Will Bitcoin Become a Financial Advisor Topic?

Ric Edelman says financial advisors need to learn about Bitcoin in order to be able to speak intelligently with their clients, in advance of the SEC approving an ETF in the space. I agree with him. A Capgemini study this summer found that more than 70% of millionaires under the age of 40 want to get cryptocurrency information from their primary wealth manager, not from someone else.

I began giving a talk on crypto to the financial advice industry last week in Denver, Colorado, where I addressed a joint luncheon of the CFA Society and the Financial Planners Association. The audience had great questions and the presentation went over pretty well considering the fact that it was my first time giving it. I plan to continue speaking about this topic, both to our clients and other advisors.

To be clear, we do not currently recommend any allocation toward digital assets – for three very good reasons.

The first is that regulators have not come around fully to the fact that this may become an asset class in the future. I think they’re doing the right thing in allowing the space to evolve before slamming the door shut or throwing it wide open. And believe me, there are going to be test cases. You don’t want to be a pioneering financial advisor and wind up becoming a test case.

Second – we don’t invest in commodities and Bitcoin is a commodity. It’s not cash, it’s not a usable currency, it’s not an equity. It’s a commodity. People are buying and selling it based on what they think other buyers and sellers will do after them. There are no cash flows. We don’t hold gold or bet on oil or invest our clients’ money in any direct commodity holdings, so why would we make an exception for this commodity – a commodity that doesn’t even have a real-world use case at this point other than the movement of money back and forth? We wouldn’t.

(Why don’t we invest in commodities? Because our portfolios work just fine without them and commodity booms end up reflected in the stock markets of the world anyway.) 

The third reason, and perhaps the most important right now, is that custody is still the Wild West. I have some coins sitting at Coinbase and some on a cold storage drive. If they were stolen tomorrow, I could go on with my life, we’re not talking about real exposure. I don’t think the infrastructure exists to have large holdings in coins with a straight face right now. Bitcoin futures exposure might be an exception. I wouldn’t open accounts for my clients on Coinbase or any other exchange, and the established banks and brokers that do traditional custody just aren’t there yet for crypto.

Here’s a quick conversation with my fellow financial advisor Tyrone Ross, who knows more about crypto than almost anyone in our business…

But it’s early and things could change.

Last night, Ric Edelman, one of the most successful financial advisors in America, was on CNBC talking about why he believes our industry needs to take an interest in this topic. I agree with everything he said up until the “it’s an asset class” remark, which I am still unsure of.

Watch below:

Tyrone and I will be serving on a panel at the Coindesk-produced Consensus: Invest 2018 conference in Manhattan next month. Check out the agenda here for details.

If you want to save on admission, Coindesk has given me my own discount code – type in ReformedBroker300 to save $300 on registration. See you there.

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

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  1. Will Bitcoin Become a Financial Advisor Topic? – Financial Solutions commented on Oct 04

    […] Ric Edelman says financial advisors need to learn about Bitcoin in order to be able to speak intelligently with their clients, in advance of the SEC approving an ETF in the space. I agree with him. A Capgemini study this summer found that more than 70% of millionaires under the age of 40 want to get cryptocurrency information from their primary wealth manager, not from someone else. I began giving a talk on crypto to the … Source: https://thereformedbroker.com/2018/10/04/will-bitcoin-become-a-financial-advisor-topic/ […]