Cryptocurrencies continue to both attract and repel investors in equal measure. While internet giants Google, Twitter, and Facebook have banned ads for cryptocurrencies and initial coin offerings (ICOs), wealth managers cannot rely upon this to shield their clients. They need to have established policies on how they approach the sector and the advice they provide.
Any investor with an internet connection cannot have missed the explosion of cryptocurrencies and blockchain-based investments in 2017. The rollercoaster ride that is the price of bitcoin (still the most established cryptocurrency) has been extensively covered in mainstream media. It has also prompted a huge number of ICOs, trading platforms, and strategies aiming at getting in on the torrent of money. Investors have stampeded into and out of various cryptocurrencies and blockchain products, ranging from the likes of Ripple’s international transfers – which has real blue chip clients in the financial industry and a concrete business case – to thousands of others that are little more than elaborate scams.
With regulators and established securities exchanges at times rushing to restrict activity or develop themselves as ICO hubs, there is a lot of conflicting information and a fear of missing out among financial firms, regulators, and investors. Understanding investors’ desire to get in on a hot new technology – and that there will be some legitimate investment cases – is the first and hardest step for wealth managers. This is followed closely by how best to protect clients in a nascent market that is replete with thefts and wild claims.
Even with the formal bans on cryptocurrency ads imposed by major social media sites, there remains a great deal of misleading or sensational marketing for investors to stumble upon. All of which means everyone from small-scale retail traders to sophisticated HNW individuals need an authoritative steer on the market, as well as access to specific blockchain and cryptocurrency investment opportunities.
Wealth managers should be the source of cryptocurrency insight (and even exposure) for their clients. They must accept that some clients will want to get in on crypto no matter what. This means wealth managers need research on the sector, access to ICOs and currency trading, and an understanding of the relevant technology and platforms – just as they would for the stocks and exchanges that make up the global equity market. They should discuss the sector’s investment potential with clients, outline how to trade securely in the space, and highlight how cryptocurrency fits in with conventional portfolios and specific financial goals.
If a client really wants to invest in crypto they will find a way. It is best that a wealth manager is there to make sure the risks are minimized, and that the client gains the exposure they crave as safely as possible.