Career Advice Feb 01 2012

The Ultimate Wealth Adviser

By randall smith

Sometime around 2006, when Facebook Inc. was little more than a collection of T-shirt-clad 20-somethings in a sparsely populated office, Goldman Sachs Group Inc. private-client adviser Divesh Makan showed up to add a dash of formality.

Dressed in a suit and tie and speaking in a South African accent, he impressed at least one of the start-up's executives with his forward-thinking ideas on taxes and estate planning before the magnitude of the company's success was clear. "He had a comprehensive approach to thinking about this stuff," the executive recalled, at "a much more sophisticated level than anybody else."

Makan's early prospecting paid off in a big way.

The executive signed up with Makan, as eventually did Facebook founder Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg, according to people familiar with Makan's firm. Ms. Sandberg and her husband Dave Goldberg have co-hosted several "wine dinners" for a few dozen of Makan's clients at their home, the people said.

Facebook's founding president, Sean Parker, and Zynga Inc. Chief Executive Mark Pincus also are clients of Makan's team, the people said.

With a Facebook initial public offering seen as imminent—paperwork could be filed as early as Wednesday— Makan is in line to manage a large chunk of the vast amount of wealth it is expected to create.

New Wealth Creation

Ron Gong, head of the Palo Alto, Calif., office of wealth-management firm Harris myCFO, says four 2011 Internet IPOs—LinkedIn Corp., Pandora Media Inc., Groupon Inc. and Zynga Inc.—will have created at least $30 billion in stock-market value, which he describes as "the start of a new wave of wealth creation." Facebook alone may be triple that total.

For Makan, the offering will likely come months after he and colleagues Chad Boeding and Michael Anders founded their own firm, Iconiq Capital LLC, last December. Makan declined to comment through a spokesman, Paul Kranhold, who said, "the firm's client matters are extremely private."

Makan, 38 years old, grew up in South Africa and got an undergraduate degree in electrical engineering there. The son of a consumer-electronics store owner of Indian descent, he worked in financial services at Andersen Consulting before earning an M.B.A. at the Wharton School in 2001. That year he joined Goldman's downtown San Francisco offices, from which he eventually started making connections with executives of Facebook, founded in 2004.

He claimed some of the social network's executives as possible clients before Facebook became widely known, according to Eric Gershman, president of Consultants Period Ltd., a brokerage industry recruiter in Stowe, Vt. "It was a key insightful move," Gershman said.

Ramen Noodles

Makan targets up-and-coming technology entrepreneurs "while they're still eating ramen noodles and can hardly afford apartments but they're building something great," said client Kevin Hartz, chief executive of Eventbrite, an online ticketing platform forsports, music and other special events.

When Makan and his team left Goldman Sachs and moved to Morgan Stanley in 2008, he received a signing bonus of roughly $20 million, according to people familiar with the matter. The bonus was repayable as a loan over a period of several years, the people said, and until recently Makan owed Morgan Stanley several million dollars on the loan.

Makan formed his own firm partly because he didn't want to be under pressure to sell financial products from each firm's own menu, such as initial public offerings they were underwriting, according to someone familiar with his work. As a "family office" which manages all its clients' financial assets, Iconiq usually steers them to other managers of stocks, bonds, hedge funds and private equity, the same person said.

People close to Goldman and Morgan Stanley say they have "open architecture" allowing sale of a wide range of products.

Part of his current financial advisory practice involves putting his own money alongside that of clients into early-stage companies, according to people familiar with his work.

Such investments by Makan had to go through an approval process at Morgan Stanley, one of the people said. Such co-investing can carry legal risks for the brokerage firms if the investments don't perform well, said one of the people familiar with the matter.

Blackjack

Since developing his clients in social networking, Makan has helped steer to certain brokers Facebook executives and investors who wanted to sell some of their stock, according to people familiar with that market. He also has arranged recent investments in online file-sharing start-up Dropbox Inc.

Eventbrite's Hartz says Makan builds personal bonds with his clients. "I don't view him as a portfolio manager, I view him as a trusted friend who has helped me with a lot of different things," Hartz said.

When Facebook's Zuckerberg announced plans to give $100 million to Newark, N.J., public schools in September 2010, Makan was designated to serve on an investment committee overseeing the funds.

Makan has also attended the Super Bowl with clients and goes on regular trips to Las Vegas with his entire wealth-management team and a small group of clients, some clients say.

There, one client says, Makan will play the occasional hand of $10 blackjack.

This story first appeared on WSJ.com.

Write to Randall Smith at randall.smith@wsj.com




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