As consumers and investors keep their eyes glued to Silicon Valley for the latest developments, financial institutions continue to flock to the San Francisco Bay Area in an effort to capture wealth management business from technology whiz kids and young tech executives quickly amassing wealth.
The triple threat with these clients, as advisors see it, is to develop a relationship early on, educate them and offer a breadth of services including tax and estate planning.
Financial behemoths that have expanded their wealth management operations in the San Francisco Bay Area include Goldman Sachs Group, JPMorgan Chase & Co., Bank of America Merrill Lynch and BNY Mellon.
On April 1, BNY Mellon acquired Menlo Park, Calif.-based Atherton Lane Advisers LLC, an independent investment advisory firm managing approximately $2.7 billion in assets for 700 high-net-worth clients. Three-quarters of the clients at Atherton Lane, which is now part of BNY Mellon Wealth Management, “touch technology,” says Perry Olson, managing director of Atherton Lane. This includes engineers, executives, and the venture capitalists and attorneys who support them.
“We’re very excited,” says David Emmes, BNY Mellon Wealth Management’s president of U.S. Markets West. He plans to deliver across his wider client base some of the specific needs that Atherton Lane’s technology clients may have. He is also eager to combine the firms’ complementary proprietary analytical tools. “We’re sort of hoping that between our two systems, one plus one equals three going forward,” he says.
Olson is excited about the opportunities for 11-year-old Atherton Lane. “We’ve followed different generations of technology people from Microsoft to Apple and Cisco and now Google and Facebook,” he says. “We realized that to grow to the next level, looking out the next 10 years, it would be good for our firm and our clients to have more resources.”
Atherton Lane already offers its clients, who value access and maintain busy schedules, direct relationships with their portfolio managers. Thanks to BNY Mellon’s sophisticated technology, it will be able to connect more easily, interactively and securely with clients, says Olson. The merger will also provide Atherton Lane’s clients with expanded alternative investment opportunities, banking services, and trust and fiduciary services.
Silicon Valley’s new millionaires “understand discipline and value and rigor and analysis because that’s how they operate on a daily basis,” says Olson. However, “We find that many of our younger tech-preneur clients aren’t used to having wealth,” he says, and may lack experience, historical context and substantial financial knowledge for making decisions about their investments and financial situation.
“Our role is to help them absorb their new reality and educate them about all the implications and considerations that come with wealth,” says Olson. “The adjustment process for these younger wealthy clients can take years—so the education process never really ends.”
He often has to remind millennial clients about the risk of holding concentrated positions of stock in their company or the company that made them wealthy. Another risk he comes across fairly often, he says, is that investors often feel loyalty to the venture capital firms that backed their start-ups and move on to other start-ups funded by the same firms.
“We try to counsel them about the inherent risk in any start-up—no matter which VC firm is backing it—and that they need to think it through,” he says.
Atherton Lane also helps evaluate stock option positions and restricted stock positions (unregistered shares of stock in a corporation), and does a lot of income tax projection and planning for clients. “We don’t replace their CPA,” says Olson, “but we add a certain amount of financial insight to these decisions that they’re making.”