Investors to wealth managers: what do I do with this crypto I own?

As trading in cryptocurrency and other digital assets continues to grow, advisors are facing renewed interest from savvy clients.

“What we’re hearing now is a lot of questions about how we think about [cryptocurrency]what is the impact on my business if I start thinking about adding these products and what type of products should I be thinking about,” said Michael Diamond, head of commodity investment products at financial services firm Fidelity based in Boston in a panel discussion at Financial Planning’s Invest event held in June.

The company announced in April that it would begin development of an offering allowing consumers to invest a portion of their retirement funds in Bitcoin.

Clients often understand cryptocurrencies such as Bitcoin and Ethereum better than their advisors, so it’s important to do your research, Diamond said.

“No matter what we [at Fidelity] think it’s fair, you as the advisor will be the fiduciary and you have to help make that decision for your clients. … And the best thing you can do is educate yourself,” Diamond said.

Some traditional brokerages are looking for clients who want to hold and trade cryptos. These include Citadel Securities and Virtu Financial, for example, which are develop a trading platform for digital currencies. Others hold on the option of an exchange-traded fund this would alleviate concerns about custody and security of digital assets.

Maxwell Lane (left), product manager for Flourish, and Michael Diamond, product manager for core investments at Fidelity, at Financial Planning’s Invest conference. “As an advisor, you’re going to be the fiduciary and you have to help make that decision for your clients…And the best thing you can do is educate yourself,” Diamond said.

Donna Alberico

But despite the openings available for advisors who seek to attract new clients through non-traditional investment opportunitiesmany still don’t know how comfortable they are with the new asset class.

Maxwell Lane, product manager for New York-based advisory platform Flourish, explained that many consumers who already trade various digital products would be eager to do so through their advisors if services were offered.

“We spend a lot of time trying to inform advisors that their clients are already there, and it’s a bit of a unique situation that it’s probably the only asset class where maybe the client knows more than advise him at this time. … And it’s a bit of a weird situation for advisers,” Lane said.

The company’s digital currency division, Flourish Crypto, announced its partnership on Thursday with the Digital Assets Council of Financial Professionals to grant clients of the firm’s Registered Investment Advisors access to educational materials on Bitcoin and other leading digital assets.

“Competition has evolved over the years, but basically what we’re hearing now is that advisors are being asked about crypto by their clients, which leads [them] to educate themselves and start looking for solutions,” Lane said. “Clients will do it with or without their adviser. The good news is that they want to do it with their advisors.

With the legislative thrusts of President Biden made earlier this year signaling a flurry of potential new laws and regulations, the level of acceptance of cryptocurrencies tends to increase.

“As a technologist, I am very optimistic about the promise and potential of crypto and blockchain technology in a number of areas, including crypto tokens as an asset class. … As a finance professional, I believe we all see the formation of a new asset class, and it doesn’t happen often,” Lane said.

Dolores W. Simon