Here’s why Charles Schwab and other financial firms keep coming to North Texas
A rising tide can lift any ship, but what happens when the momentum turns and things get tough? For Dallas-Fort Worth, the outlook may be even better.
It’s one way of thinking about Charles Schwab’s recent decision to move his headquarters from San Francisco to North Texas.
Schwab, one of the leading discount brokers, has faced financial pressure from newcomers online, heavy rivals and low interest rates. In September he dismissed 600 employees, about 3% of its workforce, and the following month, Schwab reduce commissions to zero for online trading of stocks and options.
The no-charge movement has shaken the brokerage business. Schwab then entered into a successful deal to acquire TD Ameritrade. He touted the combination’s money-saving potential, what executives like to call synergies.
The new company plans to save up to $ 2 billion per year by cutting overlapping jobs, real estate, overhead and other areas.
That means fewer workers and fewer offices, except in Westlake, where Schwab is building a major campus for 6,000 employees and has room to grow. Next door in Southlake, Ameritrade has a sparkling regional office which opened in 2018.
“We have an opportunity to expand there,” Schwab CFO Peter Crawford told analysts on Nov. 25. “Over the next four, five and more years, this is a place where we will likely add a significant number – and certainly an even larger percentage of our staff.
Consolidation can be painful, especially for those who work in the company and the communities in which they live. Ameritrade’s hometown, Omaha, Neb., For example, is worry about potential job losses.
But it is also an opportunity for the consolidator – and the place where it settles. Remember how American Airlines went through bankruptcy and merger, and once again pledged to stay in Fort Worth. Despite significant job cuts in the airline industry, American’s local workforce has grown by the thousands.
A similar dynamic is playing out with finance and insurance. One year ago, a report on industrial clusters by the Federal Reserve Bank of Dallas has forecast continued expansion of the sector as a result of nationwide consolidation.
“We’ve kind of hit critical mass with all the consolidations, offshoring and expansions,” said Laila Assanie, senior business economist at the Dallas Fed. “It’s a bit like economies of scale. If you have enough critical mass, it tends to attract even more talent and companies. “
In the Dallas Fed report, Assanie co-authored the section on Dallas-Plano-Irving, the subway division that includes Dallas, Collin and Denton counties. The title: “Texas Commercial and Financial Services Center. “
Schwab is just the most recent major financial player to settle or expand here. Others include Capital One, JPMorgan Chase, Comerica, State Farm, Liberty Mutual, Fidelity Investments, USAA, and many more.
Since 2010, the North Texas region has created nearly 58,000 jobs in finance and insurance, including 50,000 on the Dallas-Plano-Irving side.
That’s an increase of nearly 36% – more than three times the increase nationwide and more than four times the growth of those jobs in New York City, the nation’s financial capital.
In the United States, finance and insurance have grown slowly. Since 2010, the segment has added jobs at just over half the rate for the entire private sector. So why is it blowing up here?
D-FW continues to have a cost advantage over taxes, wages, real estate, and other business expenses, particularly over major east and west coast subways. Housing costs are 70% lower than in San Francisco, Schwab’s current home, according to data cited by the Dallas regional chamber.
The savings on food, transportation, health care and utilities range from 16% to 26% compared to San Francisco, the chamber said. These advantages are particularly relevant for industries in transition.
“It’s a question of cost and talent,” said Mike rosa, who directs the economic development of the chamber. “Our strengths are emerging very well.”
The region has seen tremendous growth in total employment and population, and people want to live in vibrant places. Education levels are higher than expected and local colleges are producing more graduates.
Then there’s the constant flow of outsourcing, including Fortune 500 companies, and the immigration of thousands of young, educated workers.
“Businesses view this very favorably,” Assanie said. “You want to be in a place where you can find the talent you need. “
In April, when Schwab had 1,600 employees here, an executive touted the “highly skilled workforce in all fields” and said that D-FW was “a great place to attract this talent that matches our culture. “.
Dallas’ roots in finance and insurance stretch back over a century. Assanie reported that the Dallas bankers were among the first to lend money to oil companies with oil reserves as collateral. But the banking sector collapsed in the 1980s after deep declines in energy and real estate.
Over the decade, 425 Texas banks went bankrupt, including the local bank holding companies that built the tallest skyscrapers in downtown Dallas.
Jobs in finance and insurance declined here in the early 90s, then rose sharply as the economy and people took off. The region has also become a leader in advanced services, such as back office management, call centers and the technology that makes this possible.
Meanwhile, the bank has expanded into new areas, including specialists in auto loans, credit cards and fintech. Most of the players operate on internet-based platforms, and scale and costs are critical. In this environment, D-FW stands out.
“It’s not random,” the chamber’s Rosa said of the growth in finance and insurance. “It is the fruit of the tree.”
Having critical mass has another appeal, said Frank Anderson, a former banking analyst who teaches finance at the University of Texas at Dallas.
“If there is a shortage of available talent, they can just hire existing companies,” he said.