Advisors’ Crypto Adoption Will Rise ‘Profoundly and Quickly’: Adam Dell

To most folks, cryptocurrencies are as perplexing as they are intriguing and enticing. To most advisors, they arouse skepticism, but the founder of a new investing platform says he’s seen signs that’s about to change “profoundly and quickly.” 

In an interview with ThinkAdvisor, Adam Dell, founder and CEO of Domain Money and former head of product at Marcus by Goldman Sachs, explains what crypto is, he says, really about:

“You can invest today in the technologies that will make up the operating system of finance in the future” — and you needn’t be a venture capitalist or get in early on an IPO to do so, he enthuses.

Indeed, Dell is certain that people should invest in crypto “not as a novelty, but as a core component of their portfolio,” he argues.

In January, Dell, 52, who identifies as “a serial entrepreneur,” launched Domain Money, his fifth company. 

It is a platform for both self-directed trading and turnkey actively managed crypto strategies.

Three strategies combine stocks and crypto; a fourth is 100% crypto.

While Dell holds that including crypto in a portfolio benefits diversification and can be a hedge against inflation, “the most exciting thing about this asset class,” he says in the interview, is that “blockchain technologies are going to become the operating system of finance.”

“Investors who are looking for significant upside in their investments should consider crypto as a percentage of their portfolio,” he advises.

Even for pre-retirees, “adding crypto as a percentage of their broader portfolio is a way to potentially, significantly improve their rate of return long term,” he says.

Though only 14% of advisors were using or recommending crypto to clients in 2021, 49% said that their clients were asking about it, according to the Financial Planning Association.

Crypto is gradually showing up as a pursuit among large firms’ research teams.

What’s next? “Crypto product, followed by advisors offering it,” Dell predicts in our conversation.

All Domain Money’s strategies are “focused on infrastructure bets,” since the metaverse — the current and upcoming environment integrating the technologies of blockchain, nonfungible tokens (NFTs), social media, virtual world and others — require “big infrastructure to support them,” Dell points out. 

NFTs will be “the primary ownership mechanism in the metaverse” since digital assets will be “housed and managed” through them, he adds. 

“They can hold anything,” Dell explains. “NFTs are the infrastructure layer that enables a digital asset to be presented in the metaverse.” 

Domain Money has raised $33 million from several prominent investors, including Bessemer Venture Partners and Marc Benioff.

Before joining Goldman Sachs, Dell started the companies Clarity Money — which Goldman acquired — Buzzsaw, Civitas Learning, and MessageOne, the last acquired by Dell Technologies, the firm founded by Adam’s brother, Michael Dell, who is five years his senior.

Adam is the youngest of three. The middle brother is Steven Dell, an ophthalmologist. Incidentally, their mother was a stockbroker.

In the interview, Adam discussed his supportive relationship with Michael, who helped publicize, via social media, Domain Money’s launch, he says.

Speaking by phone from his base in New York City, Dell revealed the important function of his firm’s proprietary “social sentiment tool” and his views on potential crypto regulation, among other issues. 

Here are highlights of our interview: 

THINKADVISOR: Why are cryptocurrencies an asset class that investors should hold in their portfolios?

ADAM DELL: What’s very clear is that blockchain technologies are going to become the operating system of finance. 

The engineering and the developer communities have decided that the energy and momentum around improving technologies associated with moving money around — the fundamental function of banking and finance — are going to live on top of blockchains.

What does that mean to investors?

It used to be the case that if you wanted to get access to new technologies that were going to disrupt large markets, you either had to be a venture capitalist or get in early when those companies went public. 

That’s not the case here. You don’t need to be a venture capitalist, and you can invest today in the technologies that will make up the operating system of finance in the future. 

That’s the most exciting thing about this asset class.

You’ve said that NFTs — nonfungible tokens — will be “the primary ownership mechanism in the metaverse [integrated virtual world, NFTs, social media environment].” Why NFTs?

An NFT is a digital key that’s tied to a digital asset. It’s a container that can hold lots of different digital assets. NFTs can hold anything. 

