Silicon Valley’s elite financial advisers say this age of wealth is different

If anyone is in The technology has already begun its hot summer of IPO, and it is the elite of Silicon Valley’s wealth advisors.

Two private wealth managers who work with high-net-worth technologists told me they’ve seen an uptick in activity from their client base, some of whom are anticipating a major liquidity event this year. We are of course talking about employees and early investors At SpaceX, OpenAIand Anthropic Who come to mind-boggling riches. (These wealth managers agreed to speak on the record but did not mention specific companies, so any such references are my words, not theirs.)

Visions of luxury yachts, air-cooled Porsches, and holiday homes with tanks full of Loro Piana probably come to mind. But elite advisors say most of their clients strategically handle their newfound wealth before buying big-ticket items, acquiring real estate, or sinking their money into meme stocks. (Some of them get big anyway.)

Ashley Velategui, head of wealth strategies at Bernstein Private Wealth Management, who has been mentoring high-net-worth individuals in Seattle and the Bay Area for nearly 20 years, says she encourages technology clients to know how much “core wealth” they need to feel financially independent before making any hasty moves. They should also take into account that a balance sheet that consists largely of a single stock — like SpaceX, for example — can change in value significantly over time.

“The pace and scale of wealth creation generally seems faster than before,” says Brittany Bowles Mueller, who heads Goldman Sachs’ West Coast wealth management division and moved to the Bay Area last year to cater to the technology crowd. As you can see, “A lot of what we do is objectified before“Planning to go public now.”

Some ideas I gleaned from my conversations with them:

The definition of wealth has changed. Velategui says there’s more ambiguity now about how people in tech define high or very high net worth. The mega-rich used to be anyone with between $25 million and $30 million, but these days, her average client tends to be worth between $20 million and $100 million.

Velategui adds that clients are considering forming a “family office” — a small private firm that manages family wealth and assets — much earlier than has historically been the case. Its high-net-worth clients are now setting aside $25 million to set up a family office alone, meaning their total wealth extends much further.

Navigating “lockdown periods” can be difficult. The “IPO hot fall” does not seem as lively as the “summer,” but the reality is that most employees and early investors will not be able to sell their shares until the post-IPO lock-up period is over. This is to protect the market from a destabilizing oversupply of inventory; Typically, the insurance period lasts 180 days.

Even in the case of “phased” confinements, staff are urged to be careful, Velategui says. These interim tranches introduce more complexity because there are more points at which a stockholder can sell, and the liquidation process requires more management.

Minimizing taxes remains the goal. Selling stocks can come with a hefty tax liability, and wealth managers are coming up with all kinds of sophisticated ways to let their tech clients spend their money without selling their shares.

Velategui outlines a few of her clients’ strategies, including Prepaid variant forward, Short square spreadsOr borrow money against their brokerage firm.

“The thing that seems to come up in this community more often is variable prepaid futures,” she says. Using this strategy, the seller enters into a contract with a financial institution to receive an upfront, tax-deferred payment for his shares, and agrees to deliver those shares to the bank at a later date. These strategies are not without risk, and are still subject to tax scrutiny, but what is Silicon Valley if not insanely risk-tolerant?