When the nine-person startup he co-founded was bought by Facebook for a reported $15 million in January, Cemre Gungor, 27, was inundated with phone calls and emails from wealth advisors. Yet he spurned them all, opting instead to open an account with Betterment, an online financial advisor launched in 2010 that automatically invests in a portfolio of exchange traded funds based mainly on a client's age.
"My personality doesn't lend itself to being the sort of person who would research good wealth managers and then trust them with making decisions. I don't want to spend any time thinking or caring about that," said Gungor, who grew up in Turkey and Finland before moving to the U.S.
He and others of his generation are posing a challenge for wealth advisors who are streaming into Silicon Valley and San Francisco after the public stock offerings of companies such as Facebook, LinkedIn and Twitter helped California create more millionaires than any other U.S. state since 2009.
But even as traditional financial firms battle for office space and seek out new customers, they're finding that the pickings aren't easy. The youngest winners of the thriving tech economy, many of whom came of age during the last financial crisis, aren't often interested in the ideas that attracted clients in the past. Nor are they fans of the old-school model of letting a financial planner make decisions with minimal client input.
In response, traditional advisors are changing the way they practice. They're finding that young clients need help with lifestyle issues ranging from how to give money away to how to deal with old friends who are jealous of a sudden tech windfall. And they are giving clients more of the hard data behind their decisions than they might with clients who inherited their fortunes or built them up over time.
Debra Wetherby, an independent advisor whose Wetherby Asset Management manages about $3.6 billion in assets, has fielded questions from young, single workers about when and how to tell potential spouses about their fortunes. Christine Leong Connors, who heads JPMorgan's Palo Alto office, has talked with tech clients about how to donate money effectively when their own net worth is larger than the charity they are giving to. And Michael Williams, a UBS Wealth Management Americas branch manager in San Francisco, has found himself courting potential clients whose paydays are so far away that they're still pulling all-nighters and sometimes sleeping in their startup offices.
It's all part of an attempt to appeal to a new demographic of money. The youngest members of Generation X and millennials are the most likely to say that they are dissatisfied with their wealth advisor, according to a report by the Spectrem Group, a market research company in Lake Forest, Illinois.
"The industry is not in alignment with folks who are very tech savvy, and it's an industry that is trying to catch up," said George Walper Jr., the president of Spectrem.
Nowhere is the collision between new money and the old-line business of wealth management more on display than in California. Firms like Barclays, Goldman Sachs Group Inc, Bank of America Corp's Merrill Lynch and JPMorgan Chase & Co have all expanded their Bay Area operations as firms like Facebook have gone public and the shares of more mature firms like Google have hit all-time highs.