VIPs Are Venturing Into Crypto, but Many Advisors Still Hesitate

"We come from a large bank — we came from J.P. Morgan — [and] we've been trained to avoid things without enough of a track record to really get a good understanding for things like correlation and so on," he told ThinkAdvisor in a phone interview Tuesday.

As a chartered financial analyst and fiduciary, "I have a real hard time valuing anything unless it's got some form of cash flow," he pointed out.

There is really nothing he is aware of at this point that will make him change his mind on crypto anytime soon, he said.

But the Onramp launch and Ritholtz and Dynasty supporting crypto "adds incremental justification to at least follow it," he said.

Jackson does invest in Silicon Valley Bank and Signature Bank, which operates the blockchain-based digital payments platform Signet, he noted, but added his firm invested in Signature for reasons beyond its digital payments platform.

Traditional Strategies Still Preferred

Sacramento, California-based RIA Allworth Financial also has no plans to adopt crypto in its investment portfolios, according to Jeffrey Baumert, executive vice president of financial services at that firm, who told ThinkAdvisor his firm prefers traditional investment allocations for clients.

"I cannot comfortably comment on what other firms are doing, or even speculate on why they are doing what they do," he told ThinkAdvisor. But he was quick to add: "I can say with absolute certainty that what they are doing will not in any way drive us (or many others) to follow."

He predicted crypto "will be around for the foreseeable future" although it's "impossible to know which currency will ultimately dominate, or whether it will even remain in its current form."

There is also a "dark side to crypto that we would like to avoid, and we hope that, eventually, the nefarious use of cryptocurrencies is somehow mitigated," he said.

While "things like cryptocurrency can be exciting to watch as their prices rocket upward," he said: "They quickly lose their appeal when those prices plummet, as we all recently saw. It is extremely difficult to look at crypto and assess an intrinsic value, much less fully understand what drives these prices — other than emotion. And emotion is something we always seek to minimize in portfolio management."

Big Firms Lead the Way

More bullish on crypto was Boneparth, an advisor who is president of Bone Fide Wealth, an RIA based in New York.

"We would love nothing more than to provide our clients with a low-cost passive crypto investment option," like a Bitcoin or Ethereum ETF, he told ThinkAdvisor.

"However, despite the number of applications filed with [the] SEC, it still could be some time before we see one," he predicted.

Also, he explained: "Many smaller firms, unfortunately, lack the size and scale to effectively add current products on the market. Firms with size and scale that are currently jumping into the crypto market ultimately help move things forward for smaller firms."

Pictured: Signs in New York on the day of the Coinbase IPO. (Photo: Bloomberg)