This news service looks at the Dallas wealth management arena and its surrounding market in Texas, noting the strength of business among a cluster of firms, some local characteristics, and what is driving the sector. FWR intends to map out a number of regional US markets in coming months.

The massive metropolitan sprawl surrounding Dallas is “one of the major wealth hubs in the United States,” according to Aite Group’s research director Alois Pirker.  “If you’re a wealth management firm, you have to be there.”

The reasons for Dallas’ enormous appeal are overwhelming.

The North Texas/Dallas region is the second fastest-growing metropolitan area in the country, just behind neighboring rival Houston. Its 7.5 million people make greater Dallas the fourth largest population center in the US and the region is expected to add close to another 4 million people in the next 25 years.

Texas has no state income tax. Local governments in Dallas, Fort Worth and the surrounding suburbs actively promote a “favorable business climate,” as Dallas’ Chamber of Commerce puts it, and go out of their way to accommodate the needs of both large corporations and striving entrepeneurs.

“Dallas is the kind of place where entrepeneurs are everywhere and people tend to look at a problem and say ‘We can probably figure something out,’” said Richard Joyner, president of Tolleson Wealth Management. 

Indeed, the Dallas metro region led the US in job growth last year and is the corporate headquarters for 24 Fortune 500 companies, the third-highest of any market.

Diverse economy
“What makes the Dallas market distinctive is the business community,” said Pete Chilian, market manager for JP Morgan Private Bank. “It’s a place that thinks big and is very open to business. That’s why you’re seeing such a big trend of corporate headquarters relocating here.”

What’s more, the regional economy is extremely diverse. High-tech, energy, healthcare, bio tech, real estate, aerospace and even manufacturing are all well represented.

And financial services are rising fast. Nearly three dozen large financial companies have offices in North Texas. Charles Schwab is moving its corporate headquarters to the region, joining advisory giants TD Ameritrade and Fidelity, which already have a large corporate presence.

Dallas’ central location and two major airports, including brand new terminals, is also a big draw, according to Mark Gehlbach, president and co-founder of True North Advisors. “It’s easy to be on either coast in two hours,” Gehlbach said. “That’s very appealing.”

These attributes add up to “a huge wealth creation machine,” according to Joyner. The Dallas/Fort Worth market has over 2,330 ultra-high net worth households with $30 million or more in net worth, according to Wealth-X , making it the seventh-largest - and one of the fastest-growing - in the country. 

If you have an advisory firm in Dallas, “you’re putting yourself in the path of growth,” said Colin Carter, managing director at Tiedemann Advisors, market leaders from Wall Street.

So how is this lucrative pie divided up?
“Texas has long been welcoming to New York banks since the combination of the oil-patch bust of the late 1980s and home office protection wiped out Texas banks,” said UHNW consultant Jamie McLaughlin. “Dallas remains the biggest, most diversified market in the state and is seen as cooler and hipper than Houston. JP Morgan, Goldman Sachs, Northern Trust and wirehouses dominate.”

Wealthy Texans are attracted to JP Morgan, Goldman and other private banks because of their lending capabilities and their brand names, according to Jeff Spears, a Texas native who spent 25 years as a wealth manager in San Francisco and recently moved back to Dallas as chief operating officer for local RIA Burford Brothers.

“Wall Street firms aren’t considered cool in San Francisco but people in Dallas care more about the brand and the security associated with the brand,” Spears said.
 

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RIAs under-represented?
According to Spears, McLaughlin and others, the North Texas market is dramatically underserved by RIAs.

There are only eight RIAs in the greater Dallas market (and only 18 in the entire state) with over $1 billion in AuM. By contrast, California has 60 RIAs with over $1 billion in AuM, and close to half of those are in the San Francisco Bay area.

“The Dallas market is hugely underserved by fiduciaries,” McLaughlin said. “It’s genuinely weird for such a big, fast-growing market. I don’t know why RIAs haven’t gotten more traction. It may be that the New York and Chicago banks got there first and have a first mover advantage.”

JP Morgan’s Chilian, who manages around 100 staffers in Dallas, disagrees. 

“The wealth management industry is highly fragmented market and Dallas is no different,” Chilian said. “A firm with dominant market share would only have maybe low double digits. There’s room for all kinds of firms in the market.”

