Take the plunge, Ric Edelman advises crypto-cautious advisors
Ric Edelman speaks at an event for the Digital Assets Council of Financial Professionals, a … [+]
Ric Edelman brings a buy-the-dip mentality to cryptocurrencies, even when these falls are as steep as the first drop on a roller coaster, and he believes other financial advisors should do the same.
A pioneer among RIAs – who have a duty of trust towards their customers – Edelman is not fascinated by the recent cryptocurrency, which has seen declines far greater than the 20% that marks a bear market in stocks with the total crypto market value down by about 70% from tops in November last year. He said customers can dip their toes in the crypto water without consulting their advisers.
“People have been calling me crazy about crypto for 10 years,” he said. “Most advisors are unaware of whether and to what extent their clients own digital assets because they do not talk about it with their clients and assume that their clients are not participating, and that is simply not the case.”
Many advisers are still not convinced.
“When investors hear crypto, I want them to think of tulip mania or the South Sea Bubble,” said Mark Matson, founder and CEO of Matson Money, a $ 9 billion asset management company. “There is absolutely no basic thing, no one at all, that says this thing should have any value.”
Asked how an adviser, far less a trustee, could recommend investing in cryptocurrencies, Edelman cited some major technology stocks that have also suffered major losses, including Netflix.
Nevertheless, the sector’s downturn has been much steeper than the S & P 500’s 19.9% fall this year, which could give potential investors and their advisers a break.
Financial advisors must tread carefully. The US Securities and Exchange Commission and the Financial Industry Regulatory Authority have been unclear about the appropriateness of investing in specific currencies, leaving exchange-traded funds, grantor trusts and exchange-traded securities as ways to gain exposure, including ETFs that take short positions that would take benefit from further decline.
Edelman said consultants can help clients invest in companies involved in crypto infrastructure, ranging from computer chip manufacturers such as Nvidia to developers of blockchain technology such as IBM
MicroStrategy is definitely cheaper than it was, down 68% this year. But that may be insufficient to lure buyers into a cooling market for Bitcoin and other cryptocurrencies.
“The reality is that it is not a topic of discussion at the moment,” said a top adviser from Forbes / Shook at a major wirehouse, who asked not to be named. “When I talk to clients outside the mail, I tell them that I’m not a fan of it as an investment, but I also have to make it clear that I can not discuss it much more with them.”
This adviser said that he sees a lack of government regulation as a reason why crypto does not have long-term viability. For now, he says that customers and advisers have enough on their plate, from inflation to a bear market to fear of a recession, that cryptocurrency is at the bottom of the list.
Jeff Grinspoon, a top consultant at Forbes / Shook at VWG Wealth Management, said his practice has no restrictions on advising on the crypto market, but that he must ask his parent company, Hightower, for approval if he wanted to buy crypto for customers.
So far, his lack of due diligence on the major stock exchanges and on technical knowledge of self-deposit crypto has led to his investment on behalf of clients being limited to Grayscale Bitcoin Trust, which is down over 62% so far this year. Despite the recent plunge, Grinspoon continues to be interested in investing in not just digital assets, but the underlying blockchain technology.
“What I have told customers is that from a team and company perspective, we do not recommend individual cryptocurrencies because our customers are not looking for a home, they are looking for capital preservation and growth,” Grinspoon adds. “Before that market matures, we just are not paying attention.”
Grinspoon said he believes in Bitcoin as a value store, while describing most other tokens as “shit”.
