‘Following the money’ not so easy in a world of remote work

Adarsh Shyamsundar has seen the Sacramento area transform over the past two decades.

“In 2002 when I was biking down a particular street, both sides were open and I would have rabbits and deer while I’m biking,” he said. By now, the woody roadsides have given way to the chain stores and amenities that come with suburban development. “There’s a lot of infrastructure that’s grown in this area.”

The anecdote would ring true in many midsize American cities that have seen growth spurts in recent years. While the sprawl of development outside the nation’s largest metros and waves of migration to up-and-coming areas are nothing new, two years of pandemic living, remote working and now rapid inflation may supercharge the pattern. The question is, will advisers be there to meet the money in motion?

InvestmentNews Research recently ranked the Next Cities for Financial Advisers from among the metro areas with net positive migration since the pandemic. Using income, demographic and employment data from the Bureau of Labor Statistics, we projected demand for financial advisers and compared it to actual numbers of advisers serving the area. The 10 cities below had the greatest need for additional advisers, according to our projections.

FREEDOM TO MOVE

“The pandemic gave people an opportunity to understand what Sacramento has to offer,” said Shyamsundar, who founded Polaris Capital Management there in January. “Really nice neighborhoods for families as well as individuals who want to get away from the hustle and bustle of the Bay Area.”

Indeed, cities like San Francisco and New York saw an exodus in 2020. To be sure, the pandemic didn’t cause quite the death of city centers that some anticipated. Yet, white collar and high-earning workers have still taken outsize opportunity to relocate.

Even as office life has made its gradual return, about six in 10 workers who are able to do their jobs offsite remain remote, according to Pew Research Center, and 78% of those workers wish to continue telecommuting indefinitely. Nearly one in five (17%) of them are continuing remote work because they have since relocated.

“I think societally we are realizing that we value our life balance more than our work balance,” said Leland Gross, who launched Virginia Beach-based PeaceLink Financial Planning in September 2021. “People are realizing I would rather live somewhere where the lifestyle is what I like, and I can keep my job remotely.”

Now, greater flexibility has combined with the fastest inflation in four decades. According to the government’s inflation gauges, the cost of housing had risen only 5.1% year-over-year as of April. Although that compares to overall inflation of 8.3%, increases for renters have been more dramatic. In New York, Los Angeles and Boston — already among the most expensive cities in the country — rents have risen 29.5%, 14.8% and 14.4%, respectively, over the past year, according to listing site Apartment List.

Moreover, even if rent and home prices are on the rise nationwide, since shelter represents roughly a third of a typical household’s expenses, regional differences in cost of living can make a substantial difference in a household’s finances. That represents an financial opportunity for newly flexible workers, according to Gross.

“If you can get the D.C. salary at the Virginia Beach cost of living, that’s a pretty big deal,” he said.

NEW PLANNING NEEDS

Not only are changes in migration a potential opportunity for advisers in local markets, they are also a financial planning opportunity, according to advisers.

“People look at it almost like a fresh start,” said Megan Bynum, a financial adviser at Harvest Wealth Group in Murfreesboro, part of the Nashville metro area. “Some of the things they’ve put on the back burner before, they want to bring back up and get prepared and focused on planning financially for the future.”

For many, the long-term commitment of a new home purchase is a natural time to revisit their financial plan or make one for the first time. Those relocating to a lower cost of living or a new tax regime may also need advice on how to make the most of their new cash flow.

“Gen X and millennials are OK with more remote things.”

Breanna Stott, CEO, Finwell Financial Planning.

And in a heated property market, clients also benefit from an adviser on the sidelines of the associated real estate deals who can pay attention to “the aftermath of the transaction,” said Breanna Stott, CEO of Finwell Financial Planning.

LOCAL VS. VIRTUAL        

But remote working could be a double-edged sword for advisers in cities poised for growth in population and wealth. There is a local opportunity on one hand, but new competition from virtual advisers on the other.

“I have clients all over the country because Gen X and millennials are OK with more remote things,” said Stott, who herself relocated to Nashville earlier in the pandemic.

While her practice has always had a virtual element, she’s now clearly in the majority. According to InvestmentNews Research’s survey data, by year two of the pandemic, 61% of advisers were working with at least some clients they’d never met in person.

Still, Stott said moving to a smaller city from L.A., where she originally started her career, has given her opportunities to connect further with clients. “Everyone was so busy [in L.A.] and it was hard to get to places for that organic connection,” she said. “Here I don’t have a problem doing that.”

Other advisers said that while virtual services are helpful for gaining out-of-state referrals and retaining clients who relocate, it’s easier to differentiate yourself and build rapport with potential clients when you’re on the ground.

“Since I started 10 years ago, I’ve been involved in the local charities, with the university, with women’s groups,” said Bynum. “Even though we have technology, I think to grow and thrive we still have to have those relationships.”

“In a place like this, when you move newly, you want to be able to say, ‘Let’s meet for coffee,’” Shyamsundar of Sacramento agreed.

And while the investment management can be done from anywhere, local knowledge can pay dividends in more comprehensive planning services for local advisers familiar with local real estate markets, taxes and state benefits.

“I think having someone who understands where you are and has experience there is invaluable,” said Gross. “And that’s something a virtual adviser just can’t always provide if they’re out of state.”