areas, financial companies are moving mid-level roles to the likes of Salt Lake City (Goldman Sachs), St. Louis (Stifel Financial) and Jacksonville (Deutsche Bank).  The average month’s rent for a one bedroom apartment is only $659 in St. Louis and $685 in Salt Lake City.

What does this mean for Investor Relations?  Well, to start, do not worry!  First, large metropolitan cities are not going anywhere and they are excellent places to conduct non-deal roadshows or investor days. Second, established financial hubs in suburban cities will entice new companies and new operations because of lower set-up costs and tax. Yes, it may create more traveling, but a company should think of this as a way to expand its brand.

While I do not have a crystal ball, I am confident that Wall Street will be based in New York for the next century.  My biggest concern is if KCSA moves, where am I going to get a decent slice of pizza?!