When the market collapsed in March 2020, financial advisor Ivory Johnson, founder of Delancey Wealth Management, decided it was time to introduce cryptocurrencies to its customers.
“I did it because I saw how active the Federal Reserve is and how much they are diluting the dollar,” which would be incredibly inflationary, Johnson said.
A recent study by the Financial Planning Association and the Journal of Financial Planning suggests that Johnson̵
As investors become more interested in cryptocurrencies, financial advisors are experiencing a new urgency to offer investments to clients.
About 49% of advisors say customers have asked about cryptocurrencies in the last six months, up from 17% in 2020, according to the survey.
More of these financial professionals – 26% – plan to increase how much they use and recommend cryptocurrencies over the next 12 months.
Currently, 14% of advisors use or recommend these investments. This is less than 1% in 2019 and 2020.
“People are realizing now that this is not going to go away,” said Tyrone Ross, chief executive of Onramp Invest, a provider of cryptocurrency management technology for financial advisers. The company collaborated with the FPA and the Journal of Financial Planning in the study.
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Counselors who do not adapt may run the risk of being abandoned.
“Clients come to counselors who already know more than counselors,” Ross said. “Counselors are absolutely horrified because you never want to look dumb in front of your client.”
While Johnson said most of the advisors he spoke to were not yet familiar with cryptocurrencies, that could change as new certificates emerge and broker dealers adopt technologies to process those assets.
“Whenever something becomes more common, the price goes up exponentially and we start seeing that with bitcoin and other cryptocurrencies, and I think that’s another case,” Johnson said.
How Wizards Use Crypto
Advisors who now integrate cryptocurrencies typically add a distribution of 1% to 2%, Ross said. However, those who are more committed to the strategy can reach 3% to 5%.
Ross also has its own consulting practice, which is 100% dedicated to cryptocurrencies. This means that there are no traditional assets, such as stocks or bonds.
With the advent of these new investments, there is still pressure on advisors to incorporate traditional financial planning into crypto conversations. That means finding out how many customers they own and how this is measured by their risk tolerance, Ross said.
Onramp recently launched a cryptocurrency integration platform to help registered investment advisers integrate bitcoin, ethereum and other portfolio investments.
Ross said the company was trying to provide the resources he wanted when he began his internship in 2017.
Now the challenge for the company is to meet the demand it sees, Ross said. More than 300 councilors signed up in the first few days of its announcement on May 25th.
Onramp is currently raising funds to support this search through investors such as Eterna Capital, Gemini Frontier Fund and Ritholtz Wealth Management, who also use the company’s technology to integrate cryptocurrencies into client portfolios.
Where to go to learn more
For both advisors and investors, the first step is simply to educate themselves before embarking on these investments, according to Ross.
Onramp offers an educational program, branded by Onramp Academy, to advisors who want to receive education in digital assets.
The white document on bitcoin, written by the creator of the cryptocurrency under the alleged pseudonym Satoshi Nakamoto, is also a great place to start, Ross said.
Other resources Ross recommends include Chris Berniske’s Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond, and an educational website hosted by Jameson Lop.
“Get educated about it,” Ross said.
“If you study it and think it’s an investment for you … maybe you’ll invest a little of what you would spend in the evening on dinner and just leave it alone,” he said.