All the negatives about Los Angeles are true: the high cost of living, suspect public schools, dysfunctional big-city government, a toxic business atmosphere and some of the worst traffic in the nation.
Yet loads of wealthy people populate the City of Angels because it pretty much has it all — an appealing lifestyle, opportunities and arguably the best weather in the U.S.
“People say there's a hostile business environment here,” said Michael McCall, founder of Michael J.D. McCall Inc. in downtown Los Angeles. “Well, yeah, but they're here in spite of that ... What makes it so wonderful is that we are such a melting pot. Add the weather, and people want to come here.”
Ara Oghoorian, founder of ACap Asset Management Inc., grew up in nearby Pasadena, Calif., and returned to the Los Angeles area in 2009 after living in San Francisco, Washington, D.C., and overseas.
“It goes back to lifestyle,” he said. “You don't realize how much you enjoy [Los Angeles] until you leave. Regardless of your interests, whether it's the outdoors, arts, culture or entertainment, there's something for everyone.”
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Skies are usually clear two-thirds of the time — even in the rainy winter season. In January, the coldest month, temperatures average in the mid-60s during the day and 48 at night. August highs average in the mid-80s.
DIVERSE CLIENT POOL
Los Angeles is big — nearly 470 square miles, with 3.8 million people in the city proper and 9.9 million in L.A. County — which is why the economy is more diverse and resilient than most people think, according to advisers.
The entertainment, tourist and aerospace industries are most prominent, but telecommunications, medical, technology, and other industrial and related service sectors are scattered throughout the region.
“Places like L.A. and Orange County [to the south] seemed to not be impacted” much by the recession, Mr. Oghoorian said. “Even in 2009, restaurants were packed.”
Communities further inland were hit harder by the real estate bust and the recession.
L.A. has many entrepreneurs who start firms and sell out, creating demand for financial advice, said Doug Foreman, director of equities at Kayne Anderson Rudnick Investment Management LLC.
“There are probably more [startups here] than any other part of world, other than maybe Silicon Valley,” he said. “It's very vibrant.”
That may come as a surprise, given Los Angeles' reputation as a tough place to start and run a business.
Advisers said smaller professional practices are not as affected by regulations as manufacturers and developers are. The city has a business license tax, which for professionals is about one-half of 1% of gross receipts.
“The high cost of living is the big negative,” said Jennifer Hartman, co-founder of Greenleaf Financial Group. Housing costs and poor public schools make attracting business difficult, she said.
HOUSING, WEALTH CREATION
Buyers are back in the real estate market, though. Property markets have picked up in the last six to 12 months, advisers said — not an insignificant development in a place where home values play a large role in wealth creation.
“In L.A., a lot of people [have] most of their wealth in their homes,” said Michael Glowacki, founder of The Glowacki Group LLC, who headed to Los Angeles from Illinois after his sports car was buried under a snow pile 35 years ago.
“They may have bought a home 20 years ago for $500,000, and it's now worth $4 million,” he said. “So they have accidentally saved a lot of money.”
According to Zillow Inc., the median home sale price in Los Angeles was $398,000 as of Oct. 1, 31% higher than California as a whole and more than double the national average.
Retirees seriously consider going where housing is cheaper and taxes are lower.
California Proposition 30, passed in the November election, raised tax rates on income above $250,000, retroactive to Jan. 1, 2012, adding impetus to such conversations, said Derek Holman, managing director and co-founder of EP Wealth Advisors Inc.
Many L.A.-area residents are originally from other states and don't have the local family ties that might hinder them from picking up stakes.
LAND OF OPPORTUNITY
In addition, about half of Mr. Glowacki's clients don't have children, as many moved to L.A. for the lifestyle rather than to raise a family.
“When we do multigenerational planning, it's about how to do philanthropic planning and leaving a legacy. That's huge in L.A.,” he said.
Despite its size and challenges, Los Angeles is a surprisingly easy place to do business, advisers said.
“I found that people in D.C. were more closed-vested and would not openly discuss [their] businesses,” Mr. Oghoorian said. “It was harder to build friendships. Los Angeles is a far more friendly environment ... If you have initiative and drive, you will make it happen.”
“It is a little more of a transient city, so it's not as closed off as maybe some others [are],” Mr. Holman said. “You could easily do well coming in from another town.”
“L.A. is a great place,” Mr. Glowacki said. “It has a lot of opportunity, a lot of wealth and a lot of people willing to delegate” to professional advisers.
Mr. Holman echoed that statement: “There are plenty of opportunities here, plenty of individuals who need financial planning and wealth management,” he said.
“Overall,” he added, “there are very few places better to live.”
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