How Advisors Differentiate Themselves With Crypto and SDIRA Investments

Pierre-Alexandre Heurtebize

Topics: Investment Advisors, Alternative Investments, Self-Directed IRA


Cryptocurrency has become a topic of great interest among investors in recent years. The market value of all cryptocurrencies is currently over 1.1 trillion dollars, with Bitcoin and Ethereum being the most well-known of all digital assets with the biggest market capitalization. As cryptocurrency continues to gain mainstream attention, financial advisors and planners are increasingly being asked by their clients about this asset class.

In a 2021 survey the Financial Planning Association showed that 80% of financial advisors had already been asked about cryptocurrency by their clients and Cerulli Associates recently gathered feedback from advisors and found that 45% of them say they expect to use cryptocurrencies in the future in response to client requests.

This shows a high level of interest among investors in digital assets especially amongst the younger demographics. In this context offering cryptocurrency as an alternative investment option can be a lucrative opportunity for financial advisors and can help them attract more clients. Additionally, investing pre-tax through a Self-Directed IRA (SDIRA) can have a significant appeal on the younger generation as it offers attractive tax advantages and the opportunity for compounding returns.


What the CFP board says:

The CFP Board, or Certified Financial Planner Board of Standards, is the professional organization that sets ethical and professional standards for financial planners and advisors. In a statement released in 2018 and updated in 2022, the CFP Board clarified its position on financial advisors and cryptocurrency investments.

According to the statement, the CFP Board does not prohibit financial advisors from recommending or investing in cryptocurrencies on behalf of their clients. However, the CFP Board notes that financial advisors who recommend or invest in cryptocurrencies must do so in a manner that is consistent with their fiduciary duty to act in their clients' best interests.

This means that financial advisors must be able to assess the risks associated with cryptocurrency investments and make recommendations that are appropriate for their clients' financial goals and risk tolerance. Advisors should also disclose any conflicts of interest that may arise from recommending or investing in cryptocurrencies, such as receiving compensation or incentives from cryptocurrency providers.

The CFP Board's position on cryptocurrency investments reflects the growing interest and demand for these assets among investors. However, it also highlights the need for financial advisors to stay up to date on the latest trends and developments in the cryptocurrency market and to provide sound advice and guidance to their clients.


Only a minority of Financial Advisors are offering crypto investments:

According to a 2022 survey from Bitwise on Financial Advisors attitudes towards Crypto Assets only 16% of financial advisors were offering cryptocurrencies investment options to their clients. This is a missed opportunity for financial advisors to expand their customer base. As the interest in cryptocurrencies continues to grow, financial advisors who are knowledgeable about this emerging asset class can attract new clients who are interested in investing in cryptocurrencies.

Younger generations are particularly interested in cryptocurrencies, making it a great opportunity for financial advisors to capture this market segment and establish long-term relationships with younger clients.

Additionally, investing in cryptocurrencies through a self-directed IRA can have a significant appeal to younger investors. SDIRAs allow investors to invest in cryptocurrencies on a tax-deferred basis, which can be a compelling feature for investors who are just starting to build their retirement savings. The compound effect of tax-deferred growth over time can result in significant savings for younger investors who start early.


Compelling arguments for financial advisors to attract alt-investments enthusiasts

Self-investing in cryptocurrencies through exchanges without the help of a financial advisor is easy and accessible. However, financial advisors can offer value-added services to their clients when it comes to investing in cryptocurrencies. Here are some arguments that financial advisors can use to convince their clients to work with them:

Financial Advisors can achieve better cross-assets diversification.

Having a full understanding and overview of a clients portfolio helps optimize diversification: Financial advisors can explain to their new and existing clients the value of having their advisor involved in all their financial decisions, including their alt-investments, to ensure that they choose an optimal asset allocation strategy that fit their goal.

Diversification in any investment strategy is paramount. A well-diversified portfolio reduces the risk of loss and can help clients achieve their investment goals and financial advisors can help their clients create a well-diversified portfolio that includes cryptocurrencies.

Financial Advisors can make clearer the risks and costs of crypto investing.

