It goes without saying I am a believer in the subject. You can join or you cannot, but clients can’t be ignored and crypto won’t be ignored. Cryptocurrencies and blockchain are unique subject matters and are also very complicated. The basic ownership of a cryptocurrency is complicated, let alone the advising or management of it.
Firms do not need to be experts on the blockchain nor need to have an allocation to crypto. Yet. But they do need to know enough to 1- have a basic conversation about the matter and 2- know what is on the horizon to decide how to pursue in the future.
Unless you are retiring at year-end (congrats!), you can’t dodge this one. Here is why:
Opportunity. A cryptocurrency can give us features we never knew were possible. Transparency, cheap and easy transactions, immediate and unrestricted access, liquidity, privacy… what other asset gives us this? These features may cause this asset to be popular and cryptocurrencies can have a limited supply. (do math here…)
Charts. Clients like making money and they like charts that move towards the top right (Bitcoin is up 800% from its mark 2 years ago today). Also, their friends are doing it and it makes great cocktail chatter. No one likes talking about mutual funds. At parties or in general.
Your client’s neighbor. Remember when everyone’s neighbor had a startup or fund that your client wanted you to take a look at? Those waters were navigable to anyone in the business- talk exit strategy, risk management, overall asset allocation, liquidity. Fast forward to pre-2019, everyone’s-neighbor’s-now-millionaire-kid has been mining Bitcoin since 2012. Oh and crypto is one thing, blockchain is another. Not only is it fueling startups, blockchain is also changing the way startups are raising, holding and transferring equity. (sidenote: this will eventually affect the way public stocks are held and transferred… yes, that means you, Berkshire.)
Estate planning. I speak more to CPA’s than any other profession. Do I need another reason to validate this going mainstream? They are excited about the change in the world of auditing, the prospect of triple entry accounting and the transparency. They are worried about tax planning, the pseudo anonymity and estate planning. If a crypto owner dies and leaves no mention of her crypto, the crypto dies with her. If she communicates it to someone else, how are she and her assets protected? This an entire new level of planning and strategy.
Your Code of Ethics. The SEC is all over it. If you are an RIA, you (should) have a policy in place to review employees’ personal ownership of any securities, which may/may not/probably includes ICO’s and tokens.
The firms that I serve have clients who look to them for guidance, general oversight and care of their finances. You don’t need to know the depths of technology, support the technology or believe in crypto to offer your client objective advice. You do need to know enough to gather the info you need to give good advice. If you’ve read to this point, I hope I’ve convinced you to ditch the FUD. If you are “here for it,” I recommend these things:
Find an employee who has an interest in this subject matter and let her/him run with it.
Know where your resources are. I regularly speak at RIA and private fund firms about this technology, how to answer questions and educate clients, and help develop a long term plan to accommodate for cryptocurrencies. Dallas has a strong presence in this technology and NTBA hosts weekly events on all blockchain related subject matters.