Advice on Discussing Crypto With Clients

On the back of the recent approval of spot bitcoin exchange traded funds, it’s possible that advisors are encountering more cryptocurrency-related inquiries from clients.

There’s nothing wrong with that. After all, “shiny new things” have ways of captivating clients. Clients aren’t the only ones. Data and surveys indicate advisors are enthusiastic about spot bitcoin ETFs and many are surprised this seminal event in crypto/ETF history arrived when it did.

Beyond advisors and wealth managers, there’s strong appetite for spot bitcoin ETFs. So much so that those products can likely thrive without the support of the advisory community, but financial advisors are pivotal in the spot bitcoin scenario for multiple reasons. One point that can be gleaned from that is that with bitcoin and other digital assets increasingly accessible, advisors had better bolster their cryptocurrency knowledge.

Improving that knowledge base is all the more important when considering crypto is highly relevant to the younger prospects that are so coveted in the advisory community. Here are some tips for getting there.

Explaining Crypto to Novices

Chances are only a small fraction of clients are truly fluent in crypto and the remainder are likely interested but novices. That’s alright because digital currencies are easier to explain than meets the eye.

Cryptocurrencies are like digital gold coins. However, instead of being made of metal, they exist on the blockchain. Blockchain ensures the integrity and transparency of cryptocurrency transactions. Every time someone sends or receives a cryptocurrency, that transaction is recorded on a block,” notes VanEck. “Once enough transactions are recorded on a block, it's added to a chain of previous blocks—hence the term "blockchain." The decentralization of this ledger—meaning it's simultaneously maintained by numerous participants globally—ensures its security.”

The next item of interest is explaining bitcoin because that’s by far the largest cryptocurrency and the one with which clients are most familiar.

Bitcoin, the first and most well-known cryptocurrency, operates on its own blockchain. People can send or receive Bitcoins (much like money) to make purchases or as an investment,” adds VanEck. “Many investors view it as a store of value, like gold or silver, but in a digital form. Its decentralized nature – meaning it's not controlled by any government or central bank – has made it especially attractive to a broad audience.”

Blockchain Mattes

The blockchain investment and usage cases are evolving, indicating these are areas of interest for risk-tolerant clients. Importantly, blockchain has usage cases that extend well beyond the crypto landscape. Those include healthcare and real estate record keeping and, potentially, election integrity, among others.

“With these expanded use cases, the potential and versatility of blockchain and cryptocurrencies become more evident. They're not just tech buzzwords; they're tools with the potential to revolutionize industries and daily life,” concludes VanEck.

Related: How To Extract Income From Bitcoin