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NEW YORK (
TheStreet) -- While the investment banking arms of
JPMorgan Chase(JPM - Get Report) and
Goldman Sachs(GS - Get Report) are trying to scoop up stakes in technology companies like
Facebook , banks' wealth-management operations are trying to woo the newly rich social media entrepreneurs as clients.
"The wealth has shifted from inherited to entrepreneurial," explains John Dowd, regional managing director of
Wells Fargo Wealth Management(WFC - Get Report), which manages $150 billion in assets. "When I started in the industry 25 years ago, at least 50 percent of the clients were inherited wealth. Now 50 percent of the clients are entrepreneurs and 25 percent inherited wealth," Dowd says.
"The old money client is in decline," adds Jeff Spears, CEO of
Sanctuary Wealth Services LLC, a registered investment advisor with $1 billion in assets under management. He explains that growth in wealth management is being driven from new newly created millionaires located in San Francisco and entrepreneurs in Silicon Valley.
New clients also means a new way of doing business. Dowd says that the recession and the Bernard Madoff scandal has swayed views about wealth management, and getting entrepreneurs comfortable enough to open their wallets has pushed the the industry to be more transparent.
"Clients are now more inquisitive. They want to know what are the total fees I am paying? What is the performance of my portfolio versus benchmarks?," Dowd says.
Banks also need to take a different approach to reaching out to prospects that primarily use email, text messages and social networks to communicate.
"A lot of new clients are entrepreneurs who are embedded in technology, so you have to use technology like Twitter, Facebook and blogs to reach them, communicate with them and gain their credibility," Spears says. "These are people who are math savvy, so you have to prove to them why they need someone to manage their assets."
Once a manger actually wins some business the new clients are proving to be more conservative than the "old-money" clients they replaced. Unlike the dot-com generation that invested aggressively in stocks, most of the new entrepreneurs are going into, "very few investment vehicles," Dowd says.