Kitces takes on crypto | Wealth management

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Wealth management technology companies are creating and launching at a rapid pace advisor-driven crypto platforms, providing improved accessibility and transparency to clients’ crypto holdings. But providing advisers with new technology is only part of this schismatic asset class, according to a range of panelists including Michael Kitces, Tyrone Ross Jr. and Adam Blumberg at the Bitcoin for Advisors 2021 virtual conference, which saw just under 1,000 registrations. All of the speakers agreed that despite advancements in technology, there are still a number of unresolved issues that counselors face.

The one-day event, now in its second year, revolved around a heated conversation between Kitces, Director of Financial Planning at Kitces.com, and Ross, CEO and Co-Founder of Onramp Invest. Shortly into the conversation, Kitces drew a line between blockchain technology, which he said he was very bullish on, and cryptocurrencies, where he still struggles.[s] a bit with the fundamental thesis of investment.

Related: Advisor: Bitcoin Is The Only Digital Asset Worth Investing In

The new ledger technology has the potential to disrupt the interactions between buyers and sellers that underlie the current version of the stock market, Kitces said. I can’t even fathom all the cool apps that people are bringing to the blockchain.

Cryptocurrencies present more problems, and perhaps fewer advantages, according to Kitces. Due to its volatility, investing in crypto exposes advisers to a higher risk of defending themselves in a lawsuit. Kitces pointed out that each bear market produces an increase in legal actions against advisers. Even if advisers are right, defending against lawsuits can become expensive and not worth it, he said.

Related: Navigating Digital Asset Compliance: Tips for Advisors

Crypto is also still relatively expensive for advisers, Kitces added. ETFs are going to have their own cost layers, he said, noting that the crypto’s potential higher returns come with their own corresponding higher costs. Even if [crypto assets] to give a higher return, it does not necessarily mean that it gives a higher return net of costs.

Another counterpoint to crypto enthusiasm is the investment thesis, Kitces said. While crypto coins may be limited in their supply, crypto as a concept is infinitely fractionable and infinitely forkable, he said. These characteristics of crypto prevent Kitces from drawing a clear comparison between crypto and gold, he said. No one is looking for gold.

But despite an arguably shaky crypto investment thesis, crypto-scornful advisers risk alienating clients and potential clients.

We’re seeing a growing number of young people doing everything from real estate investing to cryptocurrencies, and they just don’t want our old-fashioned good stocks and bonds, Kitces said. Part of what you’re seeing here, at least in the medium term, is changing investor behaviors for young people.

However, crypto doesn’t have to be so scary. The advisers hide behind the trustee. I think so, said Ross. As long as advisers are doing what is in the best interests of their clients, providing best execution and providing ongoing advice and oversight, they are fulfilling their fiduciary obligations in the eyes of regulators, he said.

The solutions for these mandates come from the technology now available to advisers, said Adam Blumberg, co-founder of Interaxis, an advisor-focused crypto education platform. Advisors can model the addition of Bitcoin, for example, inside a traditional wallet and examine estate and tax planning situations. The greatest value we can offer today is just reviewing these little things as we as advisors educate more on the subject, he said.

Technology vendors provide integrations that make these assessments possible. Riskalyse and Onramp recently teamed up to bring a risk assessment to Bitcoin. Meanwhile, MassMutuals Flourish Crypto has integrations with scheduling tools like eMoney Advisor and Investnet’s reporting tools.

As [advisors] learn about [crypto], you feel more comfortable with that, concluded Blumberg. You can start integrating it into [clients] plans at a deeper level.

If that makes sense to you and your customers, then you allocate it, he said. While it’s exciting to think about putting Bitcoin in customer wallets, most of us just need to talk about the basics, like keeping your customers from blowing themselves up or making unfortunate decisions that they want. don’t know because they’re sort of educated, but they don’t know what they don’t know.

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