Are Financial Advisors Ready for Digital Assets?

February 03, 2020

By Dara Albright

Individuals around the globe began accumulating bitcoin not long after the mining of the genesis block in 2009.

More recently, institutional investors joined the party, and have been gradually dipping their toes in crypto waters.

But, what about financial advisors and wealth managers?

Are they ready to embrace digital assets and start recommending this novel asset class to their clientele?

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.”

More than 1,000 financial advisors crowded the Hyatt Regency Orlando for a day-long Digital Assets track, hosted by Don Friedman, founder of the Digital Asset Strategy Summit, and Ric Edelman, RIADAC founder and one of the nation's most prominent financial advisors. The discussions were dedicated to helping advisors discover blockchain’s impact on the global economy as well as how digital assets can play a role in their clients' portfolios.

Below are some of the highlights and key takeaways from the conference

  • Blockchain engineers are now the highest paid earners in the software development field.
  • 82% of financial companies expect to develop fintech partnerships in the next three years.
  • Stock exchanges in Australia, Switzerland and Singapore plan to replace clearing and settlement platforms with blockchain in 2021.
  • Blockchain is expected to cut bank infrastructure costs by 30%, saving $12B per year.
  • Goldman Sachs expects blockchain technology to add $37B to the U.S. economy by 2021.
  • 5% of Americans presently own bitcoin.
  • Bitcoin is the fifth largest holding by millennials. In fact, according to Sunayna Tuteja, Head of Digital Assets at TD Ameritrade, “Bitcoin is making saving and investing sexy again.”
  • The benefits of a 1% bitcoin allocation far outweigh having no bitcoin allocation at all.
  • The majority of advisors believe that clients may be investing in crypto on their own, outside of their advisory relationship.
  • 6% of advisors have now placed digital assets into client portfolios. More significantly, 13% plan to do so in 2020.
  • According to Matt Hougan, Global Head of Research at Bitwise Asset Management, low correlation is the number one reason why advisors are exploring digital assets.
  • 65% of advisors say that a bitcoin ETF would be their preferred way to use bitcoin to diversify client portfolios.
  • Currently, the Grayscale Bitcoin Trust ($GBTC ) seems to be the most viable option for financial advisors.
  • Asset Tokenization could be about to give rise to the greatest diversification opportunity in the history of mankind -- enabling asset classes to become increasingly less correlated with one another and ensuring that portfolio allocation models become that much more effective.
  • According to Gabor Gurbacs, Director of Digital Asset Strategy at VanEck/MVIS, “Asset tokenization could potentially create an economy north of $100 trillion in value.”

For those still deliberating whether or not to #getoffzero, Mark Yusko, CEO of Morgan Creek Capital Management, reminded attendees that “comfort is the enemy of profit, and that the greatest wealth is created when you believe in something before everyone else does.”

But, I think that the most persuasive argument in favor of digital assets came when Ric Edelman put it like this: “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.”

Based purely on the current trends, the answer to Ric’s question is, once again, a resounding, “yes.”

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