SpaceX Employees Redefine Wealth Management Post-IPO

Thousands of SpaceX employees who have suddenly become millionaires are redefining the wealth management business with their combined fortunes.

As CNBC reported earlier this week, more than 100 SpaceX employees with between $1 billion and $5 billion in combined assets have joined forces to negotiate better terms with wealth management firms. In anticipation of their massive windfall from Friday's initial public offering, the group has signed a deal with the registered investment advisor Choreo for wealth management services at a fee that's lower than industry standard.

The deal, with a fee that starts at 0.5% and falls as the group's assets grow, represents a watershed moment in the wealth management industry, which traditionally charges clients based on their individual assets.

Choreo's CEO, Jason Van de Loo, said the SpaceX IPO is a rare opportunity to build lasting relationships with a large group of clients whose wealth is about to skyrocket.

"This is a unique transformational event," Van de Loo said. "We don't see events like this often. Most investors have decades to build wealth. When you get a moment like this, it's almost more like a large inheritance, or like winning a lottery ticket. It's not easy to wrap your head around the transactional components of that event."

The size of the Choreo group will likely grow over time, and the option is being made available to employees of other firms that are about to IPO. Yet the battle to manage the tens of billions of dollars in newly liquid wealth held by SpaceX employees is just getting started.

Private banks, wire houses, trust companies and other registered investment advisors are all sending teams and hosting events in California, Texas and Florida is hopes of winning their business.

Jamie Battmer, chief investment officer of RIA firm Creative Planning, said the firm has dozens of SpaceX clients. The biggest question they face, he said, is whether to sell any of their stock.

SpaceX equity — typically granted in the form of restricted stock — represents up to 90% of many SpaceXers' wealth, Battmer said. With such heavy concentration in what will likely be a volatile stock, advisors typically counsel clients to diversify.

SpaceXers, however, tend to be deep believers in the future of the company and rarely want to sell any stock. Battmer said his firm is helping these clients with tax-efficient indexing or other option derivative strategies. They're also seeking help with estate planning and philanthropy, including setting up charitable remainder trusts and donor-advised funds.

Most SpaceXers are engineers or technicians by training, so they immerse themselves in the details of how wealth management products work. Yet while they're highly educated, many of them are new to the often complex world of wealth.

"Because it's a group of engineers, these are individuals who do a better job of dotting every i and crossing every t," Battmer said. "But the vulnerabilities that come with just a seismic shift in your net worth are very dangerous and need to be navigated. Oftentimes highly skilled professionals can make the wrong decisions."

SpaceXers also have unique ways of addressing their financial challenges. Like with many aerospace and high-tech companies, the SpaceX culture is built around whiteboarding and troubleshooting.

Bill Dramis, a senior banker at J.P. Morgan Private Bank who works with high net worth executives and employees of aerospace and defense companies in Southern California, said that, in general, engineers typically carry the practice of group problem-solving into wealth management.

"Many of these people that we're meeting are incredibly intelligent and like to whiteboard examples with their peers," he said. "That's how they've grown up and built their knowledge base. So now it's, 'I have this problem set to tackle around wealth creation, tax impacts, charitable planning and giving.' And they want to do that with their peers. They put it on the table and stress test it."

SpaceXers are also relying on artificial intelligence for wealth advice. Advisors say SpaceX employees often come to meetings with recommendations from Anthropic's Claude or OpenAI's ChatGPT.

"What's been interesting to us so far is we're finding creative ways to leverage AI as a part of those conversations," Van de Loo said. "I think naturally for this employee cohort, the first instinct is to go ask Claude, 'What should I do?'

"They're bringing that output into conversations with our team, and we're able to say, 'OK, here's where that output is valid, but here's where it might be a product-specific solution, not a planning solution,'" he said.

Most of all, however, SpaceXers are looking for wealth advisors who can truly educate them.

"We are here to advise people who are coming into these circumstances for the first time," Dramis said. "A lot of the questions that we're asked are, 'Help me evaluate the scenarios, the trade-offs.' We have a very long-term history of helping clients manage through and continue to manage concentrations as their wealth."