Goldman Sachs Goes All-In on Florida as Wall Street South

(Bloomberg Opinion) -- Goldman Sachs Group Inc. seems determined to make clear that Florida isn’t just a passing pandemic fad for the financial industry.

The bank, which is practically synonymous with Wall Street, made waves late last year with plans to move part of its asset-management unit to South Florida. I noted at the time that the decision didn’t signal that the core of Goldman was fleeing for a warmer, lower-tax region. After all, investors don’t necessarily need the turbocharged, cutthroat environment that defines traders and investment bankers, making asset management a natural division to spread across cheaper regions.

Apparently, that kind of characterization didn’t sit well with Chief Executive Officer David Solomon and the rest of Goldman’s leadership, which looks as if it’s serious about making Florida something of a “Wall Street South” after a year that led hedge-fund titans such as Dan Sundheim at D1 Capital Partners and Scott Shleifer at Tiger Global Management to make plans to permanently relocate to the area. Insider reported on Monday that the bank is in the early stages of moving what could ultimately be more than 100 traders and sales representatives to West Palm Beach, Florida, citing people with knowledge of the plans. Perhaps most telling was this:

The transplants are expected to include the bank’s most senior executives, those 400 or so partners who earn almost $1 million and get a cut of a special bonus pool. Several partners have already expressed interest, one of the people said.

High-performing managing directors or vice presidents are also being encouraged to relocate, to signal that the office won't be considered a backwater that kneecaps their Wall Street career, the person said.

This is a big deal and strikes at the heart of something that young, career-oriented professionals are grappling with. Bloomberg News’s Marc Daniel Davies reported on a 6,000-person survey carried out for Sharp Corp., which showed that more than half of white-collar workers ages 21 to 30 are worried that their careers will plateau unless they head back into an office. For all the productivity gains that a hybrid work model might provide, younger workers also lose out on vital mentorships and connections that pay off in the long run.

In the case of a banking behemoth like Goldman, however, simply being in any office doesn’t always cut it. Just look at the firm’s 2020 partner class: All but one of them is listed as being in New York (or Jersey City, New Jersey), San Francisco, London or Hong Kong. The 2018 partner class included a slightly more diverse geographic footprint, with investment bankers from Chicago, Frankfurt, Houston, Stockholm, Sydney and Tokyo also ascending. Still, it was quite obviously New York, where Goldman traces its roots back more than 150 years, where the crux of the top performers congregated.

According to earlier reporting from Bloomberg’s Sridhar Natarajan and Natalie Wong, one of the key takeaways of the pandemic among Goldman managers is that the bank can function efficiently from disparate locations. While that finding probably holds true across much of the financial industry, it’s a monumental undertaking to attempt to create a new hub that will be viewed as on par with working on Wall Street itself. According to the Insider report, Goldman senior executives would look to move “clusters” of as many as eight to 10 people who are an offshoot of a larger New York-based team. The idea is they’ll get to work with close colleagues while in West Palm Beach while also being expected to travel to and from New York regularly “for face time with executives working from Manhattan.”

That certainly makes it sound as if those stationed in New York will be calling the shots for a while, even if Goldman recruits some top executives to make the move south. Wall Street as it’s known today won’t disappear in a day, or probably even a decade. Yet the fact that Goldman is going all-in on the future of finance including Florida — with the news breaking on the same day that many of its employees officially reported back to its Manhattan headquarters, no less — is the clearest indication yet that New York can’t count on being the undisputed financial capital forever in a post-Covid world. It may soon have a time-share on that title with West Palm Beach.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.

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