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Investors Want Professional Advice on Cryptocurrencies

July 24, 2018 by Eric C. Jansen, ChFC®

The new and aspiring Bitcoin and cryptocurrency millionaires want help from financial advisors and wealth managers. In particular, more than 70% of millionaires younger than 40 want this kind of advice, according to research by Capgemini, a French consulting firm. High-net-worth individuals are most interested in holding cryptocurrencies, the survey finds, because of the potential for outsized investment returns. In Canada and the US, about 25% of those individuals have a high level of interest in cryptocurrencies. Another 21% are curious, but need more information.

But there’s a huge gap between the demand for crypto-related services and the supply of financial advisors knowledgeable about cryptocurrencies. Only 35% of those surveyed say they had received professional advice on cryptocurrencies. That gap creates a significant business opportunity for financial advisors and wealth managers in an asset class with a $265 billion market capitalization*.

Why Learn about Crypto?

As countries around the world grapple with how to classify, regulate and tax cryptocurrencies, one thing is becoming clear: regulatory certainty is likely a tailwind, not a headwind, for crypto.  Also, as the custody issues begin to disappear, institutional investors are likely to begin entering the marketplace in droves. With those institutional investors, crypto will also see a flood of new money, and of new investors.  Recent job postings from Fidelity Investments, for example, suggest it’s planning to build its own digital assets exchange.

Look at the recent growth in the market. We have Fidelity preparing to join the fray. Coinbase, Kraken, and Circle are already major players. Earlier this year, Robinhood came in with over 1 million users joining their crypto trading waitlist in just a few weeks. This activity shows that main street awareness and adoption are likely to continue to grow. So too will the demand for guidance from financial advisors and wealth managers knowledgeable about the cryptocurrency marketplace.

If you’re starting from scratch, you can get up to speed with my article on the basics of bitcoin and the blockchain. Even if you work for a large brokerage firm that doesn’t allow advisors to advise on virtual currencies, you should still take an interest in them to stay ahead of the curve and help ensure you can talk intelligently about topics related to bitcoin, and other cryptocurrencies and tokens.

Advice on Income-Tax Complexities

Some people mistakenly think that all cryptocurrency transactions are anonymous. While privacy coins like Monero, Dash, and Zcash, are more anonymous than bitcoin and other cryptocurrencies, most are pseudonymous, meaning they’re made under the digital equivalent of a pen name, and can often be traced by anyone sufficiently motivated, and that includes the IRS. Speaking of the IRS, they have classified virtual currencies (a/k/a cryptocurrencies) as property for federal tax purposes, which makes cryptocurrency transactions subject to short- and long-term capital gains taxes.

This classification also means that any time you exchange a cryptocurrency, the transaction has the potential to create tax liability. If you receive cryptocurrency in payment, you must include its fair market value at the time of the transaction in your gross income on your tax return. And when you exchange cryptocurrency for other property, you will have a taxable gain or loss based on your adjusted basis in the currency and the fair market value of the property you receive in exchange. Investors can reduce their tax liability by holding virtual currencies in a retirement account. Understanding the basics of the tax rules associated with cryptocurrency can make advisors more valuable to their clients and their tax advisors.

Help with Estate Planning

Because of the virtual nature of cryptocurrencies, their value can be lost forever when the person who holds them passes away — unless there’s a plan in place to transfer those assets to heirs. Your client needs to maintain a record that covers:

  • What cryptocurrencies they hold.
  • What they paid for them.
  • Where they are located.
  • A carefully written access plan, that includes detailed instructions for the recovery and disposition of crypto holdings
  • The cryptographic keys, seeds, and access codes that control those holdings.

Without that access plan, they may be forever inaccessible. Cryptocurrencies can be difficult to correctly and safely incorporate into one’s estate planning documents if their attorney is unfamiliar with them. Understanding how to include digital assets in a will, trust, and power of attorney correctly is a growing area of estate planning expertise. Furthermore, the demand is outpacing the supply of knowledgeable professionals in this area.  Helping clients and their attorneys with specialized knowledge in estate planning for digital assets can be a valuable way to differentiate your practice.

Dealing with Divorce

The volatility and secrecy of cryptocurrencies make them especially tricky to divide equitably in a divorce.  Knowing how to guide clients and their attorneys in dividing or selling crypto holdings as part of a divorce proceeding can be a valuable service. Further, cryptocurrencies can make the perfect hiding spot for undisclosed assets. Unwary spouses or divorce attorneys who don’t understand cryptocurrencies may not know where to look, or what for. For advisors who work with clients experiencing divorce, understanding the complexities of cryptocurrencies is no longer an option. It is a requirement, particularly if you are a fiduciary advisor.

