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Advisors Cash In on California’s Tech Boom

By Murray Coleman February 2, 2015

Last week, advisor Fane Opperman heard from clients that a local technology giant had issued a new dress code. Some kind of clothing was mandatory, the guidelines said, but ties were no longer permitted.

The satirical notice brought a chuckle to the Wells Fargo Advisors FA, who has been with the firm in Silicon Valley for years. It also reminded him that his clients — the rising class of technology millionaires — think of themselves as iconoclasts whose refusal to “dress for success” is of a piece with their lack of professional conformity. “As an advisor, you’ve got to know how to deal with people who are constantly reinventing themselves,” says Opperman, whose San Jose-based practice manages $860 million.

In the market recovery since 2009, IPOs from the likes of Twitter and Facebook have spawned a cottage industry of advisors eager to manage their founders’ new wealth. Last year, tech companies going public on U.S. exchanges raised a record $32.3 billion, according to Greenwich, Conn.-based market researcher and asset manager Renaissance Capital. That was up almost fourfold from 2013. And the party might keep rolling on. “Brace yourself — the next 12 months could be historic for tech IPOs, even by the inflated, reality-proof standards of Silicon Valley,” said a recent column in the San Francisco Chronicle. That’s sweet music to the ears of Paul Boyd, managing partner at ClearPath Capital Partners in San Francisco, which manages $250 million. Almost all his practice’s clients are tech executives or tech entrepreneurs.

Although they range in age from millennials to baby boomers, Boyd finds they all have one thing in common. “Nobody seems to want to retire,” he says. Indeed, the classic approach to financial planning — figuring out how to turn assets into an income stream that will make work unnecessary after, say, age 70 — mostly doesn’t apply to Boyd’s clients. Instead, his challenge is persuading them to diversify their portfolios away from tech and to keep on socking away savings even during the leaner portions of tech’s boom and bust cycles.

Recently, the cofounder of a San Francisco-based software company in his mid twenties came to Boyd with a nine-digit portfolio he’d been keeping mainly in cash. The man realized he should put his savings to better use, he told Boyd, but he wasn’t sure how to do it, and asked whether putting everything into bonds might be a good idea.

Paul Boyd

Boyd asked him why he wanted to invest so conservatively. The young man explained that although his business is raking in the bucks, it’s been profitable for less than five years — in a nascent and volatile part of the industry. Boyd met with him several more times to cover the basics of investing and explain why a portfolio allocated 100% to debt isn’t risk-free. The young prospect has become a client, Boyd reports, and has agreed to put half his nest egg into equities. Furthermore, Boyd was able to talk him out of his first impulse, which was to invest only in tech stocks, and to go with a diversified mix instead. “Talking about market risks has to take front-and-center stage in educating people who work in technology,” Boyd says.

So does goal setting. Whereas traditional clients often have a fairly predictable trajectory of financial objectives, for techies they can be a moving target, says Jason Ting, a Merrill Lynch advisor in San Mateo, Calif., with AUM of about $700 million. For example, a few years ago, a longtime client who had been an executive at a global chip manufacturer in Silicon Valley decided he had amassed enough wealth to retire in his early forties. Ting sat down to revamp the client’s investment and estate plan. Three years later, he’s doing it all over again — because his client got bored. Not only is he going back to work, he’s launching a new company.

Don’t Call Them “Jobs”

That’s not an unusual situation, according to Ting. One woman who has been a client for 13 years, a tech executive, has changed jobs a dozen times. “An important way I’ve found to add real value is to stress early in a relationship that setting realistic financial goals isn’t a one-time conversation,” says Ting. In fact, techies’ notion of professional advancement is so different from mainstream clients’ that Ting uses a special vocabulary when talking to them about career moves. For example, Ting never asks a techie, “Where are you working now?” or “Did you change jobs?” Instead, he might say, “What sort of project are you working on these days?” or even just, “What are you up to?” “Someone working in tech will notice right away if you don’t realize that switching jobs is a sign of success, not failure,” Ting says. “It’s an industry where advisors need to talk more about change and opportunities and less about job titles and work experience.”