CFP counts are growing faster in states without income taxes

Certified financial planners are popping up in states with no personal income taxes at more than twice the rate of high-tax states like California and New York, according to data from the CFP Board.

Financial Planning compared CFP Board demographic data from 2020 to 2023 and tallied the total number of CFPs across the eight no-tax states and the eight states with the highest marginal individual income tax rates — California, Hawaii, Massachusetts, Minnesota, New Jersey, New York, Oregon and Vermont — into two groups. Finally, FP compared the 2020 group totals to 2023 numbers as a percent change in growth.

Between 2020 and 2023, the total number of CFPs in the United States grew 11.7% to 96,412 as roughly 10,000 financial advisors earned their CFP certifications.

In that span, the CFP population in the eight states with no personal income tax — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — jumped by 15.3% to 18,283.

By contrast, the number of CFPs in the eight states with high personal income taxes — 8.75% and higher — rose by just 7% to 26,658.

From the available data, it is unclear how many of those CFPs moved from other states and how many were already locals of the state in which they obtained their certification.

However, the CFP Board has observed a decline in newly certified CFPs in Florida, Texas and Nevada, according to the CFP Board's Head of Research Michael Kothakota. Such a decline suggests that advisor migration is a significant driver behind overall growth rates.

Still, the decline in new certifications is particularly significant for Texas and Florida, which together account for 74% of the total number of advisors in no-tax states.

"If there is a trend, it is likely due to migration, as most new CFP certificants are declining in those states," Kothakota said. "CFP professionals used to migrate to areas where people were moving, which made sense. However, with the advent of virtual meetings, this logic has diminished. Nevertheless, many CFP professionals may still relocate in order to lower their personal income tax."

It is worth noting that while no-tax jurisdictions saw a much higher rate of growth than high-tax states, they still have roughly 8,000 fewer advisors than their high-tax peers. 

Put another way, a 1% growth in CFPs for high-tax states from 2020 numbers would represent an additional 249 new CFPs. That same 1% growth for no-tax states would represent just 159 new CFPs.

While tax savings draw many clients and advisors to places like Florida, the state's political situation might make a move prohibitive to LGBTQ+ and other minority advisors.

In May, multiple organizations including the Human Rights Campaign, the largest LGBTQ+ advocacy organization in the country, and the NAACP issued warnings over recently passed state policies in Florida that the advocacy groups said are "openly hostile toward African Americans, people of color and LGBTQ+ individuals."

Still, anecdotes abound on the subject of advisors and other Americans fleeing New York and California for no-tax states like Florida and Texas in recent years.

Some industry experts say the migration is an effect of the increase in remote work brought on by the pandemic. About a half dozen advisors with midsize wealth management firm International Assets Advisory left New York, Chicago and San Francisco for cities such as Dallas and Orlando, CEO Ed Cofrancesco told Financial Planning in 2021.

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

Planner Danielle Woods of Maryville, Tennessee-based Propel Financial Advisors lived in Chicago until 2006 when the weather, traffic and costs of the city ultimately drove her to her current home just outside of the Smoky Mountain National Park.

"Tennessee is just an easier state all the way around," Woods said. "You'd have to call and talk to the Department of Revenue here. It's easy and pleasant, in fact. It's not that way for a much larger state with a much bigger bureaucracy."

Tennessee currently has less than half the total number of CFPs than Illinois, but their ranks have expanded at four times Illinois' rate over the last three years.

"One of my partners is based in New York City, and that's a little bit more of a bear," Woods said. "And so we have issues there that we don't have here, which I really like." 

New York state has had one the lowest percentage increases in CFPs of any state in the country since the start of the pandemic. Still, not all high-tax states have seen the same lackluster numbers.

Oregon, Hawaii and Vermont, while all having few CFPs in absolute numbers, have experienced above-average growth over the last few years, between 13% and 17%. Minnesota, with a top marginal individual income tax rate of 9.85%, saw only slightly below-average CFP growth in that same time.

Paul Ayotte, a founding partner of Fidelis Capital in Tampa, Florida, moved from Saint Paul, Minnesota, 25 years ago to start his career in financial advising. Ayotte, who specializes in helping clients move their residential domiciles across state lines, said the move to no-tax states like Florida is not anything new.

"I have heard of an uptick in RIAs coming to Florida because of this," Ayotte said. "But it's all based on the same reasons as it was 25 years ago. Nothing's changed. Our state income tax is zero. Losing states like New York, Minnesota and Wisconsin, have, in some cases, an 8%, 9%, 10% state income tax. So what's happening is, these RIAs and these clients are getting an instant raise just by moving to Florida of 8%, 9%, 10%."