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Jeffrey Janson

Portfolio > Alternative Investments > Cryptocurrencies

How a Longtime Financial Advisor Invests in Crypto, Counsels Clients

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There are many intriguing implications of the use of digital assets, the first new asset class in 150 years. These include “the ability to create money out of thin air,” as Jeffrey Janson, senior advisor with Summit Wealth Partners, who invests in crypto, as do some of his clients, frames it in an interview with ThinkAdvisor.

As an example, he cites the potential of the U.S. government’s using a digital dollar to “immediately pop [economic stimulus] funds into [a] digital wallet. They could even program them to evaporate if they’re not spent within 45 days,” the certified financial planner hypothesizes.

In 2021, Janson became the first financial advisor to complete the Certificate in Blockchain and Digital Assets course offered by Ric Edelman’s Digital Assets Council of Financial Professionals.

That helped prompt him to begin investing in the asset class.

As a financial advisor, Janson has notched more than 30 years’ experience helping high-net-worth individuals and institutions. His target client is in their early 60s with $1 million of investable assets. 

About 10% of his clients have asked him about crypto. Some have even invested in it using a variety of approaches, as Janson describes in the interview.

He also reports on their reactions to investing in these highly volatile assets.

As the first new asset class in a century and a half, crypto has captured Janson’s interest as a way to diversify portfolios.

He also maintains that crypto is “probably the most effective inflation hedge, though it’s a time-frame-related issue and dependent on what a person purchases,” he says.

In our conversation, he points out crypto’s pitfalls and recommends not letting digital assets “grow to be a crazy portion of your portfolio.” 

In his capacity as an accredited investment fiduciary analyst, Janson argues that Fidelity’s decision to include digital assets as an investment choice within its 401(k) plans is premature.

In the interview, Janson also discusses bitcoin ETFs — both pros and cons — and why he thinks Warren Buffett is right to avoid bitcoin.

ThinkAdvisor interviewed Janson, author of “Stacking the Odds to Win the Loser’s Game,” on July 8. He was on the phone from his base in Naples, Florida.

Here are highlights of our interview:

THINKADVISOR: What does the future hold for digital assets?

JEFFREY JANSON: They’re here to stay. Most every central bank in the world is working on some form of digital currency. I kiddingly call it “Fedcoin.”

In the U.S., we’re working on a digital dollar. There are all kinds of implications to that, including the ability to create money out of thin air. 

We say that the Fed “prints money,” when it really just creates new dollars in a computer program. Well, now they’ll be able to do that via a digital dollar. I believe they’ll also have the ability to program this money. 

If the government wants to have an immediate impact on the economy — like its stimulus payments during COVID, which they [mainly] sent in check form — imagine if we had a digital dollar and you had a digital wallet: They could immediately pop those funds into your account, and they could even program them to evaporate if they’re not spent within 45 days.

It’s a bit scary, actually.

And very futuristic.

It’s very futuristic. And the future is darn near here!

Is crypto an inflation hedge?

Yes. However, I think it’s a long-term inflation hedge. Certainly in the last six months, it’s not [accomplished that]. 

But if you extend your time horizon out multiple years, I think [crypto] is probably the most effective inflation hedge, though it’s a time frame-related issue and dependent on what a person purchases.

Have your clients asked you about investing in digital assets? If so, what do you tell them?

About 10% of my client base has asked about it. I say it’s an exceptionally volatile asset class. I believe it’s a speculative asset. 

In other words, you shouldn’t consider investing in it unless you’re doing so with money you can afford to lose.

Having said that, if they wanted to peel off a small amount to dip their toe in the water, I’m open to helping them do it.

What approaches have your clients used to invest in digital assets?

Various approaches. Over the last couple of years, some have done it via Grayscale Bitcoin Trust. Some have invested through the Bitwise 10 Crypto Index Fund. 

You can also invest using momentum strategies.

What reaction have the clients had?

So far, most of them have been fairly stoic about it. I told them on the front end that it’s a very, very aggressive asset class and they shouldn’t be doing it unless they’re [investing] money they can afford to lose. 

But of course, investors look on the bright side of the equation.

Some of the clients are shocked to see the volatility. Others are hanging on for a few years longer waiting for crypto to recover.

You started investing in crypto after completing the Certificate in Blockchain and Digital Assets course offered by the Digital Assets Council of Financial Professionals. How have you invested, and what are your feelings about digital assets now?

Oh, man! They are many and varied. I’ve invested in a whole host of different ways: some private placement, some straight-up investments through Coinbase, some through Grayscale Bitcoin Trust.

It’s an extremely volatile asset class, like nothing I’ve ever seen. So depending on the moment you ask me, I may love it or hate it.

