Investors to wealth managers: What should I do with this crypto I own?

As trading in cryptocurrency and other digital assets continues to grow, advisors are facing a surge of interest from knowledgeable clients. 

“What we're hearing now is a lot of questions about how do we think about [cryptocurrency], what's the impact to my business if I start to think about adding these products in and what type of products should I be thinking about,” said Michael Diamond, product area leader of core investments of the Boston-based financial services firm Fidelity in a panel discussion during Financial Planning’s Invest event held in June.

The company announced in April that it would begin development on an offering allowing consumers to invest a portion of their retirement fund into Bitcoin.

Clients often understand cryptocurrencies such as Bitcoin and Ethereum better than their advisors do, so it’s important to do your research, Diamond said.

“It doesn't matter what we [at Fidelity] think is right, you as the advisor are going to be the fiduciary and you need to help make that decision for your clients. … And the best thing to do is get educated,” Diamond said.

Some traditional brokerages are angling for clients wanting to hold and trade crypto. These include Citadel Securities and Virtu Financial, for instance, who are developing a trading platform for digital currencies. Others are holding out for the option of an exchange-traded fund that would mitigate concerns surrounding custody and security of digital assets.

Donna Alberico

But despite the openings available for advisors who look to attract new clients through nontraditional investment opportunities, many are still unsure about how comfortable they are engaging with the novel class of assets.

Maxwell Lane, head of product for the New York-based advisory platform Flourish, explained that many consumers who already trade in various digital products would be eager to do so through their advisors if services were offered.

“We spend a lot of time trying to educate advisors that their clients are already here, and it's a bit of a unique situation that it's probably the only asset class where maybe the client knows more than the advisor right now. … And that's a bit of a strange situation for advisors,” Lane said.

The firm’s digital currency division, Flourish Crypto, announced Thursday that it partnered with the Digital Assets Council of Financial Professionals to grant registered investment advisor clients of the firm access to educational materials on Bitcoin and other prominent digital assets.

Donna Alberico

“The competition's evolved over the years, but broadly what we are hearing now is that advisors are being asked about crypto from their clients, which is driving [them] to get educated and start looking for solutions,” Lane said. “Clients are going to do this with or without their advisor. The good news is they want to do it with their advisors.”

With legislative pushes from President Biden made earlier this year signaling a tide of new potential laws and regulations, the level of acceptance of cryptocurrencies is trending upward.

“As a technologist, I am very bullish on the promise and potential of crypto and blockchain technology in a number of areas, not least of which being crypto tokens as an asset class. … As a financial professional, I believe we're all witnessing the formation of a new asset class, and that doesn't happen that often,” Lane said.