Good advisors will clearly lay out risks and costs to help their clients make an informed decision: Cryptocurrency investments come with risks, such as high volatility and market fluctuations and transferring cryptos to and from investment platforms or cryptocurrency exchanges can include significant commissions and transfer costs. By providing their clients with a clear understanding of the risks and costs, financial advisors can help clients make informed investment decisions.

Financial Advisors can counter-balance emotional decisions.

A financial advisor is pragmatic and gives advice driven by knowledge and data, not emotion and Cryptocurrency investments can be highly emotional. Many investors are driven by the fear of missing out. Financial advisors should highlight that they can offer objective advice based on experience, knowledge, and professionalism. They can help their clients avoid making emotional investment decisions that may lead to losses.

Financial Advisors can help achieve better tax optimization.

Advisors are more knowledgeable about ways to optimize tax and can offer alternative investment options like investing through SDIRA. By knowing what can be done based on the specific situation of their clients and by being able to execute investments on behalf of their clients, financial advisors can help their clients minimize tax liabilities and maximize returns.

How can Financial Advisors help their customers invest in crypto?

Financial advisors can help their clients invest in cryptocurrencies in several ways.

  1. TDAMP (Turnkey Digital Asset Management Platform)

One option available for financial advisors is to use a TDAMP (Turnkey Digital Asset Management Platform), which is a platform that allows advisors to manage their clients' cryptocurrency investments. TDAMPs can come with a range of useful functionalities and services, such as portfolio rebalancing, tax optimization, and risk management.

For example, a few platforms have sprouted that are designed specifically designed for financial advisors to Invest directly into Defi protocols and make it easier for their clients to invest in cryptocurrencies through a platform offering a secure way to invest, compliant with SEC guidelines and which allows financial advisers to manage the crypto portfolios of all their clients all in the same place.

  1. Investing through a cryptocurrency Trust

Another option that financial advisors can recommend to their customers is to invest through a trust. For example, Grayscale Bitcoin Trust (GBTC) is a trust that holds Bitcoin and allows investors to gain exposure to Bitcoin without having to buy, store, and secure the cryptocurrency themselves.

  1. Direct purchase of the digital assets

Financial advisors can also provide their clients with direct exposure to the cryptocurrency market by investing in the tokens or coins themselves. This approach requires a deeper knowledge of the cryptocurrency market and the ability to manage the associated risks.

  1. Indirect exposure

Indirect exposure to cryptocurrencies can also be achieved through derivatives such as futures contracts, hedge funds, venture funds, index funds, trusts, and stocks of companies that are directly or indirectly tied to cryptocurrencies and blockchain technology. Financial advisors who are knowledgeable about these investment vehicles can help their clients gain exposure to cryptocurrencies while reducing the risk that generally comes with directly holding the crypto assets.

Using SDIRA to fiscally optimize returns:

Financial advisors can help their clients benefit from investing in cryptocurrencies through their SDIRA. Self-Directed Individual Retirement Accounts (SDIRAs) allow investors to invest in a broader range of assets than traditional IRAs. This includes alternative investments such as real estate, private equity, and cryptocurrencies.

Investing in cryptocurrencies through an SDIRA can provide several benefits, including tax advantages and increased investment flexibility. By investing in cryptocurrencies through an SDIRA, investors can potentially reduce their taxable income and grow their investments tax-free until retirement age.

Financial advisors can help their clients take advantage of these benefits by offering guidance on how to set up and manage an SDIRA. This includes helping clients understand the rules and regulations surrounding SDIRAs, identifying the best custodians and investment options, and developing investment strategies that align with their clients' financial goals and risk tolerance.

You can also learn more about the different types of IRA and the benefits of investing through SDIRA in our previous article on how to accept retirement money as a professional investor.


In conclusion, the interest in cryptocurrencies presents a great opportunity for financial advisors to differentiate themselves and capture market share but Financial advisors need to take the time to learn about cryptocurrencies to properly assist their clients. Fortunately, for anyone committed to learn, there is plethora of free informative material on the subject online.

By using intermediary platforms that make it easier to invest and offering alternative investment options like investing through SDIRA, financial advisors can help their clients who want to invest in cryptocurrencies and help them optimize their returns both through more thoughtful approach, comprehensive asset allocation strategy but also tax optimisation investment schemes.

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