You don't have to love crypto. You don't have to hate crypto.
But as wealth managers continue to wage war for next generation clients, experts say shoving it to the side and waiting for it to fade away is as good as waiving the white flag.
In a panel that helped kick off
Panelists spoke to the opportunities that exist for financial advisors who are well prepared to help their clients wisely handle crypto in the context of their overall portfolio, and why personal opinion should always come second to education.
"We've definitely grown past the point of advisors being able to dismiss the asset class as a whole and not have a discussion around it with clients," said
Cook, who was joined on the panel by Samuel Deane of
Be it on their TVs, their newsfeeds, or passed among family and friends, there's a nonstop flow of crypto information and misinformation out there. So like any other asset class, advisors should be prepared to talk it out should it come up in a meeting with a client or prospect.
"You don't have advisors with clients coming to their office asking about gold or commodities or high-yield, and then the advisor saying they don't believe in it and won't have a conversation," Cook said during the panel. "They've done their homework (and) they have a reason behind what their actual stance on that asset class is. And like anything else, crypto isn't for everyone. But advisors should be prepared to at least have conversations with clients who are interested or have questions that need clarifying. Because at the end of the day, financial advisors are hired for their expertise, among other things. And crypto is a very high growth area within the space as a whole."
Deane, who didn't have a strong personal interest in cryptocurrency, said he was often pulled into discussions about digital assets because he has a number of clients who work in the tech world, including a few who worked at Coinbase.
So Deane said he started to study up, citing Cook and her previous role at Onramp as a great resource as he began his journey.
But his own book of business also became a boon as he worked to get better.
"You don't necessarily have to like or believe in the longevity of crypto as an asset class. But as a fiduciary, I think it's your responsibility to be educated enough to have meaningful conversations with clients," Deane said. "Understanding the difference between a hot wallet and a cold wallet. Public keys versus private keys. Really understanding the different intricacies around different exchanges and custodians and brokers. Keeping a pulse on regulation. Those conversations sort of forced me to learn about the asset class.
"I think giving yourself the freedom and the flexibility to learn from clients (is important) because some of them may know more than you do as it pertains to this particular asset class," Deane continued. "And being humble enough to agree with that and to understand that … goes a long way."
Lally added that ignoring the information out there is the easy way out. But taking the more difficult route will eventually prove more fruitful.
A little over a year ago, his firm launched a crypto consulting practice, a decision driven by client interest. And while the level of knowledge already in house at Wipfli varied from person to person, Lally said there is great power in knowing exactly what you don't know about the subject.
"It was amazing when I put it out to the firm (to find out) who'd be interested in being part of this practice how many people raised their hand with deep knowledge of crypto," Lally said. "What I learned … was I didn't have to educate myself to know the detailed ins and outs about crypto. I needed enough information so I could ask educated questions (and) so I could get the right answers back that I was seeking."
Spinning the conversation forward to a scenario where an advisor is well-educated and has all of those right answers in hand, Gunderson asked if a crypto allocation between 1% to 5% can still be a positive risk-reward play in a client's portfolio.
Cook said that like other investments, the answer is client specific. But she does believe that a 1% to 5% threshold is suitable. "And anything above that would be a bit much for any client even just from a portfolio metrics standpoint (and) the ability for crypto to be additive to that rather than the opposite.
"There's definitely a lot of considerations there," she added. "I do understand there's a huge psychological component to it as well. And it's really easy to get scared, especially with the numbers that we see in crypto markets today. The percentage drawdowns that we've seen, it may cause clients to be very hesitant to add to this asset class. And that's where an advisor can really add value."
Lally wrapped his remarks by reminding the audience about the evolving nature of the asset class. It's said time and time again. But as a financial professional, the job is to not overreact to the next big swing, or
"There will be good news about it. There will be bad news about crypto. But as advisors, how do you hold yourself out to be a holistic wealth advisor?" Lally said. "You can't ignore it. Because to be holistic, you have to understand it. You have to know how it fits into a client's portfolio. And frankly … you have to know how it fits into their long term financial planning as well."
"Right? Like, imagine if we ignored technology and the internet in 99' and the 2000s?" Deane added. "Where would you be as an advisor if clients came to you for a technology or internet allocation, and you said 'no' because Amazon is down 90% and a bunch of other firms are going bankrupt. You would probably not be in business today."