To be sure, there are plenty of RIAs in greater Dallas.

Tolleson, True North and RGT Wealth Advisors are widely considered to be the market leaders. Crow Holdings Capital, Lee Financial, Vogel Financial Advisors, SFMG Wealth Advisors and Tailwind Advisors are also well-established local firms. Relative newcomers include Tiedemann, Beacon Pointe Advisors and Matter Family Office.

Sub-markets
The North Texas/Dallas market is roughly divided between Dallas’ wealth enclaves centered in University Park, Highland Park and Preston Hollow; Fort Worth and the northern metropolitan sprawl centered about Plano.

“This is really several markets,” said Beacon Pointe president Matt Cooper, who moved to Dallas last year from Newport Beach, California. “Dallas proper has several generations of old money, Fort Worth is very much a cowboy town that sees Dallas as too flashy and the outlying suburbs have money that has moved from other places.

“But you need to hire or acquire the talent necessary to serve each of those different sub-markets,” Cooper continued. “One person cannot have success in all three.”

Fort Worth, a large city of nearly one million people, is seen as especially parochial. “It’s very different from Dallas,” True North’s Gelbach said. “They have their own schools, country clubs and rodeo. It’s very relationship-driven.”

Joyner agrees. “Fort Worth is very distinct,” he said. “If you don’t have a Forth Worth address, it’s hard to get clients from Fort Worth.”
 

 

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Targeting UHNW clients
Tolleson’s success stems from UHNW clients in Dallas, as evidenced by the firm's $6.6 billion in AuM. “They’re the only RIA to really crack that code,” Cooper said.

The average Tolleson client has approximately $35 million to $40 million in investible assets and around twice that much in net worth, according to Joyner.

The firm prides itself on “very high-touch services” for multi-generational clients with complex needs, Joyner said. Clients come from the energy business, real estate and “a lot of entrepeneurs selling businesses.” The firm also has a bank with trust powers which helps it attract “clients with existing and funded trusts,” Joyner added.

Wealth managers competing for UHNW business say they find themselves increasingly competing with single family offices. When Tiedemann competes for the business of wealthy families with $250 million or more, “our competition is SFOs,” Carter said.

When St Louis-based Matter Family Office opened an office in Dallas last year, it found itself competing against “a relatively short list of big RIAs and not many multi-family offices,” said Katherine Lintz, a partner at the firm. But Matter, whose average client has around $40 million in investible assets, did find “a lot of single family offices” in Dallas, Lintz said. 

After a long search for the right office space, the firm has thrived, Lintz said, by working with SFOs to support services and provide other wealthy families with specialized “adaptation skills” to help them cope with change, in addition to providing traditional investment management and planning services.

Biggest challenge: Finding talent
What should other firms interested in entering the Dallas market know?

Finding the right advisors will be difficult, locals say.

“Competition for talent is the single biggest challenge in this market,” JP Morgan’s Chilian said. Joyner agreed: “There are not enough people and demand is growing,” he noted. 

True North’s Gehlbach believes that the Dallas/North Texas market is “about five to seven years behind the coasts and Chicago as a sophisticated financial center. Advisors with 15 to 20 years experience with high net worth clients are few and far between.”

Newcomers welcome?
As for wealth managers coming into the area from other parts of the country, local executives were mixed.

Some, like Gehlbach, who launched True North 20 years ago, said the market is welcoming and “it doesn’t matter where you’re from.” Others weren’t so sure. 

In areas like Highland Park and Turtle Creek in Dallas, as well as Forth Worth, “you have to be connected,” said Beacon Pointe’s Cooper. “It’s not a negative if you’re not from Texas,” said Jeff Spears. “But it’s not a positive either.”

Headhunter Danny Sarch, an executive recruiter based in New York who helps place financial advisors around the country, said he would be skeptical about moving to Dallas without connections. “An outsider moving to Dallas thinking they can get a slice of the wealth management business will find it challenging,” he said.

The risk is worth it, argue local executives, pointing to the region’s phenomenal growth. 

“When it comes to access to capital, sometimes I have to pinch myself when I think about the next ten years from a growth perspective,” said Gehlbach. “It’s only going to get better.”