Advice You’ve Never Had to Consider Before

16 September 2021

As a financial advisor, you?re expected to understand and give guidance on a variety of subjects. You?ve sat across conference tables and dinner tables, and most recently on Zoom calls, helping your clients better understand risk profiles, efficient allocation, bond yields and exchange-traded funds. You speak eloquently about retirement plans and college plans.

Now comes crypto. As I noted in my previous column, the conversations you?re going to have with clients are unlike any you?ve had in the past. These new conversations are based on new technology, markets, esoteric valuation metrics and business models. Accordingly, you?ll need to understand and advise your clients on issues you may never have considered before.

This column originally appeared in Crypto for Advisors, CoinDesk?s new weekly newsletter defining crypto, digital assets and the future of finance. Sign up here to receive it every Thursday.


Custody is an issue when it comes to digital assets because the technology is so new.

Bitcoin was created with the idea that we would each hold our own crypto assets. Of course, that custody was meant to happen in a digital wallet, where we have our own private keys, and which we can?t lose or we also lose access to our crypto. For many who are hard-core bitcoiners, or extremely crypto native, the idea of controlling your own wallet and holding your keys is a must. As more investors have wanted exposure to bitcoin and crypto, we have seen new products and services that move custody, or control of the keys, to a third party.

This is when the new conversations come in. You will need to first think about the custodial options you want for your clients and your practice, and then have those conversations with your clients.

You are used to having all their assets with traditional custodians like Fidelity and Schwab. The extent of the conversation is explaining why the client gets a statement from one of these companies.

Now you?ll have to make decisions about crypto custody and even possibly split their crypto among various offerings for different purposes. You might have some assets at a crypto custodian so that you can trade, while moving some onto a hard wallet, or cold storage offline, to keep it more secure. Of course, being offline comes with risks as well, and you will have to go over wallet and private-key security and estate planning.


While 2020 was as volatile a year as we?ve ever seen for equities, volatility still isn?t something we?re accustomed to discussing much with clients. Some tech stocks can fluctuate a few percentage points in a day based on earnings or announcements. That level pales in comparison to regular double-digit percent moves within hours in crypto.

For some, that volatility is reason enough to avoid crypto altogether. However, the chance to have conversations about it with clients will help make you a more valuable advisor.

The first conversation is one of setting the expectation. Your client needs to understand and acknowledge that their digital asset investments can move wildly in one direction or another anytime. It could be during the workday, evening or weekend.

You need to discuss the course of action for certain violent price moves. If bitcoin goes down 15%, do we get out, hold or buy more? Knowing that you have a plan will help your clients, and you, feel less anxious about the volatility.

You also get to have the conversation about how volatility can help a regularly rebalanced portfolio, especially when that volatile asset is highly liquid.

Highly volatile, liquid, alternative assets haven?t existed before, so you can really show your value.

Inflation hedge/store of value

Thinking a bit about inflation is nothing new. You routinely discuss that topic, especially as it relates to future healthcare and education costs. We usually try to offset the increases in costs by being invested in equities that also gain value with inflation.

We really haven?t seen overall economic inflation in about 15 years, as the Fed has somehow managed to keep it at its standard 2%.

With the money printing and spending we saw as a result of COVID, we now have to think about serious inflation ? the devaluing of the U.S. dollar.

Now, with crypto, you?ll get to have macroeconomic conversations about the value of dollars relative to a fixed-supply asset like bitcoin. Until now, the closest asset you had to use as a store of value was gold, which has other issues with regard to investment.

The conversation about whether a client should have some funds invested in an asset specifically to offset short to mid-term inflation is a new one, and one in which an astute advisor can shine.


This is going to be a fun conversation to have with clients, and one in which you will want to be relatively well versed in order to explain.

The U.S. regulation of cryptocurrency, digital assets, exchanges, banks, custody and investors is changing weekly, and is dependent on the regulators and legislators in office.

Your clients are going to read stories and opinions about whether crypto should be regulated, which assets should be regulated and how they should be regulated. These articles will run the gamut of whether it should be legal at all to how the yields and gains are taxed.

You likely haven?t had to have conversations with clients about assets or investments where the legality and tax treatment are all in question. Regulatory considerations will affect the willingness to invest, the determination of when to buy or sell and the allocation to crypto in the portfolio.

It will likely also cause some anxiety anytime the government discusses or hints at increased regulation, as this may have a negative impact on prices.

FUD: Fear, uncertainty and doubt

FUD is something well known in the crypto community, but is not as common in traditional finance. We use it as a term to describe the news, whether true or not, that drives the price of crypto.

Because crypto is a 24/7/365 asset that is traded internationally, one of hundreds of news items could drive the price higher or lower, somewhere in the world, which will greatly affect the entire market. You can go to bed and everything is fine, and wake up to find prices down 15% because of a rumor on Twitter that the South Korean government is considering banning bitcoin, for example.

There are few institutional analysts, and so traders and investors all over the world trade quickly based on anything even resembling news and try to determine the real effects later.

This leaves you to try to understand what happened and why it happened, and then to possibly explain it to your client. Based on the price movement, you might also have one of those volatility conversations where you look at your plan and determine if it?s time to buy or sell.

Your value for clients

As you can see, much of the value you?ll bring to clients as you adopt crypto into your practice will be the new conversations you?ll have with them on complex topics and issues in the crypto world. This is in contrast to the value many of you provide now, such as choosing investments and managers, portfolio allocation, etc.

These conversations come with the requirement that you understand the technology, the assets and the macro and microeconomic environments in which they are operating, so that you can effectively take in the information from the markets and provide good advice and guidance to your clients.

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