How crypto is attracting millennial millionaires to financial advice

Financial advisers who are still on the fence about crypto investing may miss out on attracting clientele from affluent millennials that are a part of the generational wealth transfer.

That was the takeaway of a group of panelists in New York Tuesday at the SALT conference — financier Anthony Scaramucci's annual event covering finance, technology and geopolitics. The panelists, moderated by InvestmentNews deputy managing editor Sean Allocca, shared different perspectives on crypto investing, saying they believe it either doesn’t fit into their business model, is only for young people, or is only for advisers interested in working with future millionaires and billionaires. 

Active discussions connecting investor interest in crypto tied to younger generations is happening as the largest generational transfer of wealth, at roughly $68 trillion, is poised to fall into the hands of the millennial generation. 

For panelist David Bahnsen, founder, managing partner and chief investment officer of The Bahnsen Group, crypto investing “doesn’t fit into the principles” he built his business around, so it’s not a focus for his firm, he said during the session, titled "Modern wealth management: How COVID-19 reshaped the advice industry." 

Karen Firestone, the chairman, CEO and co-founder of Aureus Asset Management, said she believes there is a place for digital assets, and it’s for “young people in particular who feel that it’s very important to them.” However, it’s critical for the young investor to know some wealth managers cannot analyze crypto in the same way they analyze other assets, she said. 

“It’s not a confidence of ours, it may be for other people, but I can see the appeal,” Firestone said. Aureus does not invest directly in Bitcoin, but does have an allocation to some external managers that own Bitcoin, she said. 

In an environment where wealth management firms like Ritholtz Wealth Management are attracting clients from social media platforms such as YouTube, it’s critical for the firm’s financial planners to understand crypto as they attract young millionaires and young “almost” billionaires, said Ritholtz CEO Josh Brown. 

“Without a doubt, if your answer to crypto is: ‘There's no cash flow, so I can't even have a conversation about it,’ then you're not a candidate for their wealth, not the recovered wealth, and definitely not their future wealth,” Brown said. 

To be fair, Brown said the notion of wealth managers actively managing a portfolio of crypto is “ludicrous” so advisers can move that off the agenda. On the flip side, an adviser shouldn’t necessarily just ignore a client that wants exposure to crypto to go do it themselves with Coinbase. 

What advisers should be doing is setting parameters around what their firms will do this year to address crypto investing like deciding which software providers they’re comfortable using and developing a cybersecurity plan. 

“You’ve got to go through this process and speak with the vendors, and in many cases, the vendors you encounter are in their infancy,” Brown said. “We’ll get there, but there are all these considerations that have to take place as you go through this process to find the least bullshitty way to do crypto for a wealth management client.” 

Ultimately, it’s just a challenging time for financial advisers and the meteoric rise of crypto that has shaken the wealth management industry as more retail and institutional investors crave being one of the cool kids investing in digital assets.

“Right now, wealth managers are trying to keep up with what's going on in the culture and in the markets, but also not end up making a huge mistake for the people that trust them with their assets,” Brown said. “It’s a very hard time.”