Close Close
ThinkAdvisor

Portfolio > Alternative Investments > Cryptocurrencies

Ric Edelman: Advisors Can Hate Crypto but Can’t Ignore It

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Advisors don't have to love Bitcoin. But those who aren't at least discussing it with their clients are making a mistake.
  • Advisors stand to lose credibility with clients if they can't answer questions about crypto.
  • Crypto is projected to generate $5 billion in advisory fees over the next five years.

Advisors don’t need to suddenly become cryptocurrency boosters and owners and they’re even free to hate crypto if they want to — but they can no longer ignore it, according to Ric Edelman, a crypto expert who founded the Digital Assets Council of Financial Professionals five years ago.

Edelman left Edelman Financial Engines, the RIA he and his wife, Jean, founded in 1986 (as Edelman Financial Services), where he was chairman of financial education and client experience, in late 2021 and has been focused on educating the industry and consumers about crypto since then.

“I believe that this conversation on digital assets is the most impactful way that we can improve client outcomes and wealth creation for themselves and their families,” he said Thursday at the Wealth Management EDGE conference in Hollywood, Florida.

Crypto is projected to generate $5 billion in advisory fees over the next five years and it is in the best interest of advisors to try and get their share of that wealth, even if they hate Bitcoin and other cryptocurrencies, he said.

“What I’m not trying to do is persuade you that you need to fall in love with Bitcoin, you need to own Bitcoin [or] you need to recommend Bitcoin,” he explained. “My focus instead is simply to get you to recognize the importance of understanding Bitcoin and recognizing that this is a real asset class, the first new one in 150 years … and because it’s new and different, we’ve got to pay attention to this.”

There are too many advisors today who are not up to speed on crypto and that is just not acceptable any longer, he said, adding: “How can we, as a fiduciary, trying to serve our clients’ best interests, have a complete lack of understanding and knowledge [and] awareness of the first major new asset class in 150 years?”

Edelman’s “goal,” he said, is to “help you understand this so that you can figure out what you want to recommend to your client about it [and] how to communicate with your client about it.”

He polled the room, asking advisors which of them had discussed Bitcoin with clients, and few hands went up.

“This is the problem that I’m having,” he said, explaining: “This is a dynamic environment…. We need to understand that this technology is revolutionary,” allowing businesses to operate faster, cheaper and safer with greater transparency and greater inclusion on a global basis.

“The United Nations says this technology is the number one way we are going to eliminate poverty on a global scale,” he also noted.

“Already the annual transaction volume of Bitcoin alone — forget about the rest of crypto — just Bitcoin … is $3 trillion a year,” he said. “That’s three times more than American Express.”

Additionally, the crypto exchange platform Coinbase has been the number one free downloaded app for Apple mobile devices, he said.

“Coinbase has more account holders than Charles Schwab, more than TD Ameritrade, more than Interactive Brokers, more than E-Trade combined,” he said, adding: “This is not something that we can deny…. If you continue to ignore this, you will continue to lose credibility with your clients, let alone referral capability and AUM opportunities.”

Bitcoin has “gone mainstream but, for a lot of you, that’s not the cover story that you like to look at,” he said. “You would rather look at the Bloomberg Businessweek cover story …. A lot of people have the full conviction, especially in the current market decline,” that Bitcoin is down 50% from its high of last November.

“A lot of folks are convinced it’s a fad or it’s a fraud,” but it’s not, he said.

The ‘Bottom Line’

“The bottom line is this,” Edelman said: “Your clients own Bitcoin. 20% of U.S. adults do. Your clients own Bitcoin the same way your teenagers are drinking beer. They just don’t want you to know because they’re afraid you’re going to have something bad to say about it. And 63% (two thirds) called themselves crypto-curious.”

That, he said, is why “you’re getting questions from clients about crypto: Because they want to understand what this is. What is Bitcoin, should I buy it, why should I care? How do I go about buying it? What is it?”

He warned: “If you can’t answer the question, they’re going to go somewhere else to get the answer. Probably their teenager. And you’re going to lose credibility because they’re coming to you and expecting you to have the answers about anything related to money. And you do have the answers to anything related to money. In every other category.”

Advisors “need to be able to be as proficient, fluent, conversational about crypto, just like everything else,” he said.

Additionally, “today there are so many ways that clients can own crypto,” he said, noting: “There are individual stocks,” over-the-counter securities, exchange-traded funds, IRAs and 401(k)s, he pointed out.

He explained: “It’s not that you have to go buy Bitcoin directly at an exchange any longer. That used to be the sole way to do it but not anymore. It has really grown up. There are now publicly traded Bitcoin mining stocks, dozens of them, companies that spend on average about $6,000 to mine a Bitcoin, which is worth $30,000. It’s a hell of a business model.”

By getting up to speed on crypto, advisors will be able to demonstrate their value to their clients, “generate more client referrals [and] you’ll build your business without actually ever saying, ‘I love Bitcoin’… You’re simply acknowledging smart business.”

After all, he told attendees: “This is the future. The younger your client base, the more routine this is going to become [and] the more you include your clients and their children in the conversation, the better off your business is going to be.”

If an advisor really doesn’t want to deal with crypto at all, they have an option, he said: “Bring in a younger colleague in your practice who is a millennial or a Gen Xer and allow them to focus on this conversation on behalf of your clients.”

(Pictured: Ric Edelman; Photo by Jeff Berman)