Since the 2017 Tax Cuts and Jobs Acts, South Florida has seen a surge in the amount of new financial services companies expecting to reinvent the region as a major finance and global business center, sizing up to New York and Chicago.

Local economic development agencies have been anticipating this transformation, with the Miami Downtown Development Authority and the Business Development Board of Palm Beach County actively recruiting hedge funds, private equity firms and wealth management offices to the area since the early 2010s. The move of these companies allow for more professional services jobs and stimulate local industry growth as new businesses continue to be attracted to the region, raising South Florida’s national and global profile. These agencies have been long at work with this effort with the goal of transforming the landscape of a previously hospitality and tourism industry driven economy into the "Wall Street of the South".

Many businesses and high-profile finance players  have already relocated to South Florida, including David Tepper and Appaloosa Management LP, Barry Sternlicht and Starwood Capital Management, Lloyd Blankefein of Goldman Sachs, Leon Black of Apollo Global Management, Universal Investments LP, and the most recent announcement by Carl Icahn who plans to relocate his hedge fund, Icahn Enterprises, to Miami from New York City in 2020. Between 2014 to 2018, the Miami Downtown Development Authority reported a 95% increase in registered investment advisors in downtown Miami, and a 50% increase in interest after the tax law. And since 2016, the Business Development Board in Palm Beach has helped relocate 70 financial services companies to Palm Beach County including hedge funds and wealth management offices.

After federal deductions of state and local taxes at $10,000, Florida's low corporate income tax and absence of a personal income tax have become an attractive alternative to higher taxed areas like New York with an 8.82% personal income tax in addition to a New York City income tax topping out at 3.8%.

“Taxes were an important consideration, but so was the overall quality of life for our employees, and the growing and modern nature of the city,” Brandon Yarckin of Universal Investments LP told the South Florida Business Journal in a recent article, after the company relocated to Miami's Coconut Grove from California in 2014. “We considered several other business-friendly states, but none matched what we found here in South Florida.”

South Florida has many desirable qualities that financial services companies looking to grow are taking into consideration. These include unmatched access to the Latin America market, lower office rents, neighborhoods rich in culture and a growing art scene, beautiful weather and beaches, and housing prices are lower in many cases which enable a higher quality of life for employees and executives.

Many of these firms have already dipped their toes into South Florida's surf with several key executives already having homes in South Florida and deciding to officially declare domicile to take advantage of the tax benefits. In fact, the US Census has estimated roughly 452,000 New York residents have already relocated from the state in 2018, with about 63,000 of those residents changing their residency to Florida. Local economic development agencies amplified their recruiting efforts after reviewing this activity and discovering nearly 100 CEO's had homes in Palm Beach County alone without a business presence.

“Almost universally, the clients I speak with already have a home in the area and then decide to become a Florida resident,” Eugene Pollingue Jr., a partner at law firm Saul Ewing Arnstein & Lehr, shared with the South Florida Business Journal, adding that most of those clients come from New York, New Jersey, and Greenwich, Connecticut.

It's clear that the growth of a finance industry in South Florida will continue to attract new professional services businesses to the region such as law and accounting firms, engineering, and technology firms, which is already the second-fastest growing sector in South Florida.

“There’s a buzz about South Florida,” Kelly Smallridge, president and CEO of the Business Development Board of Palm Beach County, told South Florida Business Journal. “The finance industry used to see this as a place for fun, sun and beaches. But after the tax law, we’re getting almost daily inquiries from out-of-state companies with questions about what it takes to make the move.”

Source: South Florida Business Journal