COVER STORY Trends in Investing
Learn, Listen, and Lead
on Cryptoassets
by Tyrone Ross
I GET MANY CALLS from financial advisers all
over the country ranging from excitement to rage.
Many times, these calls come after advisers have
conducted a meeting and learned that their client
holds a meaningful position in crypto. Another
common occurrence is an adviser learning a client
Tyrone Ross is the CEO and co-founder of Onramp Invest has multimillions in a Coinbase account. In the
and the Founder of 401stc, a storytelling consultancy. He worst cases, the adviser learns a position accrued
is a graduate of Seton Hall University and was also a 2004 massive capital gains, but the client was also being
Olympic Trials qualifier in track and field in the 400 meters. remunerated in a particular crypto. For an unsus-
He was recognized as part of the 2019 InvestmentNews 40 pecting adviser who may have been hoping to avoid
under 40 and was also recognized by Wealth Management this “speculative mania,” this finding is the rude
as one of the top 10 advisers set to change the industry in awakening that crypto is here to stay. Your clients
2019. Financial Planning named him as one of 20 people own some, believe it.
who will change wealth management in 2020, and he was In fact, the 2021 Trends in Investing Survey,
recently named as Investopedia’s top 100 financial advisers. conducted by the Journal of Financial Planning and
58 Journal of Financial Planning | June 2021 FPAJournal.org
Trends in Investing COVER STORY
FPA, and supported by Onramp Invest, found that cryptoassets are decentralized; the traditional
15 percent of advisers surveyed currently use or financial system requires the use of intermediar-
recommend cryptocurrencies with their clients, ies, such as banks, to process payments, while the
which is up from less than 1 percent in the 2020 crypto economy is peer-to-peer and peer-to-pool
survey. Twenty-six percent of advisers said they (e.g., DeFi or decentralized finance).
plan to increase their use or recommendation of
cryptocurrencies in the next year. Lastly, 49 percent
of respondents said their clients have asked about
cryptocurrencies in the past six months, up from Advisers should not be
just 1 percent a year ago. afraid to have the crypto talk
For the purpose of the piece, we will focus on
Bitcoin and bitcoin. It is important to note that
with their clients.
Bitcoin (“big B”) is the blockchain network, while
bitcoin or BTC (“little b”) is the coin itself. It has
the biggest brand, longest track record, and largest Open or “permissionless” blockchains—like
group of crypto hippie (sometimes obnoxious) Bitcoin—are transparent, meaning anyone at any
believers. But what is it, really? Digital gold? time can download up-to-date transaction data that
Money? Store of value? Savings technology? Specu- spans all the way back to the blockchain’s incep-
lative asset? Yes, all of those things, depending on tion. A “coinbase” (yes, this where the now public
where your feet are in the world. But let’s bring company gets its name) transaction is the first
this back to the investment adviser space for some transaction in a block. It is a unique type of bitcoin
perspective and clarity. transaction that can be created by a miner. Once a
Widespread technological advancement is alter- transaction is added to the blockchain, it cannot be
ing the investment advisory landscape, and the changed. For this reason, blockchains are viewed
emergence of the crypto economy since Bitcoin’s as immutable. Altering transaction history is nearly
creation in 2009 is revolutionizing the way that impossible, as hackers would have to “rehash”
investors think about deploying capital. As regis- all blocks that came before it for the transaction
tered investment advisers start examining crypto- history to check out.
assets, they must be well educated and resourced to Although blockchain technology has many
best serve their clients. benefits, there is a high level of concern from the
investment community around how U.S. regulators
A Quick Overview of Cryptoassets perceive cryptoassets. At present, the IRS, SEC,
So, what is cryptocurrency? In simplest terms, and CFTC have yet to reach a consensus on what
cryptocurrency is digital money. It is housed on the cryptoassets should be categorized as and, subse-
blockchain, which is a public digital ledger. The quently, who will be in charge of their oversight. The
ledger keeps track of every transaction to ever take IRS views bitcoin as property; the SEC views it as a
place on that particular blockchain, and its data is non-security; the CFTC views it as a commodity. My
easily accessible to anyone with internet connec- guess is that the entire RIA space would appreciate
tion. Unlike conventional financial instruments, it if the SEC and CFTC got together to provide clear
FPAJournal.org June 2021 | Journal of Financial Planning 59
COVER STORY Trends in Investing
guidance on how bitcoin will be regulated. The (4) Disclosures. Marketing materials and
SEC recently put out a risk alert on digital assets in social media posts regarding cryptoassets must
February, claiming that they “present unique risks be monitored for proper disclosures about risks
to investors.” The alert specifically cited five main involved with investing in the asset class. Risks
areas of concern: specific to the digital nature of cryptoassets are
(1) Portfolio management. As advisers invest especially important to express to clients.
client assets into crypto, there are many questions. (5) Pricing client portfolios. Selecting valu-
How cryptoassets will be classified within a port- ation methodologies becomes increasingly diffi-
folio, ensuring that advisers perform proper due cult when it comes to cryptoassets. How advisory
diligence, and methods in which advisers measure fees are calculated can be greatly impacted by the
and mitigate risk are all grey areas. adviser’s chosen valuation practice, thus justify-
ing examination by regulators.
