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Here S Why Some Financial Advisors Are Adding Bitcoin To Client Portfolios : CryptoCurrency _BEST_



We understand there is some client interest and engagement in cryptocurrencies, and we are looking closely and cautiously at this space. Clarity from regulators will be important before we consider offering a retail cryptocurrency experience. If we do, you can expect it to be a great value, designed to support client need and surrounded by the advice and education our clients have come to expect and deserve from us.




Here s Why Some Financial Advisors Are Adding Bitcoin To Client Portfolios : CryptoCurrency


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As these new investments emerge, the pressure is still on for advisors to incorporate traditional financial planning into conversations around crypto. That means finding out how much clients own and how it measures up against their risk tolerance, Ross said.


Although some advisors today may foresee themselves never recommending crypto investments, the last thing they should want is to look like "a deer in headlights" should a client ask about digital assets.


So said Don Friedman, president of the professional group Digital Assets Council of Financial Professionals, on the first day of Financial Planning's INVEST: Cryptocurrency for Advisors virtual event on Dec. 12. Friedman was one of many industry representatives who said that even with the recent FTX scandal and related bankruptcies, he doesn't expect cryptocurrency to be going away. That means advisors can expect clients to continue asking about it.


Advisors who do decide they might want to recommend crypto, at least to some clients, have a host of other steps they'll have to take. Matt Calabro, executive director of the software company Compliance Solutions Strategies and another panelist at the "Advising on Crypto in Today's Environment" session, said advisors getting into crypto will have to do their due diligence to make sure the investments they are recommending are sound. They will also have to do more humdrum things, like set up ways for customers to open accounts and figure out how they are going to report results. Perhaps most importantly, Calabro said, advisors will have to make sure they talk to clients in a way that conveys all the risks of getting into a particular digital asset.


The SEC rejected Grayscale's petition in June 2022, partly over concerns that cryptocurrency remains too loosely regulated. Grayscale responded with a lawsuit that's still pending before the U.S. Court of Appeals for the District of Columbia Circuit. LaValle said having a bitcoin-tracking ETF would benefit not only investors but also advisors.


"The biggest benefit of having this ETF come to market is that advisors understand how to utilize exchange-traded products as building blocks in their clients' portfolios," LaValle said. "In many cases, advisors are solely using exchange-traded funds for those building blocks."


LaValle said that one frustration for advisors is no doubt seeing clients who search for alternative means of getting into crypto in the absence of an ETF or some other tried-and-true means. He said he hopes the collapse of FTX and other digital exchanges will spur regulators to issue rules that will make investing in crypto both easier and safer.


"For the advisors that are listening, this is going to be something that has an allocation in every one of their portfolios," LaValle said. "So let's get the framework correct. Let's bring these opportunities to invest in the market in a way that gives clients and advisors and institutions a high degree of confidence."


More from FA 100:Here's where to invest your money in 2022, CNBC's top advisors sayHere's how to choose the right financial advisor for youHere's how top financial advisors are hiring young talent


"We have spent most of our energies educating clients on what cryptocurrencies and the blockchain are," said Mark Mirsberger, CEO of Dana Investment Advisors, in Waukesha, Wisconsin, which came in at No. 1 on CNBC's FA 100 list. (Blockchain is a kind of ledger, a method of recordkeeping, on which bitcoin is exchanged. Many believe the future of financial transactions will take place on it.)


In time, as the regulation and security of digital assets become more robust, Mirsberger believes many more financial advisors will put them into their clients' portfolio. "We see the sector as quickly evolving and offering continued growth," he said.


A variety of reasons for potentially adding Bitcoin exposure to client portfolios are provided in the survey, but the fact that the cryptocurrency is largely uncorrelated with other asset classes is the most highly-cited factor for financial advisors.


Of course, there are still a number of issues with allocating client funds to the crypto market, which is why the vast majority of financial advisors still do not feel comfortable with this proposition.


That's because cryptocurrency isn't regulated by agencies like the Securities and Exchange Commission and Financial Industry Regulatory Authority, which Boneparth and other advisors take their guidance from before bringing recommendations to clients. The most he can do is educate them on where and how they can buy it if they choose to themselves, the risks associated with incorporating crypto assets into their portfolios and how it can impact their overall financial goals.


While government agencies don't prohibit advisors from selling or recommending cryptocurrency, Bitcoin remains unregulated in the U.S. Since the digital currency doesn't adhere to the rules government agencies have for other assets traded on the public market, like how public companies need to release regular financial statements, many firms don't allow advisors to make crypto recommendations.


Advisors have to thread the needle. While Johnson points clients towards the Grayscale Bitcoin Trust, Welka lets her clients know there are ways to invest in the sector without being invested in cryptocurrency itself, like buying Coinbase stock.


