December 2, 2023

In states with no personal income tax, certified financial planners are springing up, and the tax rate is more than double that of high-tax states like California and New York, according to the data. CFP Committee.

financial plan Compared 2020 to 2023 CFP board population data and counted CFP totals for 8 tax-exempt states and 8 tax-exempt states. Top marginal personal income tax rate — California, Hawaii, Massachusetts, Minnesota, New Jersey, New York, Oregon and Vermont — split into two groups. at last, FP The 2020 totals are compared to the 2023 figures, expressed as a percentage change in growth.

Between 2020 and 2023, the total number of CFPs in the U.S. will increase by 11.7% to 96,412, with approximately 10,000 financial advisors certified as CFPs.

During this period, the CFP population in the eight states with no personal income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming increased by 15.3% to 18,283 .

In contrast, the eight states with higher personal income taxes (8.75% and above) saw a 7% increase in the number of CFPs to 26,658.

From available data, it’s unclear how many of these CFPs relocated from other states and how many were already natives of the state in which they were certified.

However, according to Michael Kothakota, director of research at the CFP Council, the CFP Council has seen a decline in the number of newly certified CFPs in Florida, Texas and Nevada. This decline suggests that consultant migration is an important driver behind the overall growth rate.

Still, the decline in new certifications was particularly notable in Texas and Florida, which together account for 74 percent of the total number of consultants in tax-exempt states.

“If there’s a trend, it’s probably due to immigration, because most new CFP certifications are declining in these states,” Kotakota said. “It makes sense that CFP professionals used to migrate to areas where people moved Yes. However, with the advent of virtual meetings, that logic is gone. Still, many CFP professionals may still relocate to lower personal income taxes.”

It is worth noting that while tax-exempt jurisdictions have experienced much higher growth rates than high-tax jurisdictions, they still have around 8,000 fewer advisors than high-tax jurisdictions.

In other words, a 1% increase in the number of CFPs in high-tax states compared to 2020 represents 249 new CFPs. For tax-exempt states, the same 1% increase would represent only 159 new CFPs.

While tax savings have drawn many clients and advisors to places like Florida, the state’s political landscape can deter LGBTQ+ and other minority advisors.

In May, groups including the Human Rights Campaign, the largest LGBTQ+ advocacy group in the United States, and the National Association for the Advancement of Colored People (NAACP) released Warning against recently adopted national policy In Florida, advocacy groups called it “openly hostile to African-Americans, people of color and LGBTQ+ people.”

still, anecdotes abound The theme is that consultants and other Americans have fled New York and California in recent years for tax-free states like Florida and Texas.

Some industry experts say this migration is the impact of increased remote work brought on by the pandemic. About half a dozen advisors at midsize wealth manager International Assets Advisory left New York, Chicago and San Francisco for cities like Dallas and Orlando, Chief Executive Ed Cofrancesco said. Tell 2021 Financial Planning.

While COVID-19 may have accelerated this trend, other consultants say they made the move years ago.

Danielle Woods, a planner for Maryville, Tennessee-based Propel Financial Advisors, lived in Chicago until 2006, when the city’s weather, traffic and costs eventually forced her to move to her current home just outside the Great Smoky Mountains National Park.

“Tennessee is an easier state in every way,” Woods said. “You have to call the tax office here. Actually, it’s easy and pleasant. That’s not the case in a bigger state with a bigger bureaucracy.”

Currently, Tennessee has less than half as many CFPs as Illinois, but their numbers have grown four times as fast as Illinois’s over the past three years.

“One of my partners lives in New York City, which is kind of a bear,” Woods said. “So we have problems there that we don’t have here, and I really like that.”

New York State has had the lowest increase in CFP of any state since the start of the pandemic. Not all data from high-tax states were equally lackluster, though.

While the absolute numbers of CFPs are small, Oregon, Hawaii, and Vermont have seen above-average growth over the past few years, between 13% and 17%. Minnesota’s marginal personal income tax rate topped out at 9.85%, and CFP growth was only slightly below average over the same period.

Paul Ayotte is a founding partner at Fidelis Capital Partners in Tampa, Florida, and moved from St. Paul, Minnesota 25 years ago to begin his financial advisory career. Ayotte, who specializes in helping clients relocate across state lines, said moving to tax-exempt states like Florida is nothing new.

“I’ve heard of an increase in RIAs coming to Florida because of this,” Ayote said. “But it’s all for the same reasons as 25 years ago. Nothing has changed. Our state income tax is zero. Failed states like New York, Minnesota, and Wisconsin, in some cases 8% , 9%, 10% % state income tax. So what’s happening now is that these RIAs and these customers get an immediate 8%, 9%, 10% raise just by moving to Florida.”