The debate for crypto investing has been flipped on its head, claims Ric Edelman. It’s no longer a question of why advisors are putting clients in this new asset class, but why aren’t they?
Edelman, the founder of Edelman Financial Engines, one of the most successful financial firms in the nation, and the founder of the Digital Assets Council of Financial Professionals, said in a recent webinar hosted by the Investments & Wealth Institute that cryptocurrency investing is evolving as it matures. It is now up to a fiduciary to present it to clients as a reasonable investment.
The difference is a sea change for advisors and for their clients, said Edelman, the author of 11 financial books, including The Truth about Crypto, and a passionate advocate for investing in digital assets.
“As a fiduciary, can I recommend crypto?” Edelman asked in the webinar. “Yes. An advisor has to understand digital assets and blockchain technology, and then look at a client’s circumstances and see if the investment is appropriate.”
Edelman used to recommend investors have 1% of a portfolio in digital assets. He said he now recommends 2% to 3%. “As crypto ETFs have become available, the argument has shifted,” he said.
Though he said it’s not too late to invest in digital assets, he also said the initial skyrocketing increases are over.
Bitcoin, in particular, has outperformed all other assets.
“I think we are just at the beginning,” he added. “Blockchain technology is revolutionary—it is a newer, better, cheaper way to move money. Paper money is crazy. Every central bank in the world is studying creating a digital currency.
“Opponents of investing in digital assets say it has no intrinsic value, but they are asking the wrong question,” Edelman explained. “They are forgetting that bitcoin is not a stock. Digital assets are a brand new asset class that has nothing in common with other asset classes. That is why investors should want it—as a diversifier.”
He said that major wirehouses are beginning to allow advisors to recommend investing in digital assets, and some countries want to move to blockchain technology to reduce dependence on the U.S. dollar.
“You want to put money somewhere it is safe and protected from inflation,” he added. “The next step for advisors is to determine how they can add it to their practices and how to translate it into meaningful communication with clients.”
Advisors need to know how to explain the asset—the first to be invented in 150 years—to clients, Edelman said.
“If advisors do not have an understanding of, and information on, digital investments, the clients will get their information from someone else,” Edelman warned.