But for all the hype, adoption by professional investors remains in the early stages. According to a recent Bitwise Asset Management survey, about 9% of financial advisors currently have an allocation to crypto assets in client portfolios, while 24% said they owned them in their personal portfolios. Four in five financial advisors said their clients asked them about crypto assets in 2020, and 17% said they planned to invest via client portfolios in 2021.


IEQ Capital is a California-based asset manager and financial advisor with $12 billion in assets under management. The firm recently started adding a 1% to 3% allocation to Bitcoin for clients who can afford the risk and are comfortable with holding crypto assets. IEQ now has $80 million in Bitcoin across all of its portfolios, which its co-CEO Eric Harrison anticipates will double or triple in the not-too-distant future.


Whether up or down, cryptocurrency garners lots of attention: 94% of financial advisors fielded client questions about cryptocurrency in 2021, according to a survey from Bitwise and ETF Trends. The same survey reports that 47% of advisors hold crypto assets in their personal portfolios. Yet, only 16% of advisors allocate to crypto in client accounts.


The Certificate in Blockchain and Digital Assets is a program offered by Digital Assets Council of Financial Professionals (DACFP). It's for financial advisors who want to recommend crypto investing strategies to their clients. Certificate holders must complete 11 learning modules and sign a code of ethics annually.


Be prepared to interview several candidates. You want someone who's versed in crypto, as well as traditional investments, and general personal finance. The right advisor will also be trustworthy and personable. Learn more about vetting financial advisor candidates here.


Cryptocurrencies are censorship-resistant store of value. The desire for a reliable, long-term store of value is another reason to invest in cryptocurrency. Unlike fiat money, cryptocurrencies have a limited supply, which is controlled by mathematical algorithms."}},"@type": "Question","name": "Where should one go for crypto advice?","acceptedAnswer": "@type": "Answer","text": "Getting professional recommendations from an accountant or a lawyer is the best way to find a crypto financial advisor. They can also browse the internet and explore credible websites like The National Association of Personal Financial Advisors (NAPFA) or the Garrett Planning Network.","@type": "Question","name": "What are the risks associated with cryptocurrency?","acceptedAnswer": "@type": "Answer","text": "The main risk associated with cryptocurrency trading is its volatility. A high level of risk is involved, and they are speculative. Additionally, since banks do not back it, investors don't have the same protections as a bank account. "]}]}] EducationGeneralDictionaryEconomicsCorporate FinanceRoth IRAStocksMutual FundsETFs401(k)Investing/TradingInvesting EssentialsFundamental AnalysisPortfolio ManagementTrading EssentialsTechnical AnalysisRisk ManagementNewsCompany NewsMarkets NewsCryptocurrency NewsPersonal Finance NewsEconomic NewsGovernment NewsSimulatorYour MoneyPersonal FinanceWealth ManagementBudgeting/SavingBankingCredit CardsHome OwnershipRetirement PlanningTaxesInsuranceReviews & RatingsBest Online BrokersBest Savings AccountsBest Home WarrantiesBest Credit CardsBest Personal LoansBest Student LoansBest Life InsuranceBest Auto InsuranceAdvisorsYour PracticePractice ManagementFinancial Advisor CareersInvestopedia 100Wealth ManagementPortfolio ConstructionFinancial PlanningAcademyPopular CoursesInvesting for BeginnersBecome a Day TraderTrading for BeginnersTechnical AnalysisCourses by TopicAll CoursesTrading CoursesInvesting CoursesFinancial Professional CoursesSubmitTable of ContentsExpandTable of ContentsWhich Are the Worst Places to Seek Crypto Advice?Where to Get Crypto AdviceCFP Board Issues Crypto GuidelinesWhy Crypto Advice Is BeneficialHow to Find a Crypto AdvisorHow to Verify a Crypto Financial AdvisorQuestions to Ask a Financial AdvisorWhy should one invest in cryptocurrency?Where should one go for crypto advice?What are the risks associated with cryptocurrency?The Bottom LineCryptocurrencyStrategy & EducationWhere Not to Go for Crypto Advice?ByTobi Opeyemi Amure Full Bio LinkedIn Twitter Tobi is a freelance crypto writer at Investopedia. He aims to simplify the complex concepts of blockchain and cryptocurrencies for the masses.Learn about our editorial policiesUpdated December 08, 2022Fact checked byRyan Eichler Fact checked byRyan EichlerFull Bio LinkedIn Ryan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. He has held positions in, and has deep experience with, expense auditing, personal finance, real estate, as well as fact checking & editing.Learn about our editorial policiesOver the last few years, cryptocurrency has become an increasingly popular option for investing. The crypto market is known for its volatility but has captured the attention of a large number of investors looking for new ways to seek profit in their portfolios. But amid such a new and unregulated financial market, investors are left looking for guidance on crypto matters such as how to choose a coin to buy or how to account for taxes on crypto trading proceeds.


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