Financial Planning 

An estimated 16 million Americans own one or more cryptocurrencies. Questions regarding crypto ownership should be part of your financial planning fact-finding process. Be prepared to answer questions regarding how to incorporate crypto holdings into your clients’ short or long-term financial strategies. Cryptocurrencies may only become more common as the market grows.

Teaching Best Practices

Regardless of your own beliefs regarding bitcoin and cryptocurrencies, clients will naturally look to their financial advisor or wealth manager for assistance. They want you to help them understand better the marketplace, and how they can buy, sell and safely store cryptocurrencies and tokens. Advisors should be prepared to explain the advantages and disadvantages of different exchange and storage methods and how they work. Do you know what to tell a client who asks if they should keep all their Litecoin in their Coinbase account?

Clients may also want guidance on how to properly evaluate Initial Coin Offerings (ICOs) and the more than 1,600 plus virtual currencies available. Teaching them how to identify and steer clear of potentially fraudulent  ICOs- and the regulatory uncertainties regarding their classification as securities – can be quite helpful.  You should educate your clients on these issues without offering specific advice on buying, holding or selling a particular cryptocurrency. That key distinction should make compliance departments happy while helping you avoid unsettled regulatory rules and guidelines involving digital assets.

Conclusion

Clients from all walks of life, including the new crypto millionaires, are seeking advice on their digital holdings. They represent an untapped market, which could help savvy financial advisors establish a client base for years to come. Watch carefully as the technology continues to unfold, regulatory uncertainty diminishes, and crypto’s main-street acceptance grows worldwide.  Knowledge on these issues and others related to virtual currencies can set you apart from other advisors. In the process, you provide a much-needed service to both existing and potential clients, and their other professional advisors. Advisors who ignore cryptocurrency, do so at their peril.

*As of 7/5/18.


The information in this article is for informational and educational purposes only. Investing in ICOs, cryptocurrencies or tokens is highly speculative, and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.

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Eric C. Jansen, ChFC

Fun Facts About Me

When he is not researching the next great stock to add to client portfolios, you can find him travelling frequently with his family to Jackson Hole Wyoming.

  • Hometown: Chicago, IL
  • Birth Month & Year: November, 1964
  • Favorite Hobby: Goldmining in Nome, AK
  • Favorite Food: Steak at Charley’s Steakhouse in Orlando FL
  • Can't be interrupted when: Watching the Discovery Channel
  • Hidden Talent: Finish Carpenter
  • Something on bucket list: Obtain Helicopter Pilot License
  • Family Pet: Goldfish

Steven C. Johnson, ChFC

Fun Facts About Me

Steve would tell you that one of the best parts of the day is spent talking to clients and relationships that result from it. When away from the office, he loves to travel the back roads of New England enjoying all the great sites that can be found off the beaten path.

  • Hometown: Townsend, MA
  • Birth Month & Year: December, 1967
  • Favorite Hobby: Playing Hockey
  • Favorite Food: Chicken Caesar Salad
  • Can't be interrupted when: Watching the Bruins
  • Hidden Talent: Cooking – Makes a great Thanksgiving turkey
  • Something on bucket list: Travel to Italy and Greece
  • Family Pet: Max – our Pomeranian

Frederick M. Lane, ChFC, CASL

Fun Facts About Me

When not managing client portfolios, Fred can be found relaxing with family and friends.

  • Hometown: Nutley, NJ
  • Birth Month & Year: July, 1954
  • Favorite Hobby: Dog Walking
  • Favorite Food: Italian
  • Can't be interrupted when: Listening to Pink Floyd
  • Hidden Talent: Landscaping
  • Something on bucket list: Space Flight - Tourism
  • Family Pet: None

Catherine Utley

Fun Facts About Me

  • Hometown: Huntington Beach, CA
  • Birth Month & Year: February 1977
  • Favorite Hobby: Anything that gets me outdoors exploring nature
  • Favorite Food: Anything Mexican
  • Can't be interrupted when: Drinking first cup of coffee for the day
  • Hidden Talent: Putting together complicated puzzles
  • Something on bucket list: Over the water bungalow in Fiji
  • Family Pet: Currently between pets. Previous owner of 2 adorable pugs

Catherine M. Gareri

Fun Facts About Me

When not caring for her clients Cathy enjoys relaxing in her yard at home.

