Envestnet is bringing cryptocurrencies to its technology for registered investment advisers.
The asset management and fintech giant has new integrations with Flourish Crypto and Gemini Bitria, two companies focused on providing RIAs with access to crypto markets, which bring data on digital assets into Envestnet Tamarac.
More than 3,100 RIA firms managing a collective $1.3 trillion in assets use Tamarac for portfolio management, reporting and billing, according to the company’s website. The integrations pull custody data on cryptocurrencies directly into Tamarac so advisers can view the investments, add them to reports and bill on them as they would any other asset class.
Helping advisers access cryptocurrencies is one of the two pillars of Envestnet’s strategy for digital assets, said Dani Fava, group president of product innovation at Envestnet. While Flourish Crypto focuses on bitcoin and Ethereum, the two largest cryptocurrencies, Gemini Bitria provides a menu of more exotic digital coins.
“We wanted to make sure we created more of a marketplace of access,” Fava said.
Ultimately, it’s up to advisers to decide whether they think crypto is a suitable investment recommendation, she said. But if clients are demanding it, advisers should be equipped with the information necessary to serve them.
“In order for us … to have the fullest ecosystem, we have to enable the adviser to have access to what they think is right for the clients,” Fava said. “Advisers want to manage the client’s entire [financial] life. If you look at the adoption we’ve had as a society, [crypto] is an asset class you can’t ignore."
That’s why the other pillar of Envestnet’s strategy is around education, she added. To that end, Envestnet is launching a cryptocurrency education platform in partnership with Anthony Pompliano, author of The Pomp Letter, a popular newsletter covering bitcoin.
“Pomp has created a crypto education program that we think is a good fit for what our advisers are looking for,” Fava said. “Not only a certification on the foundations and basics of cryptocurrency and blockchain, it’s ongoing and dynamic, live content on what’s going on in the crypto space.”
Envestnet’s push into cryptocurrencies comes at a difficult time for the asset class. After months of volatility, retail investors appear to be losing their enthusiasm for crypto. Bitcoin and Ethereum have fallen about 70% from their 2021 highs, some high-profile crypto companies have gone bankrupt and left investors holding the bag, and the Securities and Exchange Commission has started to crack down on celebrities like Kim Kardashian for touting assets without disclosing their compensation.
Fava declined to comment.
While a contingent of advisers has taken the so-called “crypto winter” as validation for their decision to stay away from digital assets, others are using the slowdown as an opportunity to learn more about it, said Ben Cruikshank, president of Flourish, which is owned by MassMutual.
“Advisers are still receiving client questions on crypto,” Cruikshank said. “Not as many as 12 months ago when [crypto] was in the Wall Street Journal every day, but they’re still receiving questions.”
Far more clients had invested in digital assets than many advisers realized, and many of them are now looking for help with some of the losses they have taken, he added. A quarter of all Americans and 91% of high-net-worth individuals younger than 40 have invested in digital assets, Cruikshank said.
There is also a contingent of advisers who believe strongly that the assets will rebound, and partnerships with companies like Envestnet are setting the stage to take advantage of the next big rally, he added.
“If you think there’s a chance that this asset class could come roaring back, then today was a far better time to invest than it was 12 months ago,” Cruikshank said.
A survey of 200 professional investors across seven countries by Nickel Digital Asset Management, a London-based digital assets hedge fund manager, found that two out of three believe the crypto winter is either over or has less than six months to run. One-fifth think cryptocurrency valuations will start to rise over the next six months.
Conversations with the financial institutions Envestnet serves reveal that many are also doubling down on investing in the technology aspect of digital assets, such as digitizing investment products with the blockchain to reduce overhead and costs, Fava said.
“I don’t know how about how institutions are looking at allocating assets, but I can tell you from a technology perspective that there is a heightening interest and a lot of intellectual power going into how to leverage [digital assets],” she said.
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