SpaceX employees create low-fee Choreo wealth management plan for post-IPO

A group of current and former members SpaceX Employees who joined forces to manage their wealth after the IPO have created a new, lower-fee advisory option with Choreo, according to people familiar with the agreement.

The employee group has more than 100 members and represents a potential fortune of between $1 billion and $5 billion, according to the people who spoke on the condition of anonymity to discuss the confidentiality agreements. What started as an informal chat forum focused on philanthropy has evolved into a broader effort to create more efficiencies and improve access to financial advice using the wealth amassed from their post-IPO windfall, the people told CNBC.

A small team representing the group evaluated potential companies and created a new wealth management offering with Choreo that members can sign up for. Choreo, a Chicago-based registered investment advisory firm, says on its website that it has more than $28 billion in assets under management and advisory, more than 40 offices, and 200 wealth advisors.

Specific details and terms remain confidential, but sources told CNBC there will be a minimum annual fee or annual management fee of less than 0.5% of assets under management. Any fee less than 0.5% could undermine the industry standard of 0.5% to 1%. Choreo’s fee structure is for a long-term agreement and not a one-time promotion.

Choreo did not immediately respond to a request for comment.

The deal represents a bold experiment in the wealth management industry that could shift the balance of power from advisory firms to wealthy investor groups.

Wealth management firms typically base their fees on an individual or family’s wealth levels, offering a sliding scale based on investable assets. By joining forces, SpaceX employees and alumni are proving they can use their collective financial scale to secure an option with better terms.

The agreement also highlights the unprecedented power of SpaceX’s IPO – creating large numbers of new millionaires who were paid in stock as well as creating one of the most sought-after liquidity prizes in the wealth management industry.

The Elon Musk-led rocket company is set to make its debut on the Nasdaq on Friday.

The vast majority of SpaceX employees – many of them engineers who are paid below-market salaries in exchange for stock – have never had significant fortunes to manage.

By lowering the fees, SpaceX Group members hope they can allocate more of their wealth from SpaceX’s IPO to charity, the people said.

At the forum, several SpaceXers shared advice and connections on how best to use their newfound wealth to give back to their communities, the people familiar with the matter said. Some indicated that they were considering establishing scholarships and funding for colleges and universities where they trained and taught. Others said they wanted to fund new programs that would give children better access to engineering, science and math programs.

Anthropic employees, which recently filed confidential plans to go public, are also in discussions with consulting firms about a potential collective option, people familiar with the matter told CNBC.