  • Hometown: Bellingham, MA
  • Birth Month & Year: July, 1957
  • Favorite Hobby: Cooking and Entertaining
  • Favorite Food: Steak at the Capital Grille
  • Can't be interrupted when: It's family time
  • Hidden Talent: Dog Whisperer
  • Something on bucket list: Spending a couple months on the Almalfi Coast
  • Family Pet: In Between Mastiffs now so a little blue fish “Willy”

Katie E. Moore, CLTC

Fun Facts About Me

When Katie is not busy taking care of her clients, she spends her time being a mom to her two little ones, Owen and Isla.

  • Hometown: Modesto, CA
  • Birth Month & Year: September, 1982
  • Favorite Hobby: Swimming
  • Favorite Food: Mexican Food
  • Can't be interrupted when: I'm cooking
  • Hidden Talent: Climbed Yosemite's Half Dome, twice - no fear :)
  • Something on bucket list: See the Northern Lights and Potty Train my 2 year old
  • Family Pet: Caddy and Sierra – our two cats

Herbert Kyles

Fun Facts About Me

When Herbert isn't reviewing your portfolio or assisting you with your financial well-being you can probably find him relaxing with friends.

  • Hometown: Overland Park, KS
  • Birth Month & Year: November, 1989
  • Favorite Hobby: Hockey, Golf & Cooking
  • Favorite Food: Chipotle
  • Can't be interrupted when: Studying
  • Hidden Talent: Fluent in French
  • Something on bucket list: Demolition Derby
  • Family Pet: None

Hesper Duval

Fun Facts About Me

Loves spending time with 2 daughters and enjoys participating in 5k obstacle races throughout the year.

  • Hometown: Charlton, MA
  • Birth Month & Year: October, 1981
  • Favorite Hobby: Running
  • Favorite Food: Cheesecake
  • Can't be interrupted when: Reading a good book
  • Hidden Talent: Interior Design and furniture restoration
  • Something on bucket list: To travel cross-country in an RV
  • Family Pet: Charlie and Nora, both black labs from the same litter

Donna Fournier

Fun Facts About Me

When not cheering for the Patriots, Donna spends her free time travelling throughout the United States looking for new haunted places to explore. She loves to wear her cowboy hat and boots when travelling out west.

  • Hometown: Swansea, MA
  • Birth Month & Year: February, 1961
  • Favorite Hobby: Exploring haunted locations
  • Favorite Food: Pizza
  • Can't be interrupted when: Eating my pizza
  • Hidden Talent: Rollerblading
  • Something on bucket list: Travel to Australia
  • Family Pet:  Had a pet skunk

Anne Whitney

Fun Facts About Me

  • Hometown: Jaffrey, NH
  • Birth Month & Year: September 1988
  • Favorite Hobby: Drawing and painting
  • Favorite Food: Anything spicy!
  • Can't be interrupted when: Reading a good book
  • Hidden Talent: Expert calligrapher
  • Something on bucket list: Go to San Diego Comic Con
  • Family Pet: Most recently, a rescued beagle named Max

Steve Taylor

Fun Facts About Me

  • Hometown: Franklin, MA
  • Birth Month & Year: May 1975
  • Favorite Hobby: Golf
  • Favorite Food: Pizza
  • Can’t be interrupted when: Spending time with my family
  • Hidden Talent: Juggling
  • Something on bucket list: Play golf at Pebble Beach
  • Family Pet: none

Sarah Kupec

 

  • Hometown: Wyckoff, NJ
  • Birth Month & Year: November, 1992
  • Favorite Hobby: Hiking
  • Favorite Food: Chipotle
  • Can't be interrupted when: Watching LSU football. Geaux Tigers!
  • Hidden Talent: Chalkboard art
  • Something on bucket list: Travel to Germany
  • Family Pet: Max, a 14-year-old Westie

Cathy Hession

Fun Facts About Me

When away from the office, Cathy enjoys working out and participating in the 26.2 mile Jimmy Fund Marathon Walk each September.

  • Hometown: Hanover, MA
  • Birth Month & Year: May, 1964
  • Favorite Hobby: Travel & hiking
  • Favorite Food: Danny's Homemade Sauce
  • Can't be interrupted when: Watching Katie ride
  • Hidden Talent: Equestrian photographer
  • Something on bucket list: Spend a month in Monterosso Al Mare w my family
  • Family Pet: Sassy, our Australian terrier

Kieran Lavery

  • Hometown: Bedford, NH
  • Birth Month & Year: November, 1989
  • Favorite Hobby: Playing tennis and softball
  • Favorite Food: Tex-Mex
  • Can't be interrupted when: Watching college basketball
  • Hidden Talent: Can solve a Rubik's cube in under 2 minutes
  • Something on bucket list: Attend Oktoberfest

Matthew Cleary

In his free time, Matt likes to hike, camp and travel with his wife Gina.

