Advisors Pivot to Cryptocurrencies as Clients Want in on the Action

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  • As watching bitcoin's price fluctuations becomes the norm, financial advisors are finding clients increasingly want to get in on the action.
  • For advisors, that presents a new challenge as to how to integrate cryptocurrencies into portfolios.
  • One expert who is betting the trend continues says the first step is to get educated.

As investors become more interested in cryptocurrencies, financial advisors are feeling a new urgency to offer the investments to clients.

About 49% of advisors said clients have asked about cryptocurrencies in the past six months, up from 17% in 2020, according to the Financial Planning Association and the Journal of Financial Planning.

More of these financial professionals — 26% — plan to increase how much they use and recommend cryptocurrencies in the next 12 months.

Currently, 14% of advisors are using or recommending those investments. That's up from less than 1% in 2019 and 2020.

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"Folks are realizing now that it's not going away," said Tyrone Ross, CEO of Onramp Invest, a provider of "cryptoasset" management technology for financial advisors. The company collaborated with the FPA and the Journal of Financial Planning on the survey.

Advisors who don't adapt could risk getting left behind.

"Clients are coming to advisors now knowing more than the advisors," Ross said. "The advisors are absolutely terrified, because you never want to look dumb in front of your client."

How advisors are using crypto

Advisors who are integrating cryptocurrencies now are typically adding a 1% to 2% allocation, Ross said. However, those who are more committed to the strategy may be as high as 3% to 5%.

Ross also has his own advisory practice, which is 100% devoted to cryptocurrencies. That means no traditional assets, such as stocks or bonds.

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.

Onramp recently started a cryptoasset integration platform to help registered investment advisors integrate bitcoin, ethereum and other investments into portfolios.

Ross said the company is trying to provide the resources he wishes he had when he was starting his practice in 2017.

Now, the challenge for the company is to meet the demand it's seeing, Ross said. More than 300 advisors signed up in the first couple days of its May 25 announcement.

Onramp currently is raising funds to help meet that demand through investors such as Eterna Capital, Gemini Frontier Fund and Ritholtz Wealth Management, which is also using the company's technology to integrate cryptocurrencies in client portfolios.

Where to go to learn more

For both advisors and investors, the first step is just to get educated before dabbling in these investments, according to Ross.

Onramp offers an education program, branded Onramp Academy, to advisors who want to become educated on digital assets.

The bitcoin whitepaper, written by the cryptocurrency's creator under the presumed pseudonym Satoshi Nakamoto, is also a great place to start, Ross said.

Other resources Ross recommends include the book "Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond" by Chris Burniske and an educational website hosted by Jameson Lopp.

"Get educated on it," Ross said.

"If you get educated on it and feel like it's an investment for you ... maybe put a little in that you would spend on a night out on dinner and just leave it alone," he said.

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