Tech investment may be booming amid a surge in artificial intelligence, but it’s also leading to upheaval as both public and private firms reorient their workforces amid job losses driven by that same tech boom.
According to tech job platform TrueUp, nearly 150,000 technology workers were laid off through May—about 971 people per day. For financial advisors who specialize in working with tech employees, the result has been a burst in interest in their services from laid-off workers or those who feel under threat.
“A lot of what our job is to de-escalate the situation and say, ‘Look, we have a financial plan, we have prepared for this, we have an emergency fund, that’s why we do all this financial planning,’” said AJ Ayers, whose firm has a specialty in working with tech employees. “We tell them, ‘We got this, we’ve weathered worse before, and we’ve been training for this day.’”
Ayers, the co-founder and CEO of Brooklyn Fi, said the recent layoffs have become a focus area for the firm. Many current clients, who typically have between $2 million and $10 million in assets, are the ones doing the firing, she said. But for those current or prospective clients who have been laid off, the initial work can include a checklist of “immediate triage needs,” Ayers said.
Those include assessing emergency funds, evaluating health insurance options and considering a person’s stock option situation for a privately held company. The stock conversation can often be the trickiest, Ayers said, because people typically have about 90 days to decide whether to exercise their options and take a tax hit or stay invested.
“You had planned to ride out this private company until a good event. Now you have 90 days to make a decision,” she said. “That’s really where we provide the most value as a decision-making partner to talk through it.”
De-escalating
Bill Werner, a lead advisor at Mission Wealth, agreed that a key concern for laid-off tech workers is making decisions around company stock options and deferred compensation plans.
“They have this great job, great salaries, great benefits,” he said. “But they often don’t realize their benefits, their income, a lot of their future compensation are all really highly concentrated in one specific company.”
Werner said the recent wave of tech layoffs has brought calls from people who hadn’t previously had a financial advisor because they thought, “I’m good, I don’t really need an advisor.” He said the initial work with these clients can be “a little tough” because “the foundation isn’t there, so you’re doing a lot of things all at once, where normally it’s meeting specific and done over time.”
He sees his role as “de-escalating” the situation to help people avoid emotional decisions.
He noted one example in which a client didn’t want to sell his company stock because he had put so much into the firm. But Werner advised that it would be the best path to take the tax hit immediately and be set up for the future. The client didn’t like the idea at first, but was glad later when the stock value plummeted.
Praveen Krishnamurthy, principal advisor at Empower Financial, has been using his 15 years of experience in technology, including as a software engineer at Google, to help technology clients navigate this wave of layoffs. Some of that work involves just keeping up with the fast-paced, competitive world of tech.
“Recently I was talking to a prospect who was on the verge of burnout because things felt like they were moving so fast, promotions were coming and going,” he said. “That prospect said they felt like they were heard and seen because I went through something similar.”
The most difficult part of layoffs, he said, is that people are faced with a compressed timeline for decisions that can impact them in the long term.
“It’s not just about the fact that they’re laid off, and they have severance, and a certain amount of time,” he said. “It’s decisions around healthcare, about whether they are leaving any equity on the table that they might negotiate. Most people don’t even realize that severance can be negotiable.”
Krishnamurthy, a fee-only financial planner, said most of his clients are in dual-income relationships, which can help buy time. But for mid-career tech employees who aren’t yet ready for retirement and for whom full retraining isn’t a realistic option, he can help them evaluate their job-hunting timeline and goals for a new position.
“How do you kind of re-pivot from where you are in a more time-sensitive and cost-effective manner rather than jumping to extreme solutions?” he said.
Unplanned Sabbatical
Ayers said a layoff can also present an opportunity for a tech worker who has built up assets. If they decide to take a year of “low income,” for instance, it opens up tax savings opportunities while they can take advantage of the time by doing something like “taking a sabbatical in Italy.”
Ayers tells the story of a client in their early 40s who initially panicked after being fired and went through a month of tough interviews. Eventually, the client took a step back and went on to have “the best summer of their adult life,” said Ayers, who wrote about the client in a post. The client then returned to the job market and eventually received two offers from publicly listed technology companies.
“That’s the paradox,” Ayers wrote in the post. “A layoff can feel like the end of the world, but with a little cushion, it can just be a temporary blip in an otherwise fabulous year.”
Another paradox Ayers pointed out is that clients who are the people laying off workers. That role can also be difficult, and it becomes a topic of conversation with Ayers about their job and how they feel about being at a place that requires them to lay people off.
“You’re a senior manager, and you had to lay off all these kids who got their dream job and believed in the company,” she said. “That’s also a tough place to be in and can cause some different planning scenarios.”
Werner of Mission Wealth said mass layoffs can prompt people to reassess their careers and what they want, leading to positive outcomes.
“If they maybe were doing really great financially, but they absolutely hated their life, you know, should be making sure that they understand, like, let’s not rush into another role just because of the income, if the rest of your finances are stable, is there anything else that you may want to do?” he said. “Let’s stop treating your portfolio like a painting work of art where the numbers go up. Let’s use the money for what the purpose is … everything that you want to do now.”
