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VIPs Are Venturing Into Crypto, but Many Advisors Still Hesitate

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What You Need to Know

  • The recent launch of the Onramp Invest platform could help attract more RIAs to crypto.
  • But challenges, including the SEC delaying approval of cryptocurrency ETFs, continue to persist.
  • Crypto is also still too risky to recommend to clients, says, Andrew Graham, a managing partner at Jackson Square Capital.

The launch in late May of Onramp Invest — with Ritholtz Wealth Management as an initial investor — and Dynasty Financial Partners rolling out its first crypto options for its advisors could help persuade more RIAs and other advisors to start offering cryptocurrency to their clients.

But ongoing challenges, including the Securities and Exchange Commission postponing a decision on approval of the first Bitcoin exchange-traded fund — continue to cause hesitation among advisors, RIA firm executives and industry experts told ThinkAdvisor.

Onramp is a crypto-asset integration platform for financial advisors led by investment advisor Tyrone Ross. It is championed by a number of prominent figures in the advisory industry; it lists Danielle Fava of Envestnet, Jamie Hopkins of Carson Group, Jason Wenk of Altruist, Douglas Boneparth of Bone Fide Wealth and Anthony Stich of Advicent among its advisors and investors.

Dynasty, for its part, has teamed with Eaglebrook Advisors to offer Bitcoin and other digital asset investment strategies to its network of independent advisory firms.

Movement, but Slowly

“I think the Onramp platform will make it easier for those advisors who want to get their clients allocated to crypto to do so,” according to Joel Bruckenstein, head of Technology Tools for Today (T3).

“Based upon our experience last year when we had Ric Edelman,” founder of Edelman Financial Engines, “organize a half-day seminar on crypto, it seems to me like there is movement in that direction, but it has been slow to date,” Bruckenstein told ThinkAdvisor by email Tuesday.

“Most advisors are a conservative bunch, and it takes time for newer ideas to get fully vetted and accepted in the marketplace,” he pointed out.

In addition, “more education is needed” in the advisor sector, he said. “I think when the SEC starts approving crypto ETFs it will lend further legitimacy to crypto as an asset class.”

Meanwhile, Timothy Welsh, president, CEO and founder of consulting firm Nexus Strategy, said he believes “when industry leaders like Dynasty and Ritholtz embrace something new, then that portends well for the future.”

But, echoing Bruckenstein, he said: “The RIA industry has always been a conservative, ‘fast follower’ marketplace. RIAs want to wait and see if a new trend or approach has staying power, and doesn’t blow anyone up.”

His prediction: “Once there are some credible firms that have passed the guinea pig stage, then look for broader adoption. In this case, crypto has so many unknowns still that it does take time, but inevitably, RIAs and the ecosystem that supports them will customize solutions and then it is off to the races.”

Waiting on the SEC

More optimistic was Tommy Marshall, executive director at Georgia Fintech Academy, who also pointed to the significance of SEC approval of crypto ETFs.

“I think that we will continue to see more and more RIAs offer cryptocurrency investing capabilities for clients,” he predicted. “One simple reason is that sophisticated clients are asking that this type of investment be available in the portfolio.”

He added: “The marketplace will also likely soon offer cryptocurrency ETFs as soon as regulatory approvals allow. … As these ETFs become available a much wider group of RIAs will have a relatively easier way to provide cryptocurrency exposure in client portfolios.”

RIA Skepticism

San Francisco-based RIA Jackson Square Capital doesn’t yet offer crypto investment options to clients, for whom the firm manages about $375 million in assets, according to Andrew Graham, its founder, managing partner and portfolio manager.

“We come from a large bank — we came from J.P. Morgan — [and] we’ve been trained to avoid things without enough of a track record to really get a good understanding for things like correlation and so on,” he told ThinkAdvisor in a phone interview Tuesday.

As a chartered financial analyst and fiduciary, “I have a real hard time valuing anything unless it’s got some form of cash flow,” he pointed out.

There is really nothing he is aware of at this point that will make him change his mind on crypto anytime soon, he said.

But the Onramp launch and Ritholtz and Dynasty supporting crypto “adds incremental justification to at least follow it,” he said.

Jackson does invest in Silicon Valley Bank and Signature Bank, which operates the blockchain-based digital payments platform Signet, he noted, but added his firm invested in Signature for reasons beyond its digital payments platform.

Traditional Strategies Still Preferred

Sacramento, California-based RIA Allworth Financial also has no plans to adopt crypto in its investment portfolios, according to Jeffrey Baumert, executive vice president of financial services at that firm, who told ThinkAdvisor his firm prefers traditional investment allocations for clients.

“I cannot comfortably comment on what other firms are doing, or even speculate on why they are doing what they do,” he told ThinkAdvisor. But he was quick to add: “I can say with absolute certainty that what they are doing will not in any way drive us (or many others) to follow.”

He predicted crypto “will be around for the foreseeable future” although it’s “impossible to know which currency will ultimately dominate, or whether it will even remain in its current form.”

There is also a “dark side to crypto that we would like to avoid, and we hope that, eventually, the nefarious use of cryptocurrencies is somehow mitigated,” he said.

While “things like cryptocurrency can be exciting to watch as their prices rocket upward,” he said: “They quickly lose their appeal when those prices plummet, as we all recently saw. It is extremely difficult to look at crypto and assess an intrinsic value, much less fully understand what drives these prices — other than emotion. And emotion is something we always seek to minimize in portfolio management.”

Big Firms Lead the Way

More bullish on crypto was Boneparth, an advisor who is president of Bone Fide Wealth, an RIA based in New York.

“We would love nothing more than to provide our clients with a low-cost passive crypto investment option,” like a Bitcoin or Ethereum ETF, he told ThinkAdvisor.

“However, despite the number of applications filed with [the] SEC, it still could be some time before we see one,” he predicted.

Also, he explained: “Many smaller firms, unfortunately, lack the size and scale to effectively add current products on the market. Firms with size and scale that are currently jumping into the crypto market ultimately help move things forward for smaller firms.”

Pictured: Signs in New York on the day of the Coinbase IPO. (Photo: Bloomberg)


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