Get Think Tanked Distilled with Caitlin Cook and Jeremy Schwartz

As Bitcoin, Ethereum and other cryptocurrencies continue to become a greater part of the financial, economic and social landscape, it’s become increasingly difficult for financial advisors to figure out ways to properly serve their clients. Legal and fiduciary risks as well as a general lack of knowledge regarding this fast-changing industry are presenting advisors with new questions about how and if to weave crypto into client accounts. The ETF Think Tank recently welcomed Caitlin Cook, the Head of Community and Research Associate at OnRamp Invest, and Jeremy Schwartz, Global Head of Research at WisdomTree, to discuss some of these challenges.

According to Cook, the biggest challenge today is education and there’s a need to make it very simple for advisors. Understanding the vocabulary around defi and cryptocurrency is probably the first step. Many advisors simply don’t know what they don’t know at this point and starting with the basics is often the most beneficial early on. She notes that, in many cases, the clients know more than advisors and you are not serving your clients properly by not having a certain level of education on the topic.

Another way, she says, to bridge the gap is advisors talking to other advisors. With education being the building block of trust and a widespread acceptance that this is not going away, it’s important for advisors to leverage each other whenever possible, so there’s less discouragement from adopting crypto faster. Most clients don’t understand crypto or the risks and volatility associated with them, so educating them before having the suitability discussion is a logical first step. One of OnRamp’s goals is to be a holistic source of education including curating resources for tax planning, financial planning and end of life planning and how crypto can get built into these things.

Another hurdle for advisors is making them feel comfortable having the crypto conversation with clients without having them feel as if they are going to run into compliance troubles. Compliance approval tends to scare advisors away. There is a big need to update legal disclosures and it’s about taking the time to do the research and covering their bases. One issue is that while there have been some regulatory comments from the SEC, there has not been a big come-together on guidance and that needs to happen at some point soon.

Schwartz talked about crypto in terms of how WisdomTree was working it into model portfolios. The company has recently added bitcoin to its 60/40 and 80/20 models, but in different ways. In the 60/40 model, the allocation to crypto came from bonds due to the belief that fixed income presented a poor risk/reward opportunity given record low yields. In the 80/20 model, it came from equities so as to add diversification without sacrificing long-term growth potential. WisdomTree has a 5% allocation to crypto in these models, enough to make it meaningful but not enough to expose them to undue risk.

Schwartz also talks about how WisdomTree’s approach to alternative asset classes has changed over time. The company has traditionally maintained more of a value orientation that weighted towards things, such as dividends and earnings. Today, product offerings cover themes, including growth, momentum, and disruptive tech. Some of the models, he notes, also include small allocations to gold, commodities and crypto, so the thinking has evolved a bit over time. As it stands today, WisdomTree is keeping an eye on inflation, but believes that high inflation and money printing could lead to increased demand for cryptocurrencies over time.

Both Cook and Schwartz agree that the crypto space will continue experiencing rapid growth and acceptance. There’s work to be done for advisors making clients more knowledgeable about this sector, but eventually most will be weaving crypto in the conversations in the same way that they are with stocks, bonds, and real estate today.

This week our guest will be Frank Holmes, joining us to discuss crypto, gold, and mining. Sign up here.


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ETF Industry KPI – 07/19/2021

ETF Industry KPI – 07/19/2021

Week of July 12, 2021 KPI Summary This week, the industry experienced 15 new ETF

Growth in Assets and Research

Growth in Assets and Research

The ETF industry is experiencing record growth

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