  • Hometown: Farmington, Maine
  • Birth Month & Year: March 1986
  • Favorite Hobby: Hiking
  • Favorite Food: Lasagna
  • Can't be interrupted when: Watching the Celtics
  • Hidden Talent: Water skiing
  • Something on bucket list: Traveling to Greece
  • Family Pet: Aspiring British Bulldog owner

Justin Giuliano

When not helping clients, Justin enjoys spending time with his wife and family while settling into his new home.

  • Hometown: Wethersfield, CT
  • Birth Month & Year: July 1988
  • Favorite Hobby: Exploring new destinations with my wife
  • Favorite Food: Frutti di Mare
  • Can’t be interrupted when: Grilling
  • Hidden Talent: A unique inability to sit still
  • Something on bucket list: Traveling to Europe

Nicole LeGuern

In Nicole’s spare time, she enjoys outdoor activities with her four kids such as sports, hiking, boating and fishing. She also loves to volunteer her time in helping organizations fundraise such as the American Diabetes Association.

  • Hometown: Shrewsbury, MA
  • Birth Month & Year: February,1983
  • Favorite Hobby: Fishing
  • Favorite Food: New Haven style Pizza
  • Can't be interrupted when: Cooking
  • Hidden Talent: Can change a tire in under 5 minutes
  • Something on bucket list: Visit Hawaii and Bora Bora
  • Family Pet: Petey, Our old man Chihuahua

Rana Choubah

When Rana is not helping clients with their financial needs, she spends her time with her family traveling, hiking and running.

  • Hometown: Beirut, Lebanon
  • Birth Month & Year: October 1967
  • Favorite Hobby: Running
  • Favorite Food: Pizza
  • Can't be interrupted when: Reading a good book
  • Hidden Talent: Construction and home repair
  • Something on bucket list: Complete a triathlon
  • Family Pet: Two sweet cats, Macy and Maya

Krista Isabelle

In her free time, Krista can be found crafting or playing outdoors with her husband and son, curled up reading next to her beloved cat, "Berg", or cooking her favorite go-to meals.

  • Hometown: Acton, MA
  • Birth Month & Year: August 1994
  • Favorite Hobby: Graphic Design
  • Favorite Food: Anything with peanut sauce
  • Can’t be interrupted when: Reading
  • Hidden Talent: Cartoon Drawing
  • Something on her Bucket List: Fostering animals

Danielle Drew

When Danielle does not have her head in a book studying to expanding her financial planning knowledge, she enjoys anything active and outdoors, including visits to the beach and hiking.  

  • Hometown: Dennis, MA
  • Birth Month & Year: November, 1985
  • Favorite Hobby: Working out, concerts, and exploring wineries
  • Favorite Food: Lobster pot pie, cheeseburgers, BBQ, the list goes on...
  • Can't be interrupted when: Working out 
  • Hidden Talent: Country line dancing
  • Something on bucket list: To hike the 48, 4000 footers of New Hampshire
  • Family Pet: none, hopefully a big dog someday

John "JP" Bisceglia

JP loves spending time with his niece and enjoys weekend trips to the cape during the summer.

  • Hometown: Shrewsbury, MA
  • Birth Month & Year: October 13th 1993
  • Favorite Hobby: Fishing with friends and family
  • Favorite Food: Pasta Alleluia
  • Can't be interrupted when: Hiking Wachusett Mountain with the pup
  • Hidden Talent: Navigating and driving boats
  • Something on bucket list: Helicopter snowboarding in Japan.
  • Family Pet: Alaskan companion noble dog

Jay Willwerth, ChFC

Fun Facts About Me

Jay’s days are spent helping clients achieve their financial goals, followed by nights and weekends typically watching his daughters play competitive volleyball.

  • Hometown: Melrose, MA
  • Birth Month & Year: September, 1959
  • Favorite Hobby: Golf
  • Favorite Food: Anything at a Patriot’s Tailgate
  • Can't be interrupted when: Watching the Patriot’s Game
  • Hidden Talent: Competitive Volleyball Watcher (Mostly his 2 daughters)
  • Something on bucket list: Play a round of Golf at Pebble Beach
  • Family Pet: Bella, our Shih-poo