Finance industry: Bullish on
Denver
Monica Mendoza, Reporter
Denver Business Journal, Jul 22, 2016, 4:04am MDT
KATHLEEN LAVINE/DENVER BUSINESS JOURNAL
Denver once compared 17th Street to New York’s Wall Street.
You don’t hear many comparisons of 17th Street to Wall Street anymore, and that’s fine with local financial leaders, who say
the local scene is thriving on its own terms.
It was a hot day in June and about 100 people had walked out onto the 10th floor deck of one of downtown Denver’s newest
financial firms.
Mayor Michael Hancock didn’t seem to mind the heat. That’s because he and the city had been courting the New York-based
online lending company On Deck Capital Inc. (NYSE: ONDK) for the last three years.
On this day, he was celebrating the company’s growth from 18 employees to 170.
On Deck spent $5 million renovating office space at 101 W. Colfax, the Denver Post’s headquarters building, in its bid to join
the city’s growing and thriving financial services sector – one to which the state has committed more than $81 million in tax
incentives over the next decade for financial services firms adding thousands of jobs in the state.
Decades ago, Denver leaders liked to refer to the city’s banking center along 17th Street as another Wall Street. Sometimes
they called 17th the “Wall Street of the West” — a phrase that has also been applied to financial districts in San Francisco, Los
Angeles, Salt Lake City and Fort Worth. More recently, “Wall Street of the Rockies” came into vogue, appearing on metal
historical markers along 17th Street where a cluster of bank buildings once stood.
But while Denver may have once aspired to be like Wall Street, these days an association with New York’s fabled financial
center doesn’t seem so important to local leaders.
For one thing, while metro Denver is one of the largest financial services centers in the U.S., it isn’t close to moving the kind
of money that Wall Street does. There’s no New York Stock Exchange.
For another, after the financial crisis and various scandals, the name “Wall Street” doesn’t have the prestige it once had.
One thing is certain: In metro Denver, the financial services sector is hot. It now includes 13,800 companies and about 97,000
employees working in banking, investments and insurance. In the past five years, the industry has added nearly 18,000 jobs
here.
“I view Denver as on an upward trajectory, an up and coming center for financial technology,” said Noah Breslow, On Deck’s
CEO. “And it’s a great thing that Denver may not exactly be Wall Street. It’s the best Denver it can be as a hub and attraction
point – it’s only improved in the last three years.”
Gold fuels growth
Denver has had a long love affair with financial services dating back almost to its founding as a gold-mining supply center in
the late 1850s. The Kountze brothers founded Colorado National Bank in 1862 to buy gold from miners and sell it to East
Coast investors.
With a lot of gold flowing through town, and with the coming of the railroad in 1870, banks of all sizes grabbed up real estate
along 17th Street to ensure they were in the city’s epicenter, said Tom Noel, also known as Dr. Colorado, historian and
professor at University of Colorado Denver.
“In the old days, there was a huge welcome arch in front of Union Station,” Noel said. “Mayor [Robert] Speer put it up in 1906
to welcome newcomers and investors. Once the railroad station had opened, 17th Street became the address to have. You
had your biggest banks and biggest law firms there.”
Over the decades, booms and busts reshaped and transformed Denver’s financial district.
In the early 1980s, the city romanced the penny stock market and it flourished with brokerage firms lining 17th Street. Other
cities were competing in the financial sector, too.
However, in 1982, the penny stock market hit the skids and firms in Denver started to shutter. Then came a recession and the
state lost 48,000 jobs over the decade.
It wasn’t a pretty scene, said Fred Taylor, who moved back to Denver to work at Boettcher & Co., a regional brokerage firm.
“It was the firm to work for in Colorado financial services,” said Taylor, who was let go from the firm in 1987 when the stock
market crashed. By then, Kemper Corp. had acquired Boettcher for $16 million.
At the time, Denver was more about bonds than stocks. It was also a time when banks were consolidating.
In 1991, United Bank of Denver sold to what was then Minneapolis-based Norwest Corp., which combined with Wells Fargo &
Co. in 1998. And in 1997, Colorado National Bank merged with U.S. Bancorp.
Then mutual funds took off, with firms like Janus Capital Group putting Denver on the map as the growth mutual fund Mecca,
Taylor said.
“People capitalized on that and others started promoting growth mutual funds,” Taylor said.
Taylor and three partners, tired of being at the whim of the big firms, started their own firm in 1996, Northstar Investment
Advisors. They started a new way of doing business — charging a fee, rather than working on commissions. The firm also built
a custom portfolio to help clients to live on stock dividends.
“We took an old-fashioned approach and modernized it,” Taylor said.
Newcomers stake their claims
Over the years, Denver has had to rethink its relationship with the financial sector, especially as more outside firms began to
open up shop here, said Tom Clark, CEO of the Metro Denver Economic Development Corp.
“In 1989, a guy by the name of Charles Schwab decided to build a call center. ... We didn’t know what he did. But it was 300
jobs and he fell in love with the Denver.
“That was the beginning of what we know today. We had started thinking, who were the big players and how can we get
them interested?” Clark said.
TIAA, (formerly known as TIAA CREF), a provider of retirement services in the academic, research, medical and cultural fields,
also decided in the late 1980s to make its first move out of New York into Denver. Then came wealth manager Merrill Lynch.
“When you start building that labor force, guess what? More companies start coming in,” Clark said.
In 1998, the city invested $3.5 million in lights, signs and street medallions — that look like large coins — along 17th Street in
an effort to revitalize the financial district. The markers were labeled “Wall Street of the Rockies.”
“If someone asked the question, ‘Why are firms moving to Denver?’ Denver is the second most educated workforce in the
country. Forbes says it has one of the best legal pools,” said Skip Spriggs, TIAA executive vice president and chief human
resources officer.