Say you want to display a piece of art or music, a digital creation you’ve made, or anything else. The way that digital asset is housed and basically managed is through a nonfungible token.

NFTs are the infrastructure layer that enables a digital asset to be presented in the metaverse. 

You say that crypto is appropriate as a “core component” of portfolios. 

But only 14% of financial advisors use or recommend crypto, according to the Financial Planning Association. 

So, are you talking about a “core component” in the future?

That [advisor] number is going to change profoundly and quickly. The research coverage [on] crypto that’s coming out of the large financial firms — Morgan Stanley, Goldman Sachs, Fidelity — [is an indication] that crypto as an asset class is becoming much more mainstream. 

And advisors will follow suit in making these products available to clients and advise them on how to avail themselves of them.

Those firms [mentioned above] and Citi, Raymond James, Jefferies, Credit Suisse have all started to set up research teams dedicated to cryptocurrencies. The large houses start with research, and then they start products.

Why has it taken a relatively long time for this to happen?

It’s such a new industry. It takes time for the system to embrace these new products. You’ll see that on the advisor side. 

We’re already seeing it in our own business. We’re getting a lot of inbound inquiries from advisors who are asking if we can make our products available on their platforms so they can offer it to their end clients.

So big firms are going to allow or encourage their advisors to offer crypto?

The first thing is that they’ve started to initiate much more fundamental research, which is the first step in starting to frame out the opportunity set around these asset classes.

What’s the next step?

To think about ideal portfolio construction around exposure to these assets. The first thing is understand it; the second thing is to think about how to increase an investor’s allocation to it.

You’re seeing those steps [moving] forward in the industry quite clearly.

But why should an investor have crypto in their portfolio?

From a diversification standpoint, that certainly is why. It’s [clearly] a reasonable hedge against inflation in many markets, [especially] when there’s instability around currencies and inflation. High inflation is certainly a risk in the United States.

Do you think that most portfolios should contain crypto?  

Investors who are looking for significant upside in their investments should consider crypto as a percentage of their portfolio. 

Whether that should be 5% or 10% is a function of an individual’s ultimate risk tolerance. 

Someone looking for higher returns and is willing to take a little more risk might go a bit higher, maybe to 10% or 15%, depending on their risk tolerance or desire to achieve yield.

Obviously, this asset class is quite volatile. So investors should be thinking about that relative to their allocation.

Is crypto good for retirement saving and planning, or is it too volatile to rely on for retirement income?   

For someone who’s thinking about retirement, adding crypto as a percentage of their broader portfolio is a way to potentially, significantly improve their rate of return long term.

Investors who are looking at retirement need to [consider] the long-term implications of inflation and growing their wealth in retirement.

So for investors who are looking for additional ways to improve that growth potential, crypto is a great example.

Please talk further about crypto allocation. 

It’s up to the individual. There are many people who have decided they’re going to make crypto 50%, 25% or 100% of their overall portfolio.

I’ve spoken to a number of large institutional investors who said, “I’m basically getting out of any investment position that isn’t crypto. I’m all in on crypto.” 

I don’t think that’s a reckless philosophy. I think that’s a forward-thinking philosophy.

What’s in it compensation-wise for financial advisors to offer crypto?

That depends on the relationship between the advisor and whatever products are being discussed. I can’t speak to that. 

But I can tell you that consumers want access to crypto investment vehicles. 

Grayscale [digital currency asset manager] is a perfect example; it’s grown enormously large. It’s a public entity where investors in the stock market can get access to Bitcoin as an investment vehicle. 

And Galaxy [Fund Management] has a number of institutional products — strategies and portfolios — that they make available to investors.

This shows that both retail and institutional investors are looking for access to this investment class. 

Because of the size of the advisor community and number of dollars they control, you can be certain that products will emerge in the market that speak to and fill that demand.

How else do investors get access to crypto?

If you have an account at Schwab, TD Ameritrade or Fidelity and say, “I want to buy some crypto,” they’ll tell you that you can get it at Grayscale.

Now they could also say, “Get it at Domain Money.” Right?