Expand Your Knowledge
Without further guidance, the future landscape
Independent advisers should be of cryptoassets from a compliance standpoint
conversant on the $2 trillion global remains opaque to the most skeptical of our
market capitalization world of peers. Advisers strictly adhering to the fiduciary
cryptoassets to oblige crypto-curious standard may be hesitant to allocate until
clients and prospects. regulators come to an agreement. However, as
fiduciaries, independent advisers should still
be conversant on the $2 trillion global market
capitalization world of cryptoassets to oblige
(2) Books and records. Like within the rest of crypto-curious clients and prospects.
an adviser’s practice, regulators must ensure that Regardless of whether they end up investing
advisers are keeping adequate records of transac- in crypto, they have a responsibility to provide
tions. Within a highly liquid crypto market that best-in-class service and be amenable to a wide
never closes and that has no wash sale rule, this array of investments. In fact, advisers should
only increases in importance. Advisers also need adjust their business models to better accom-
to ensure they choose a platform that reliably modate it. Ideally, they would gain access to the
documents transaction history, order executions, crypto economy through their existing wealth
and settlements. tech stack.
(3) Custody. Regulators must be able to moni- Registered investment advisers depend upon
tor unauthorized transactions, suitable custody, technology to manage their business effectively.
and proper storage of client assets. How advisers Practice management should be viewed in the
can provide safekeeping of private keys is a major same manner when it comes to crypto. In the
security concern, as well as the reliability of the highly niche world of cryptoassets, clients still
software they use to participate in the crypto want advisers to manage their assets from begin-
markets. ning to end. Whether it’s their CRM, portfolio
60 Journal of Financial Planning | June 2021 FPAJournal.org
Trends in Investing COVER STORY
management system, or financial planning soft-
ware, advisers will need to interface with tools
FPA Chapter Leaders
for reporting, rebalancing, planning, account Conference:
aggregation, and automated tax strategies for
cryptoassets.
Call for Presentations
Unless provided with integrated tools and data
THE CHAPTER LEADERS CONFERENCE (CLC)
within their legacy systems, advisers are limited
is just that—a conference for our chapter
in the advice they can provide clients interested
leadership. A conference designed specifically
in learning more. Best-in-class educational
for you, including updates from the Central
resources are lacking and, if available, would
Office and information necessary to run a
encourage adoption and help advisers feel com-
successful FPA chapter.
fortable conversing with clients and prospects
At this year’s CLC, we’d like to allow our
who are looking for guidance. So, where should
chapters the opportunity to not just learn from
advisers start to get educated on this topic?
the Central Office, but to learn from each
I’ll suggest one book, podcast, newsletter, and
other. In addition to offering roundtable and
certification that I feel are for any adviser:
one-on-one opportunities across chapters,
• Book: Cryptoassets: The Innovative Investor’s
we’d like you to be able to highlight something
Guide to Bitcoin and Beyond by Chris Burniske
you’re proud of within your chapter that
and Jack Tatar.
others may be able to emulate. Did you start a
• Podcast: Coindesk’s On Purpose podcast.
podcast? Let’s hear about it. Did you develop
Hosted by an adviser (me), providing educa-
a student mentor program? Fantastic! Did you
tion on bitcoin and cryptocurrency for the
collaborate on a successful event with other
modern adviser.
chapters? Pull together a panel and share with
• Newsletter: Coinmetrics, a cryptoasset
your fellow chapters!
market data and research provider.
If you’d like to be considered for present-
• Certification: Certified Digital Asset Advisor
ing at CLC this year, please complete your
(CDAA) designation from Interaxis.
submission no later than June 18, 2021.
Advisers should not be afraid to have the
Submissions will be reviewed and responses
crypto talk with their clients. In fact, they should
will be sent no later than July 15, 2021. Any
welcome it. The best advisers will learn, listen,
chapter chosen to present will receive a free
and lead on cryptoassets. Skeptics who refuse to
registration to the event.
simply become educated on this emerging space
Thanks in advance for sharing your successes
will fall behind to their more open-minded peers.
with your FPA colleagues, and good luck!
Those who have done their homework will learn
that this is not rushing to make allocations for
Submit ideas at:
clients, but more about strengthening existing
www.surveymonkey.com/r/CLCspeaker
relationships and helping their practice grow in
the years to come.
FPAJournal.org June 2021 | Journal of Financial Planning 61
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