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Alternative Investments

What's Top of Mind for Advisors When it Comes to Crypto?

What's Top of Mind for Advisors When it Comes to Crypto?

Ben Johnson: From Morningstar, I'm Ben Johnson. Crypto assets, bitcoin, ethereum, and even JPEGs of digital rocks are on everyone's minds these days, and they're grabbing all sorts of headlines. And it's a topic that is going to be a topic of discussion at this year's Morningstar Investment Conference. And joining us to discuss that topic is Tyrone Ross. Tyrone is the co-founder and CEO of Onramp Invest. Onramp Invest is a platform that's aimed at educating advisors and helping them to integrate crypto assets into their client's portfolios.

Tyrone, thanks so much for joining me today.

Tyrone Ross: Thank you so much for having me. Looking forward to this chat.

Johnson: Let's dig in. I want to know, Tyrone, what is top of mind for advisors right now when it comes to looking at crypto assets for their clients? What's the biggest challenge that they face as we sit here today?

Ross: I think it's multifaceted. I think the first is education. But you start to branch out from there on, Do I know what the regulatory environment is, truly? Do I have a good framework for that and compliance and then Eno. And, you know, building my practice to prepare to give advice and allocate on behalf of clients, if that's the case. I think the other thing right now is obviously just simply the volatility, right? The speculation that is going on, advisors are very much looking at this and saying, "OK, is it worth me taking the risk of putting 0.5% or 1% or 3% of an allocation of bitcoin into client portfolios—having to deal with that call when it's down 80% in three months?" So, I think it's those things when you cobble them together—just simply are, "Where do I start? Where do I go? Is there one place for me—an advisor—to get started on this?" but it all goes back to education.

Johnson: Now, Tyrone, I'm interested to know, because you've had countless conversations with countless advisors—you come from a place of having once been an advisor yourself—when you have these conversations, what are the common traits of models that advisors have in place today, where they're helping their clients to succeed and integrate crypto assets? And alternatively, what does the model for success look like where it might not be the right fit for a client and an advisor might have to educate them not only on crypto assets, bitcoin 101, but why it might not necessarily be a good fit for that particular client?

Ross: Right. So I'll start with what you just said. I think—I tell financial advisors this all the time—most financial advisors really shouldn't be saying anything to their clients about this right now. But learning and leading to have the conversation just simply be conversing, prepare your practice, take client questions and concerns. But leave your opinion at the door, just simply be conversing. To that end, I think right now, there's a lot of "hotels" for advisors, so to speak, to get themselves integrated into the space to get access for clients. Are they the best? Are they the most efficient? That's not up for me to say, which is you get into the bitcoin ETF conversation as well—why advisors want that—which pairs with the other part of your question is: integrating it into the conversation and portfolios for clients. If it's easy, if it's seamless, an ETF does that, right, Onramp is trying to do that. It's a lot easier to see the client's whole financial life and say, "OK, well, Mr. and Mrs. Client, you have one of those 60 million Coinbase accounts, right? Let's pool that into your portfolio and take a look and have a conversation." And the advisor is simply doing what an advisor is supposed to do: Be a trusted fiduciary for their client. I think once the rails and all the integration points are there, it'd be a lot easier for advisors to do that, as opposed to trying to find out everything on their own, but simply do it right from their existing workflow.

Johnson: Tyrone, something you mentioned is there are a number of different ways today for investors, for advisors to allocate to crypto assets, to bitcoin to ether, you name it. One of the ways that gets sort of the most attention is really the one way that today no one can invest in bitcoin, which is a bitcoin ETF. What's your take on wrapping this crypto asset or any crypto asset like bitcoin in an ETF package?

Ross: Oh, that's a setup, you know I don't like that. I'm a big fan of holding the underlying, not a fan of a bitcoin ETF, but we are going to get one. It's just like if you want to hold GLD or if you want to hold the actual gold bars, you can. I'm a big fan of holding the underlying. I'm a purist. And I believe that there comes a lot of benefits with that for advisors and their clients when you actually hold the underlying and everything you could do inside the crypto economy. Now, I understand, don't necessarily agree, but understand the arguments for a bitcoin ETF. I'm sure this will come up with myself and Matt Hogan. It always does. Because advisors, again, its easy. advisors need to, you know, they want to get paid, right. And it's also very similar to buying Apple. They can do it the same way with a bitcoin ETF, and it's seamless, and it's right in their workflow. I completely understand it. But being a purist, it makes my skin itch when we talk about putting a 21st century new and novel asset class, going all the way back to the 20th century and sticking it in there and saying, "All right, something to trace 24/7/365. We're going to stop, slow it down, and put it in this box so we can sell it to retail investors." Angers me.

Johnson: Well, Tyrone, I want to thank you first and foremost for making me not be alone among the bitcoin ETF sceptic crowd, which gets thinner by the day. And thank you for joining us today to share your insights. I really appreciate it.

Ross: Absolutely. Only way to fix to bitcoin ETF conversation is bitcoin futures ETF. Now we're talking investor protection! Unbelievable. Thank you for having me, man. I appreciate you.

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