I would hope they would. We’re very focused on establishing a number of different strategies that give consumers access in a diversified, actively managed way.

What are you chiefly concentrating on in your crypto investments?

We’re very focused on infrastructure bets. In our research, that’s a very consistent theme that emerges.  

NFTs, virtual world, blockchain [and so on], each of these pieces requires large infrastructure to support [them]. That relates to our focus around the fundamentals we pay attention to.

In order to use your platform, an investor doesn’t require an intermediary financial advisor, right?

There’s value in the way that financial advisors do a good job of helping investors understand the rationale behind strategies.

We’ve constructed portfolios that we think address the needs of a variety of different types of investors.

Such as?

If you just want to get your toe into crypto, [our] Domain Access [strategy] is a great option. It’s 80% stock, 20% crypto. 

You get a meaningful exposure to a broad base of blue-chip crypto assets and meaningful exposure to some of the largest growth-potential technology-enabled companies on the traditional equity side of the world.

If you want to be a bit more aggressive, you can access Domain Balanced, which is 50% stocks and 50% crypto.

If you want to be even more aggressive, you can pursue Domain Edge, which is 100% crypto.

That’s a very broad-based exposure to the most established cryptocurrencies, as well as a meaningful exposure to a number of the newer cryptocurrency entrants in the market for which we see real growth potential.

Which of your strategies would be perceived as the riskiest?

We just launched Domain Metaverse, which is our metaverse NFT strategy. It’s a combination of both stocks and crypto, and focuses on the infrastructure layer of the metaverse.

It includes a number of cryptocurrencies that really have the potential to break out. 

With your strategies that invest in stocks in addition to crypto, do investors interact with a human to decide which equities to invest in? Or do all the portfolios invest in the same stocks?

Each of our varied strategies has a list of underlying assets, which are actively managed by our investment team.

If you buy into a strategy like Domain Access or Domain Balanced, that underlying strategy is the same for all holders.

If you own Domain Balanced, you own the same underlying assets that I do.

What are your thoughts about regulating cryptocurrencies?

We think that regulations are a good thing for this industry. These products are about technology innovation and what the technologies mean for financial systems. So we’ve very, very clear that the industry would benefit from regulation. 

We’ve sought to be a part of the conversation about what the policy considerations would be. 

Transparency about pricing, security, auditing and taxation is essential for this industry to mature and become more mainstream.

I’m excited that on the federal and state level, this asset class is getting the attention of the regulators. It will weed out some of the more fringe pieces of the industry.

Do you still identify as a venture capitalist?

I’m really a serial entrepreneur at my core. I’ve started five companies. I’ve sold four of them. This is my fifth.

So, are you likely to sell this one too after a short time?

I’m not really thinking about that. I’m much more focused on building a long-term stand-alone asset.

You’re the youngest of three brothers. The eldest, Michael Dell, who founded Dell Technologies, bought a company of yours, MessageOne, in 2010. 

So do you two talk business very much?

Yes, I talk to my brother regularly. We talk about all kinds of stuff.

Did you discuss plans for Domain Money with him?

Oh, sure. Absolutely. He’s a very supportive guy. Michael was kind enough to post a tweet with a picture a week or two ago when we were on the Nasdaq big board in Times Square being congratulated on the launch.

I’m obviously very proud of my brother and the things he’s done. He’s an amazing entrepreneur, an amazing CEO and an amazing brother.

Despite the five-year age difference between you two, do you remember observing Michael’s professional achievements when he was quite young?

Dell went public when I was 18. It’s been a great thrill to have a front-row seat to see all that Michael and Dell have accomplished. It’s been an amazing ride.

Turning back to Domain Money, please fill me in on what a “social sentiment tool” is? The press release announcing your launch mentions that you have a proprietary one.

We built an internal dashboard for our investment team to look at different metrics. 

We look at social sentiment for various things, in particular, cryptocurrency. It’s the collective wisdom of chatter across Twitter and other social networks.

We view that as an important signal when thinking about the future of a particular cryptocurrency.

Pictured: Adam Dell