The longtime gap between Wall Street and Main Street is closing. What used to be done only in New York can now be done almost everywhere. Thanks to the reach of computers, an options trader can drop work when the market closes and hike in the Rockies minutes later. Small firms like D.A. Davidson, known in these parts as Dadco, can attract big-city talent. And the Dow can reach record highs while vacancy rates are increasing in the putative heart of the market, lower Manhattan.
Technology is driving this transition, along with real-estate costs and a new generation’s insistence on the kind of lifestyle hard to pull off in New York. These forces are reshaping the geography of the securities industry, relocating thousands of jobs, billions of dollars and the power that goes with them. Along the way, attitudes are changing, as Wall Street learns what all American business is learning: it doesn’t much matter where you call home.
For the last 200 years, it did matter. Wall Street, the main drag for commercial traffic on Manhattan Island in the 1600s, got its start as a financial capital when the first Congress met there in 1789 and authorized the issue of $80 million in war bonds. “Wall Street,” still a distinctive place, also came to symbolize the market itself.
Lower Manhattan will not be reduced to echoing canyons–at least any time soon. As finance goes more global, Wall Street’s importance as an international hub is growing. And there is still a significant attraction for companies that want the stimulation, network and image emblematic of the city. “Nothing has to be here,” says Merrill Lynch executive vice president Edward Goldberg, who has helped move more than 6,000 jobs to Denver, Jacksonville, Fla., and other cities in recent years. “But we want to maintain a presence in Manhattan.” New York officials are “determined to keep New York the financial capital of the world,” Morgan Stanley chairman Richard Fisher said last fall. But now they have to work at it. Last year the city granted more than $140 million in incentives to induce firms such as Morgan to stay put.
In spite of such efforts, the exodus is on. New York’s share of securities-industry employment in the United States dropped to 30 percent last year from almost 50 percent in 1970. Meanwhile, much of the industry’s growth has happened elsewhere. Mutual funds, an industry born and bred in Boston and which has major firms like Janus all over, was once dwarfed by the brokerage giants based on Wall Street. But mutual funds have boomed, with equity volume of $475.4 billion last year, nine times what it was in 1982. Meanwhile, Nasdaq, the computerized market that operates from any dealer’s desk, has taken a big chunk of business from the New York Stock Exchange, where market makers must be on site. Companies that are Wall Street customers also have moved themselves outside the major business corridors.
No matter how far they are out of those corridors, securities people can now assume that Wall Street will come calling. On a recent Monday morning, Jim Craig, a top stock picker at Janus Funds, was at a briefing with executives at Intel, which had just reported its quarterly earnings. But Intel last year eliminated the in-person quarterly briefings it had held for 22 years; this discussion was conducted by international conference call with 180 other people, with the help of a firm that specializes in largescale, hassle-free telechat. Access to information is more democratic, and analysts and investors save the time and money it would cost to go to such meetings, which are most often held in Manhattan.
Information is power in any endeavor, but it is virtually everything on the Street, and the digital age is working a radical redistribution. “Technology is an equalizer,” says Andrew Mills, president and chief executive of Thomson Financial Services. Back-office operations, such as order processing, were the first to move out of Wall Street, seeking lower costs. (Office space is $12 to $14 a square foot in Denver, but $40 to $50 a square foot in New York.) But operations closer to the heart of the Street, such as trading and research, are also moving, thanks to personal computers.
Since the mid-1980s, firms once dependent on mainframe systems have been putting PCs on almost every desk. With Thomson’s First Call system, for example, an investor can punch up the latest reports on, say, IBM, from more than 35 brokers. In the “old” days, to get even one broker’s IBM report, an investor had to be big enough to be at the top of the broker’s call list (hence the name “First Call”), and the broker had to wait for the report to be copied and distributed by his research department.
The technology free-for-all is also changing attitudes. When it came to new-product development or executing big deals, New York for years assumed a “not invented here” bias. The “East Coast really felt comfortable maintaining control over information,” adds Victor Hymes, a Scudder, Stevens & Clark portfolio manager in San Francisco. “That’s thoroughly changed.”
While other firms have struggled with the question of whether to stay in the Big Apple, CEO Ian Davidson has transformed his father’s humble Montana brokerage into a full-service regional firm based in Great Falls. Davidson’s team finds it easier to convince local officials that the guys next door are just as good; in one year it doubled its business in underwriting municipal bonds for projects like highways and hospitals to $372 million. And the firm can capture business from the kind of companies that used to cluster near Boston or in Silicon Valley; half a dozen laser-technology companies are now in Bozeman.
With business beckoning, farflung firms have little trouble attracting topflight talent. When Tom Marsico, a Denver native, left New York for Janus in 1986, he just smiled at colleagues who told him he was heading for “the information wasteland.” (“Get your mind out of Denver,” one of those seers had told him in 1984, when he predicted that four-wheel-drive cars would be big sellers.) Now an industry star, Marsico doesn’t consider a Wall Street stint necessary for a Janus recruit.
In fact, the true believers say that those outside New York even enjoy an advantage. “New York tends to be a little myopic,” says Janus chief Bailey. “The same boys tend to go to the same luncheon meetings and hear the same speeches all the time.” If you want to check out a company’s stock, he says, go “to [its] plant in Oswego and [feel] the energy at the receiving dock.”
And if success and clarity of vision aren’t enough, try quality of life. New York is also losing ground for a reason much simpler than technology: this generation wants to live where it can balance work and other pursuits. Marsico works long hours but can get to the soccer field in minutes to coach his kid’s team.
Dadco proved this point recently when it advertised for a new research director. “Ten years ago that would have been a laugher,” says Bruce Madsen, Dadco vice chairman. This time he got 200 replies from big-city professionals. One was from Fred Dickson. When a Wall Street friend suggested he apply, Dickson remembers, “I said, ‘Give me a break: Montana?’” A couple of weeks later he saw Dadco’s slick headquarters and went trout fishing on the Missouri. He started packing.
