Crypto assets are here to stay. What began as some niche financial experiment has matured into a retail-driven bona fide market, garnering the interest of financial institutions and professionals alike. Bitcoin, the oldest and most secure crypto asset, has seen its highs and lows, as its price has plummeted and skyrocketed – seemingly all while you grabbed your morning cup of coffee.
On Oct. 6, CoinDesk hosted its second annual Bitcoin for Advisors event to educate financial professionals on all things bitcoin. And while the focus remained bitcoin – hence the name – the conference also dabbled into some of the other parts of the larger crypto ecosystem, giving advisors a new understanding of bitcoin as an asset class and equipping them with the tools to do more research on their own.
So why should advisors take a close look at crypto now? Well, according to Onramp Invest’s CEO Tyrone Ross the answer is simple: “If we’re going to see the next great lift in crypto assets, it’s going to come from the registered advisors space … it’s clear institution adoption has come after mass acceptance”.
What bitcoin and digital assets mean for advisors
And Bitcoin for Advisors’ first keynote speaker corroborated this story.
Ric Edelman, the founder of Digital Assets Council of Financial Professionals, gave a lot of food for thought when discussing bitcoin and what this new digital asset class means for advisors. He made it clear that advisors cannot afford to be left behind and that they need to educate themselves on this new asset class.
Edelman, who is famous for creating the 1% digital allocation strategy for bitcoin and digital assets, went on to demonstrate how getting advisors “off zero” upside far outweighed the potential downside.
He went on to note his support of Gary Gensler’s recent actions as chair of the U.S. Securities and Exchange Commission, citing Gensler’s experience at MIT and stating, “We finally have adult supervision in the room” (though to be clear, this was not a slight at Gensler’s predecessor). Edelman was appreciative of Gensler’s breadth of experience in crypto and said that he looks forward to the clean-up that’s to come. Notably, Edelman doesn’t see the lack of full regulatory clarity as a reason for advisors to sit on the sidelines, believing that they have enough of a framework to work with.
While Edelman may have been a tough act to follow, all of the speakers brought important insights for advisors. Max Schatzow, a shareholder at the law firm Stark & Stark, broke down compliance and what advisors can and can’t say to their clients, and Morgen Rochard of Origin Wealth Advisers LLC led an excellent discussion on bitcoin and practice management.
Bitcoin’s obstacles and opportunities
At the top of the hour, Bitcoin for Advisors featured financial planning nerd Michael Kitces in a fireside chat with Tyrone Ross, covering bitcoin’s obstacles and opportunities. Kitces isn’t quite completely sold on the bitcoin thesis; he holds a healthy dose of skepticism when it comes to the oldest digital asset in the ecosystem, and for good reason – the “holding” problem advisors have on how to integrate assets into their systems remains. Unless advisors are able to aggregate crypto held by their clients for tracking and reporting, the conversation remains somewhat bleak, Kitces said. Furthermore, he anticipated that advisors’ investments in crypto assets will much more likely happen in the format of an exchange traded fund (ETF) or a separately managed account (SMA) as opposed to trading individual coins, believing advisors to prefer more diversified baskets.
Ross pushed back on the ETF bit, mentioning that fees would be quite expensive, and Kitces conceded that the cost might be prohibitive. And while Kitces remains skeptical about an asset that goes up solely because others are putting money into it, he positions himself and advises others to remain curious and keep an eye out as everything continues to unfold. For one thing, Kitces said he is certain that advisors, whether they hate or love bitcoin, can no longer afford to ignore the asset.
Perspectives on advisor fees and continuing education
Rounding out the end of the day were two of the most recognizable names on the advisor end: Grayscale and Coinbase. (Disclosure: Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.) In a redux of last year’s event, Grayscale CEO Michael Sonnenshein and Lauren Abendschein, Coinbase’s head of U.S. institutional sales, spoke together. From the onset, Sonnenshein came out strongly, saying that fees ought not to be the determining factor on whether an advisor breaks into the space. He noted that the fees will come down over time, but advisors should not let that be the reason they don’t consider bitcoin as part of their portfolio.
Abendschein agreed on the fees, and went on to encourage advisors to continue educating themselves in the space, citing the sophisticated tooling being introduced to the market as an opportunity, as well as catching investors up to speed on the ever-expanding crypto landscape.
Crypto moving forward
And finally, in a closing keynote that can only be described as a history lesson rolled into an optimistic forward-looking take, Dani Fava, Envestnet’s head of strategic development, took advisors down memory lane to a time and place when only a select few institutions were able to trade stocks and how deregulation gave rise to the likes of Charles Schwab. She likened this history lesson to the current situation unfolding before our eyes: Crypto is cutting out the middleman, and if advisors don’t adapt, they will be left behind because their clients will keep building wealth without them.