A group of current and former SpaceX employees has created a low-fee wealth management arrangement with Choreo, a Chicago-based registered investment advisor, according to people familiar with the agreement. The employee group, which has more than 100 members representing potential wealth between $1 billion and $5 billion, negotiated terms that include an annual management fee under 0.5% of assets under management — below the industry standard of 0.5% to 1%. The arrangement comes ahead of SpaceX's initial public offering, which is set to debut at the Nasdaq on Friday, and reflects an effort by employees to use their collective financial scale to secure better advisory terms and devote more resources to philanthropy.
SpaceX Employee Group Negotiates Sub-0.5% Annual Fee with Choreo
What began as an informal chat forum focused on philanthropy has grown into a broader effort to create efficiencies and better access to financial advice using combined wealth from post-IPO windfalls, people familiar told CNBC. A small team representing the group evaluated potential firms and created the wealth management offering with Choreo that members can opt into.
Choreo says on its website it has more than $28 billion in assets under management and advisement, 40-plus offices, and 200 wealth advisors. The sources told CNBC the arrangement includes either a minimum annual fee or an annual management fee under 0.5% of assets under management. The fee structure is for a long-term agreement rather than a one-time promotional offer. Choreo didn't immediately respond to a request for comment.
Wealth management firms have typically set fees based on an individual's or family's wealth levels, offering a sliding scale based on investible assets. By joining forces, the SpaceX employees and alumni are proving they can use their collective financial scale to secure better terms, the people said.
SpaceX IPO Set for Friday Nasdaq Debut
The Elon Musk-led rocket company is set to debut at the Nasdaq on Friday. The agreement highlights the unprecedented power of the SpaceX IPO — establishing vast numbers of newly minted millionaires who were paid in stock as well as creating one of the most sought-after liquidity prizes in the wealth management industry, according to the sources.
The vast majority of SpaceX employees — many of them engineers who were paid below-market salaries in return for stock — have never had large wealth to manage, the people familiar said.
Employee Group Focuses on Philanthropic Giving
By reducing fees, members of the SpaceX group hope to devote more of their fortunes from the SpaceX IPO to philanthropy, the people said. In the forum, many of the SpaceXers have been sharing advice and contacts on how best to use their new wealth to give back to their communities, the people familiar said.
Some indicated they are considering creating scholarships and funding for the colleges and universities where they were trained and educated, according to the sources. Others have said they want to fund new programs that give children better access to engineering, science and math programs.
Anthropic Employees Explore Similar Collective Advisory Arrangements
Employees of Anthropic, which recently filed confidential plans to go public, are also in discussions with advisory firms about a potential collective option, the people familiar told CNBC.
FAQ
What fee did the SpaceX employee group negotiate with Choreo?
The SpaceX employee group negotiated an annual management fee under 0.5% of assets under management with Choreo, according to people familiar with the agreement. This is below the industry standard of 0.5% to 1%. The fee structure is for a long-term agreement rather than a one-time promotional offer.
When is SpaceX's IPO scheduled?
SpaceX is set to debut at the Nasdaq on Friday, according to the article.
What is the SpaceX employee group planning to do with their IPO wealth?
By reducing advisory fees, members of the SpaceX group hope to devote more of their fortunes to philanthropy, the people familiar said. Some are considering creating scholarships and funding for colleges and universities, while others want to fund programs giving children better access to engineering, science and math programs.