Probably right now you hate it!

It’s not my favorite at this moment!

You need a strong stomach to invest in crypto. Right?

Or a screw loose — one of the two [laughs]. Or a very long-term time horizon.

What do you think of Fidelity’s decision to allow plan participants to invest in crypto through their 401(k) plans?

This is a real fiduciary issue. My background [as an accredited investment fiduciary analyst] is in fiduciary compliance with 401(k)s. So I’ve been monitoring the Department of Labor and their views on having digital assets inside a 401(k).

Frankly, I don’t think that the asset class belongs in 401(k)s just yet. I’d like to see the industry regulated to a great extent before I can see this asset class included on a 401(k) menu.

Because of its volatility?

Yes. I don’t feel that the average plan participant — and I’ve had extensive experience with literally thousands of plan participants over the years — understands crypto or its volatility. 

They need more guidance and guardrails [to include it] in a 401(k) because it [can] wind up being their largest asset other than their house.

There should be guardrails in place. For example, they shouldn’t allow someone to put more than 5% into digital assets. 

Last month, author Ric Edelman, founder of RIA Edelman Financial Engines and the Digital Assets Council of Financial Professionals, said that crypto is projected to “generate $5 billion in advisory fees in the next five years.” 

In May 2021, you become the first advisor to earn the DACFP’s Certificate in Blockchain and Digital Assets. Why were you so eager to learn about crypto?

I was aware of it years ago and didn’t really take any action on it. But I watched it continue to go up in value. 

A couple of years ago, when Ric Edelman started that program, I thought it was high time that I got educated about the space. 

I looked into digital assets more for its growth potential because the growth rate on bitcoin, in particular, was off the charts. 

I’d never seen anything like that. So I was very interested in learning more about it.

Mr. Edelman emphasizes that crypto is the first new asset class in 150 years. What significance does that hold for you?

It’s an interesting data point. The only reason that financial advisors are interested in [any] new asset class, I think, is for its lack of correlation [with other asset classes].

So to the extent that a new asset class — whether digital assets or some other — could be added to a portfolio and provide a level of diversification, we would have interest in it.

That’s why I’ve been interested in it as it pertains to portfolio construction.

And I believe it will likely do well over the long haul. So I expect it to be a contributor for longer-term return.

What are the main pitfalls to investing in digital assets?

A lot of it depends on the method you choose to invest. For example, if you invest directly, losing your private key [similar to a crucial password for access] means that you could also lose your bitcoin. 

You’ve heard of “Not your key, not your bitcoin”? 

Many people don’t trust themselves to hang on to their private key, so they may outsource it to organizations that are trustworthy to custody these assets. That entails perhaps ETFs or separately managed accounts. 

So that’s one huge concern.

What’s another?

It’s behavioral. If a person isn’t prepared for the level of volatility, I think it’s very easy to get stung in this asset class.

That’s why I say: [If you choose] to dip a toe in the water to see what it’s like, don’t then let it grow to be a crazy portion of your portfolio.

Are bitcoin ETFs popular?

Yes and no. They exist, but they’re futures-based. That’s one of my gripes. So far, the SEC hasn’t approved a bitcoin spot ETF — my hope [is that they will]. It would be geared to the spot price of bitcoin.

I think the SEC is behind the curve here: Canada has a spot ETF for bitcoin, and I think Australia does as well. So it’s not like it can’t be done.

There was even recent approval for a short bitcoin ETF [from ProShares]. But we just don’t have one that gives straight exposure to the price action of the underlying asset bitcoin.

Why are most advisors hesitant to get into digital assets?

The learning curve is huge. It’s difficult to get up to speed on this topic. It’s much easier to just quickly have a sound-bite opinion that dissuades people from [delving] into it further.

But I think those advisors who are really looking out for their clients’ best interest will at least educate themselves about it. 

That doesn’t mean they’re going to allocate to it. It just means if they choose to allocate to it, they’ll have a reason for doing it. 

And if they choose not to allocate toward it, now they’ll have a better opinion about why that’s so.

Just because I got the certificate doesn’t mean I think everybody should be in crypto. I don’t think many people are geared to handle this level of volatility.

What do you think about both Warren Buffett and Jamie Dimon’s calling bitcoin “worthless”?

Dimon’s rhetoric isn’t matching what his company is doing. So I take issue with that.

I agree that Warren Buffett should be saying [essentially], “If it ain’t broke, don’t worry.”

He’s a person who understands the market and companies really well but doesn’t understand tech all that well. This technology is exactly that: It’s like software. 

So I think he probably isn’t the person to opine on [bitcoin]. He should probably stick to his knitting, where he’s done so well. 

If I were he, I wouldn’t venture into it.