Q&A: How to Improve Your Digital Asset Expertise

Digital asset education is essential for today's financial advisors.

Q&A: Digital Asset Expertise

Some financial advisors may decide to pursue a certificate like the Certified Digital Asset Advisor (CDAA) designation.(Getty Images)

Cryptocurrency and digital assets are a fact of life for investors and advisors alike. Whether you're in favor of these new products as investment opportunities or prefer to steer your clients down more well-trodden paths, one thing you can't do is ignore them.

Crypto and digital asset expertise is becoming a requirement for all of today's financial advisors. At the very least, you need to know enough to speak authoritatively about why they're not a good fit for your clients. If you're feeling more intrepid, you might even pursue a certificate like the Certified Digital Asset Advisor (CDAA) designation.

To gain a better understanding of why and how advisors can improve their digital asset and crypto knowledge, we spoke with Adam Blumberg, co-founder of Interaxis, a digital asset and crypto education provider for financial advisors that provides the CDAA course. Here are edited excerpts from that interview.

Why do financial advisors need to be educated on cryptocurrency and digital assets?

We can take this answer in two parts. First, is it in the interest of the advisor to make crypto a part of their practice? We know that investors are interested in crypto, and become even more interested by the day. The data show that many of those interested are in their prime earning years, or about to be, and do not invest like their parents did. Therefore, if advisors want to help the clients that are going to make up a bulk of their business they should be looking at crypto as a part of their practice. These clients are going to inherit a tremendous amount of wealth, and they're interested in crypto.

This is before we even broach the idea that crypto and decentralized finance, or DeFi, are creating new financial systems, which could become more prominent, or even the norm, in the coming years.

If the advisor then decides to make crypto a part of his or her practice, education is a necessity. Digital assets come with new technology, custodial options and value propositions, which all lead to different investment theses, opportunities, conversations and business models than advisors have had to learn about and discuss throughout most of the last few decades. The security, estate planning and volatility are all new.

The understanding advisors need to have regarding crypto is more comprehensive than in most new asset classes.

Do they need to know about these assets even if they don't want to use them in client accounts?

They should know about crypto even if they aren't going to allocate into client accounts. The advisor's job is to help a client with all aspects of their financial life. Clients are investing in crypto without the help of advisors already, just like clients often have brokerage accounts outside of their relationship with their advisor. As an advisor, I want to have the conversation with my client about crypto – how much to allocate, why she is investing in crypto, security and safety, estate planning – regardless of whether I am choosing the cryptoassets, or even have them under my custodial relationship. It's part of my client's financial portfolio, which means it should be part of my job.

In contrast is the outright dismissal of crypto as scam, unsafe, hype, bubble, without having had the appropriate understanding to make such claims. If an advisor has a negative view like this of crypto, mainly from media reports, without having learned about the ecosystem, he is not acting in a fiduciary capacity. If the advisor learns about crypto and still decides it isn't a viable investment option for his clients, that is completely acceptable. The decisions need to come from a position of knowledge and understanding, not media and hype.

From a business perspective, dismissing crypto will likely push some clients to find new advisors.

What are the different avenues advisors can take to become educated about crypto and digital assets?

We definitely don't recommend advisors just take what they learn from Twitter or TikTok, or even just a Google search. There are so many that are not qualified, or just shilling the tokens they own or support. You likely wouldn't use TikTok to learn about ESG investing for clients, so don't do it for crypto.

The key is to understand a bit about the technology and how it impacts your practice and your clients' portfolios.

Advisors can learn from platforms like Flourish and Onramp, and fund or management firms like Grayscale, Bitwise, Eaglebrook and Arbor Digital. They all have the advisory practice and relationship in mind when helping to educate the advisors. They can also address issues like taxability, custody and fees.

Then, a higher level of understanding of the assets, investment theses, ecosystem and impact can be found from those that are independent of a product or service and providing education courses designed by advisors, for advisors. The main certificate programs are Digital Assets Council of Financial Professionals (DACFP) and our own Certified Digital Asset Advisor (CDAA).

What is the Certified Digital Asset Advisor (CDAA) designation program and who should get it?

The course was originally created by my partner, Ron Dixon, and me to teach financial advisors about crypto as we would have wanted to learn it. When Steve Larsen joined us, it became the Certified Digital Asset Advisor program.

The coursework includes in depth teachings of Bitcoin and blockchain technology, Ethereum and smart contracts, decentralized finance, use cases like NFTs (non-fungible tokens) and DAOs (decentralized autonomous organizations), investment theses, custody, client conversations, regulation and how crypto fits your practice. The goal is to prepare advisors to not just allocate a few percent for clients now, but to be able to make crypto and DeFi a more valuable and vital part of their practice and their clients' portfolios for the future.

Interaxis is currently one of the education partners that teaches a course toward the CDAA.

How does the CDAA compare to the Certificate in Blockchain and Digital Assets (CBDA) designation?

I haven't gone through the CBDA course, so I can't comment on the quality of the information or delivery. It is owned and managed by DACFP, which also teaches the courses.

CDAA is owned and managed by PlannerDAO — a decentralized community of financial professionals. We knew a designation this important needed to be managed by an independent group, so we gave it to PlannerDAO.

The Education Working Group within PlannerDAO determines the requirements to attain the CDAA designation, and approves education partners to teach courses toward the CDAA. PlannerDAO also created and manages the exam advisors need to pass and deliver their certificates as NFTs.

The goal of CDAA is to be one of the top five most important international designations in the financial service industry. Education providers in Australia, UK, Europe, South Africa and South America are developing courses toward the CDAA, and will go through the PlannerDAO process soon.

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