Major Investment Force Awakens As Financial Advisors Warm Up To Bitcoin
In a piece published on accounting firm EisnerAmper LLP’s website by New York-based financial advisor Dara Albright, a number of developments were highlighted to show how traditional finance is in the process of merging with digital assets.
“What about financial advisors and wealth managers,” Albright asked in the article while adding “are they ready to embrace digital assets and start recommending this novel asset class to their clientele?”
She went on to answer her own question:
“Based on the enthusiasm at last week’s National LINC 2020, TD Ameritrade's annual conference for financial advisors, I’d say that the answer is a resounding yes,” Albright said, listing key takeaways from the conference such as:
- “Bitcoin is the fifth-largest holding by millennials.”
- “The benefits of a 1% bitcoin allocation far outweigh having no bitcoin allocation at all.”
(More than 1,800 registered investment advisors reportedly participated in the conference.)
“Bitcoin is making saving and investing sexy again,” Albright quoted Sunayna Tuteja, Head of Digital Assets at major U.S. brokerage TD Ameritrade. (In January, regulated derivatives exchange ErisX, backed by TD Ameritrade, launched bitcoin futures for small investors).
Also, according to the advisor, Mark Yusko, CEO of Morgan Creek Capital Management, reminded attendees of the event last week that “comfort is the enemy of profit, and that the greatest wealth is created when you believe in something before everyone else does.”
However, Albright stressed that “the most persuasive argument in favor of digital assets” was made by Ric Edelman, founder of Edelman Financial Engines and of the RIA Digital Assets Council, who reportedly said:
“The question you need to be asking yourself is not whether you think bitcoin is going higher, but rather do you think other people believe that it is.”
Meanwhile, Edelman, at a separate major conference in January, Inside ETFs, made it clear that he believes financial advisors shouldn’t ignore bitcoin and blockchain technology.
Financial advisors are often “fairly oblivious to blockchain” and “hesitant to invest client money in bitcoin,” but they shouldn’t be, Edelman was quoted as saying by ThinkAdvisor. He called open-source distributed ledgers “the most important innovation since the introduction of the magnetic strip.”
“Bitcoin is worthy of consideration in your portfolios,” Edelman reportedly said, while suggesting financial advisors invest 1% to 2% of client funds in bitcoin, as long as the client understands the technology, plans to hold it for several years and can accept strong volatility and even a total loss.
Meanwhile, a recent survey of financial advisors in the U.S. showed that “some legacy concerns about crypto” are “continuing to fade from view.” Only 6% of advisors believe that cryptocurrencies are a scam,” down from 11% last year. And 13% thought that “cryptocurrencies are in a bubble,” a drop from 2019’s figure of 19%. Moreover, the number of advisors allocating to crypto in client portfolios is expected to more than double in 2020, from 6% to 13%. Also, 76% of all surveyed financial advisors report receiving questions from clients on crypto in 2019.