Ask Ric2021-07-21T15:44:50-04:00

Ask Ric

Ask Ric your questions about blockchain and digital assets. And read Ric’s answers to questions posed by other financial professionals.

Give us the bear case. How would this fall apart?
Jason Cooke, Advisor, Hermann & Cooke | Ric responded, March 4, 2021
2021-07-20T10:47:35-04:00

The captain of the Titanic was certain he had smooth sailing too. On that basis, that’s why you diversify.
Does that mean you should put all of your money into bitcoin? I think we can all agree that would be foolish. But to do none, out of extreme fear that something might go wrong, is equally foolish.

I think you need to look at it from a rational perspective of diversification and prudent money management. Just as you would with any asset class, especially an emerging one.

Ric responded, March 4, 2021

As RIAs, how do we handle compliance and regulation with bitcoin?
Bruce Lemley | Ric responded, February 1, 2021
2021-07-20T10:47:25-04:00

I created RIA Digital Assets Council (RIADAC) to answer questions just like this one. RIADAC is launching a Certification in Blockchain and Digital Assets at the end of Q2, to not only provide education but also for advisors to be able to demonstrate to their clients that they have attained the education and can provide advice that is in the client’s best interest.

This is an online class taken at your own pace. The 10 modules of the certification are split into two camps. The first five modules are on blockchain and digital assets. This is the fundamental knowledge and education needed to understand digital assets and explain it to clients. The second five modules are centric to financial advisors. This half focuses on practice management elements so that advisors can actually put all of these methods to use. The certification covers questions such as these:

  • How do you integrate this into asset allocation?
  • How do you diversify?
  • And what are the reasons for doing so?
  • How do you create the asset allocation models?
  • Where do you buy it?
  • What exchanges what?
  • What custodians do you use?
  • What are the funds that are available for purchase?
  • How do you store it and safeguard it?
  • Do you do that through hot or cold wallets?
  • How do you track it?
  • How do you provide the record keeping?
  • How do you rebalance it?
  • How do you do the tax reporting?
  • How to integrate it into rebalancing with the rest of your portfolio and as a financial advisor?
  • How do you provide or receive compensation along with the rest of your asset management services?
  • What are the tax reporting obligations?
  • The regulatory requirements?
  • What are all the issues associated to allow the advisor to do their job as an advisor while serving the client in their best interests?

Please visit our Certification in Blockchain and Digital Assets page for further details and to register.

Ric responded, February 1, 2021

>> Add Your Comment
Are we able to put Bitcoin into an IRA?
Beth Bebb, Regional Learning Specialist, Thrivent | Ric responded, February 10, 2021
2021-07-20T10:47:58-04:00

There are some platforms available where you can invest your IRA into Bitcoin. These are cumbersome. They are not primary players. It raises concern by the advisor who has reputational risk, as well as the investor who has confidence risk. And it reduces the degree to which there is engagement and involvement by both advisors and their clients. These do exist, but they’re more expensive than they alternatively would be. Some folks are saying, I don’t mind paying a 3 percent fee if I’m dealing with an asset that’s growing double digits every year.

Fidelity Digital Assets is providing these services for the institutional marketplace. They will eventually roll it out for the retail marketplace. You’ve got companies like Kingdom Trust, which manages 19 billion dollars in assets. That’s a qualified custodian you can actually use to buy Bitcoin in your IRA.

Ric responded, February 10, 2021

What is the likelihood that the SEC approves an ETF, and what is the estimated timeline?
Patrick McReynolds, Investment Analyst, Merrill | Ric responded, December 15, 2020
2021-07-20T13:53:59-04:00

The SEC will approve a bitcoin ETF within 18 months. I’ve been saying that for five years. Hey, at some point, I’ll be right! Until then, you should explore alternative ways to buy. There are many, and we cite lots of them at RIADAC.com.

Ric responded, December 15, 2021

What would be your advice for clients asking how much to invest in Bitcoin?
Christopher Rubio, Account Development Representative, MongoDB | Ric responded, December 15, 2020
2021-07-20T10:48:40-04:00

I’m the guy who pioneered the concept, a few years ago, of a one percent asset allocation model. In traditional asset management activities, if you’re not going to put three percent or five percent of assets into an asset class then why bother doing it? It’s not going to have a material impact on the portfolio. However, with Bitcoin, you don’t need five, 10 or 20 percent, which you would likely do with stocks or bonds. Bitcoin has a lot of unknowns technologically and regulatory.

My position is that you don’t need to do 10 or 20 to have a meaningful exposure. One percent allocation is plenty and the reason for that is Bitcoin’s incredible volatility.

A one percent allocation won’t hurt you. If you’re wrong, it’ll be annoying, but not devastating. And if you’re right, that one percent allocation can have a material impact on the improvement of your client’s returns.

Therefore, it is very much worthwhile to learn about Bitcoin. I’m not saying you have to like it. I’m saying as an advisor you have an obligation to learn about it.

Ric responded, December 15, 2020

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