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Is your firm ready for the new IPO millionaires?

I spoke to a CPA friend recently with a number of clients who were Uber employees, newly rich from the tech company's IPO.

“Many of them are in their late 20s or early 30s,” she told me. “They’ve never had money before, and they have no idea which way to turn first. They know this payday is coming with a huge responsibility attached. They don’t want to blow it, but they don’t know how to decide, what to prioritize. They are looking for help.”

It’s a high-quality problem but a problem nonetheless. Reuters estimated the 2012 Facebook IPO produced thousands of new millionaires. Some believe this latest round of initial offerings may create more than six times that number. Remember, we’re not just talking about founders and CEOs: Key employees, department and product managers, while not anticipating billion-dollar payouts, are probably looking at becoming instant millionaires. These instant high-net-worth individuals will hail not just from Silicon Valley but from tech hubs in Austin, Texas; Dallas; Raleigh-Durham, North Carolina; Phoenix and the Washington, D.C., area.

What is your firm doing to prepare itself to attract and retain this newly affluent demographic? Make no mistake: your competitors and others are targeting them. As recently reported in The Wall Street Journal, these “soon-to-be-enriched employees are being inundated by high-end sales pitches.” Marketers of luxury services such as yacht rentals, heli-skiing and high-end real estate are already calling, emailing, and otherwise wooing the likely recipients of IPO riches. Especially for those unaccustomed to the attentions of such purveyors of luxury, these invitations can be both flattering and seductive.

Uber,part-time job-bloomberg.jpg
An Uber Technologies Inc. logo sits on a smartphone display in this arranged photograph in London, U.K., on Friday, Dec. 22, 2017. Uber will be regulated in European Union countries as a transport company after the bloc's top court rejected its claim to be a digital service provider, a decision that could increase legal risks for other gig-economy companies including Airbnb. Photographer: Chris J. Ratcliffe/Bloomberg

Our firm’s plan is to reach out to this demographic using CPA referrals, targeted social media initiatives and other efforts geared to projecting that we understand, and can help them cope, with both their opportunity and the uncertainties surrounding it. We’ll make use of technology — specifically our eMoney platform — to offer simulations, demonstrations and information sessions about how our services can provide answers to some of the what-ifs they will be facing.

We’ll help them understand the technicalities of lockup periods, stock options, restricted stock units and other factors related to their firms’ IPOs. We will also explain how our full suite of advisor services leverages technology to stay abreast of the markets while also considering the unique needs, goals and dreams of the individual client. In addition, we will provide legal and tax referrals to ensure they have access to expertise appropriate for their evolving estate planning and philanthropic objectives, as well as understanding the capital gains implications of their company equity.

But most importantly, we will offer clients the emotional tools they’ll need to deal with the decisions and responsibilities that accompany greater wealth. As word of their new affluence gets out, they will be receiving pleas for financial assistance from family, friends and others. They’ll be in the crosshairs of nonprofit organizations searching for donations.

It will be bewildering, intimidating, and often, guilt-inducing. Not long ago I was working with a younger client who found himself in a similar position. Though his windfall was the result of an unexpected inheritance, he shared with me that he felt completely unable to enjoy his new affluence. “I don’t even know who I am anymore,” he said. “I’ve suddenly got all these people calling me, asking for money. I don’t know what to say to them.” He wasn’t sure he had the right to refuse any request; after all, the money didn’t even feel like it belonged to him, he said.

We helped my client turn the corner on his feelings of anxiety and guilt by helping him to establish his priorities and zero in on what was most important to him: providing for his children’s future, giving back to the less fortunate and securing a financial foundation for his immediate family. It then became much easier for him to make judgments and prioritize, not only about the continuing requests for financial help, but also with regard to his ongoing use of his new wealth. “Now that I know where I want to go,” he told me later, “it’s much easier to see which choices will keep me headed in the right direction.”

That knowledge should be our goal with every client, and it certainly applies to the new IPO millionaires who are coming our way in the next several months. If we can use language they already understand to position ourselves as reliable guides, we will be doing what is right for our firms, for our new clients and for society as a whole.

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