Advisors, You’re Running Out of Time to Get in Front of the Institutions

By Ric Edelman | Founder, Digital Assets Council of Financial Professionals

Watch the full “The Institutions are Coming – What That Means for Crypto” session from our VISION conference

For years, I’ve been telling you that the institutions would eventually engage in crypto, and that their massive asset flows would generate significant price increases.

That engagement is now underway – giving you one last chance to invest before their onslaught of investment takes crypto prices to new all-time highs. You need to act soon or you and your clients will miss this opportunity forever.

At DACFP’s VISION crypto conference in June, three remarkable people at the forefront of this shift confirmed all of this. Katherine Molnar is the CIO of the Fairfax County Police Officers Retirement System, whose fund was one of the first public pensions in the U.S. to invest in crypto, starting in 2018. “It was never a bet on bitcoin,” she told the audience. “It was a bet on blockchain technology.”

That bet has already paid off – with more gains to come. Her initial allocation was 50 basis points, but her confidence in the asset class has prevented her from selling. The result: the fund’s crypto allocation is now in “the mid to high single digits.”  It’s part of her broader innovation theme, she said, alongside investments in AI, life sciences and cybersecurity.

Katherine got comfortable with investing in such a volatile sector thanks to careful diligence and the support of her board. She brought trustees to manager meetings, something she normally wouldn’t do – to ensure their buy-in.

Her biggest obstacle? It wasn’t risk. It was process.

“Most pensions meet quarterly,” she said. “Getting a new allocation through investment committees and boards can easily take a year or two.” Worse, most pensions rely on consultants who aren’t incentivized to be first. “They’re incentivized to avoid blame.”

Her point: institutional progress is happening, but slowly. Like the boiling frog parable, you’re likely to miss it until it’s too late.

Sovereign Wealth Funds Are Moving Faster

Lakshmi Narayanan, vice chair of the Patel Family Office, said the sovereign wealth funds he works with operate on a much shorter timeline.

“Sovereign wealth funds don’t move like U.S. pensions,” he said. “They can make allocations of $15 million to $200 million in 30 days.”

According to Lakshmi, 60 of the world’s 140 sovereign wealth funds already invest in digital assets, with 34 custodying crypto. These investments help explain why crypto’s market cap has passed $4 trillion, and Lakshmi believes that number could surpass $6 trillion by next summer.

He’s not alone. Coinbase, for example, now has $220 billion in assets under custody on its institutional platform, said Anthony Bassili, Coinbase’s president of asset management. “We serve everyone from sovereigns to family offices to RIAs,” he said. “Institutions are using crypto not just for access, but for lending, collateral, and liquidity.”

Advisors, Your Clients Are Ahead of You

Here’s what all this means for financial advisors.

Your clients already hold crypto – and they expect you to understand it. Pew Research Center says a third of U.S. adults ages 18 to 29 have invested in, traded or used a cryptocurrency. According to the 2023 Fidelity Digital Assets Study, approximately 65% of surveyed institutional investors plan to invest in digital assets in the future.

If you’re not helping your clients with crypto, someone else will.

As Katherine put it, “If you don’t have it in your portfolio, you are effectively short.” That is not a position you want to be in – professionally or personally.

Skeptics remain, of course. But as Anthony explained, most critics simply haven’t experienced the technology. “They’ve never sent money over a blockchain. They haven’t borrowed against crypto or experienced real-time settlement,” he said.

We’re moving toward the day when tokenized funds, real-time collateral and blockchain-based financial products will be an integral part of every portfolio. If you embrace this shift now, your business will grow far faster. The longer you resist, the more credibility – and client assets – you will lose.

Act Now

Institutions are allocating to crypto at an accelerating rate, and increasing numbers of investors expect you to show them how – not whether – to invest in this asset class.

If you’re still waiting for your clients to give you permission to add crypto to their portfolios, you’re failing as their advisor. You are, after all, the advisor. So, advise. Otherwise, you’re nothing but a clerk, and you’ll eventually lose your clients when they realize they’ve been paying the fees of a podiatrist but getting nothing more than the help of a shoe-store attendant.

Learn how crypto works. Understand the investment options. Explain them to your clients.

Because like it or not, crypto is no longer niche. It’s mainstream. Your clients are waiting, and they won’t wait much longer.