“I think that means when you have critical mass, you tend to drive more employers from the financial sector here,” he said.
“If you are in the financial services industry, you absolutely know how important Denver is to the financial sector.”
City and state officials tout Colorado’s Front Range as one of the few areas outside of the Northeast with a substantial
financial services industry in three key market segments: banking and finance, investments and insurance.
“I think we did grow up to be in the running against any city,” Clark said.
Employment growth in the investments sub-cluster led the financial services sector in 2015 was 7 percent, compared with 2.5
percent growth nationally, which helped make financial services the region’s second-fastest growing industry last year.
Three years ago, seven of the state’s largest employers in the financial services sector formed the Colorado Investment
Services Coalition with the mission of growing the industry in the state, said William Kavanagh, COO of Fidelity SelectCo. The
coalition works with Colorado’s universities on curriculum and recruiting.
In January 2013, Fidelity Investments announced plans to establish a new regional U.S. site in Greenwood Village with 500
employees and last year the company said it plans to hire 300 more employees. The Colorado Economic Development
Commission agreed to offer the company as much as $8.13 million in job-growth incentive tax credits to create those new
jobs.
“One of the things we realized as we looked at Denver was there was an investment services community that was already
here and diverse and deep and growing,” Kavanagh said. “We knew the workforce was very good and growing.”
The companies that have located here, while large in numbers, really focus on investments services such as 401(k)s and
retirement planning, he said. Fidelity likes to view the company as more Main Street than Wall Street, he said.
“It is a vibrant investment services community in a growth mode in Denver,” Kavanagh said. “I think it’s going to be one of the
cities in the United States that will continue to see investments services growth.”
‘Wishful thinking’
All of that growth is great, said Michael Quinn, founding partner at Denver-based Q Advisors investment bank, which
specializes in telecom, media and technology mergers and acquisitions and debt and financing deals around the world.
“We are not the Wall Street of the West for three reasons: One, we don’t have enough private equity and venture capital
here,” Quinn said.
“Two, the only banks here that are left are asset-based lenders, not cash-flow lenders. Growth companies need cash-flow
lenders. And No. 3 – a lot of our larger corporations have been bought.”
The lack of capital makes Denver’s financial sector “sleepy,” not sophisticated, Quinn said. It will take the addition of large
corporations before the city’s financial sector grows up.
“[Large corporations] spin off entrepreneurial companies and attract more sophisticated financial service offerings,” he said.
“If you are a company and trying to attract local Colorado funds – there are not 50 funds, there are 10. That lack of capital is
what I mean by sleepy. It’s killer. Commercial banks, none of them understand how to deal with early-stage companies.”
Even a decade ago, when there were about 450 banks in Colorado, it still had not grown up to the hype of being another Wall
Street, said Don Childears, president and CEO of the Colorado Bankers Association.
“It was a little exaggerated,” Childears said. “It was wishful thinking.”
Today there are about 145 banks in the state. The smaller number represents consolidation and closures. But fewer banks
should not be construed as banking turmoil, Childears said. Banking is solid and growing in Colorado.
In 2015, the state’s division of banking reported that commercial banks and trust companies both realized positive asset
growth with total deposits held by state chartered commercial banks up 4.9 percent to $38 billion and assets up 4.6 percent
to $43.8 billion.
Capital among the commercial banks improved over the year by 1.9 percent to $4.1 billion, signaling improved financial
strength. And Colorado’s banks employ about 23,000.
“We have made lots of progress,” he said. “The Wall Street of the West didn’t quite fit us. We aren’t there. We do represent a
concentration of financial services that you don’t see from the West Coast to Chicago.”
Paul Washington, executive director of Denver’s Office of Economic Development, believes it’s time to let go of the name
Wall Street of the West. The city is focused on bringing in high-paying jobs and the financial services sector does that, he said.
“Wall Street of the West connotes an image of billion dollar investments and transactions,” Washington said. “That’s not
Denver. Denver is a small business community, but we are no less sophisticated.”
Denver has had to think about its financial services in a new way, including cultivating an entrepreneurial environment,
Washington said. Some of the financial technology companies the city wants to attract are startups.
“The financial industry is going through profound change,” he said. “Models you see now are designed to give more
education and sophistication to the investors. I think that is where I see the future — more innovative, investor friendly
services delivery model. To me that is exciting.”
If not Wall Street, then what?
Financial services is a sector the city and state want to develop and grow. Over the past three years, an estimated $81 million
in tax incentives has been offered to financial services firms to expand or relocate to Colorado with the promise of adding
more than 6,000 jobs.
The financial sector added 3,500 jobs year-over-year as of May 2016.
Steve Jenks, chief marketing officer at Empower Retirement and Great West Financial, described Denver as rapidly emerging
in financial services and he expects Denver’s financial services industry to keep growing.
Two years ago, Greenwood Village-based Great West Financial, an annuity and life insurance company, spun off its
retirement services as a new company, Empower Retirement, also headquartered in Greenwood Village. Together, the firms
have about 3,000 employees.
“If you look at the Denver area, from an employment perspective, it’s pretty attractive,” Jenks said. “There is a real attraction
based on the lifestyle here. There are advantages to being in the Mountain Time zone. The growing financial services sector
was attractive to us because we knew there would be talent. Adding all those factors, it felt like a natural headquarters.”
Back at the grand opening party for On Deck in June, Breslow said the company had considered other cities for its expansion,
including Phoenix and Salt Lake City. Denver offered an educated workforce and an attractive lifestyle, he said.
And to sweeten the deal, the state kicked in $10 million in tax breaks if the company grew to 600 employees over the next
eight years.
“A big part was the welcoming aspect of city and state – the message was we want to attract companies like you to Denver,”
Breslow said.