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Bitcoin, Bitcoin ETFs and Reality on Crypto Office Hours with Tyrone Ross

Updated: Nov 4, 2023

Tyrone Ross leads another Crypto Office Hours LIVE with Jay Coulter.

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This is Crypto Office Hours LIVE exclusively on FinancialAdvisor.TV. My name is Jay Coulter. As always Tyrone Ross is going to help lead a discussion on what's new in the crypto space for financial advisors. If you are watching this recording live on YouTube, Facebook, LinkedIn or Twitter, and you would like to ask Tyrone a question.


Just submit it in the comments. It'll come through the studio. And I'm happy to pose it to Tyrone. Tyrone, let's get started over the weekend. Let's do it. The folks who are clamoring for an ETF in this space, they got teased a little bit. What do advisors need to know? Yeah. So first of all, that was actually not this weekend, but earlier today, a couple of hours ago, Eric Balchunas posted something that turned out to be a bad game of telephone.


that BlackRock's spot Bitcoin ETF got approved. It did not. I am under the firm belief that Mr. Gensler is going to wait till the very last day, till the very last minute, like a college football team milk in the clock to hit go on this thing. But even with the fake news, I was already getting tons of messages and what does this mean and this, that, whatever. So it seems like I still think it's gonna be more bark than bite.


but it looks like we're gonna get one here soon. So everyone stay tuned. You're gonna get your Bitcoin ETF here sooner or later. And that will be a really good show for us when it happens. By the way, just so everyone knows, I am recording this from my parents' house. So if in the background you hear gun smoke, Jeopardy, some type of car race or something, it's my dad watching television in the background. Ha ha ha. What state do you guys live in?


New Jersey. So I'm in the great state of New Jersey and ready to go to the greater state of Southern California. Awesome. Hey, before we continue, I want to make viewers aware of a conference that Tehran both you and I have participated in in the past. And that's the advice tech live showcase. If you're not familiar with this platform is put on by the team at asset map.


And they bring in best in class speakers and experts to talk about things that are going on in the advisor tech space. So you can get a feel for some of the new technologies that are out there and updates to existing platforms. If you just look at the list of folks that are going to be demonstrating on this particular one this year, which is November 2, and third, you can see it's some of the brand names that we all know, love and use. Plus Tyrone, I see names on this list that I haven't even heard of. And it's my job to know these. Yeah.


It's good to see my Morningstar family on there. Good to go. Hopefully there's a plug for our turnkey somewhere. Thanks. But no, big fan of the team at Asset Map. Love everybody over there. Adam is awesome, the whole team. So yeah, be there, people. And tune in for the Morningstar portion of the program. You can get your free, I'll say it again, free tickets to this event by going to Advice Tech Live. All right, Tyrone, let's switch back to crypto. I saw FP Alpha on there.


uses FPL for social to FPL. Let's switch back to crypto. What's new? I love the open any question for you. So so a lot. So let's just talk generally, the space continues to be in the doldrums, if we're being completely honest, as far as price action, even though there's been a little bit of a jump here recently. activity as far as funding across the space continues to be constrained.


But there's a lot of really cool things. This reminds me of that 18, 19 period where there was a lot of really good news, but it was just kind of falling under the radar. So MasterCard, JP Morgan, a lot of folks are doing some really cool things with private chains. Let me be very clear with that. Private chains meaning not public, but private chains owned by the entities of, you know, settling trade, bond trades and things like that. So.


would encourage folks to look up some of that stuff. And I was saying this to someone. I don't remember who. I think right now for advisors, it's the headlines that are going to matter, right? Because they're not drilling down, right? So if you see MasterCard is doing something interesting, or JP Morgan is doing something, or the iShares ETF gets approved, it's a headline story for advisors right now. They'll see it in passing. If it means something, they'll click. So that's one thing that is happening that


I think we're starting just to see, again, PayPal continues to move forward here. You're seeing a lot of news as far as wealth managers' concerns. So three things that I think are going to be huge. Two announced, one not. One, Chris King in Eaglebrook announced that they will be partnering with Anchorage to offer custody. That is huge. What Chris and his investors are building at Eaglebrook is phenomenal.


L1 advisors, I think they 1.6 million round that they close with Vanek being a really big partner there to do on chain management for crypto. Big news again, didn't get covered a lot in the TradFi angle, but those are two big things. Again, add this to OnRamp being acquired by Securitize. Again, shout to Eric and the whole team over at OnRamp for getting that accomplished. So you're starting to see things progress here.


There is news. So a little birdie told me there'd be some news happening this week that I'm not at Liberty to say, but stay tuned. If you know the names that I've just mentioned, there's a similar company in the space that has some big news coming this week with one of the bigger custodians. So stay tuned for that. And then I think lastly, there has been a...


a lot of, I kind of monitor things based on DMs or messages that I've gotten in the past and I still do that. And I've gotten a lot of messages asking about partnering with this integrations with that conversations with this we're having a lot of really cool conversations at 401 with the folks over at Wisdom Tree, some really constructive conversations with Bloomberg and others. And then obviously everyone's knows what's going on at Turnkey. We have a couple of


New integrations lined up that I will be sharing soon and the news will be coming out on that. Had a really good conversation before this, which you'll love and the folks, the other advisors out there who hate crypto is there's a tool, I won't say their name yet. I won't give them the pub because we haven't signed anything or whatever, it's more conversation. But what they've done is really cool is they do traditional and crypto compliance for firms to be able to, hey, this is on our restricted list. These are the firms who own


you know, X amount of Bitcoin or these accounts at Coinbase or this to GBTC is really slick. And I think that's something that advisors can rally behind. So shout out to all you compliance officers out there. There's a really cool tool out there that we may be partnering with eternity to bring that service to wealth management firms. So excited about that. So needless to say, a lot of things happening behind the scenes and excited for what's to come. All right. Now, I don't hate crypto.


I own some crypto, thanks to your recommendation six or seven years ago, whenever we first started. Not you, but everyone else. I love advisors and helping them better serve their clients. And that's why this is so important. And yes, most of my network are not big fans of crypto, and that's why we're doing this. We wanna make sure that people understand the importance of it and how this isn't a fad. This is something that's very important to their clients, so it's important to their business. And in fact- I'm kidding, I'm kidding.


think it makes for some great back and forth because the questions I get in fact, why don't we start with that? The questions that I get from people who've watched the show, which by the way, we're on Episode six now, are generally probably the ones you were getting 10 years ago. And it's here's here's one in particular, Jay, like what you're doing with Tyrone on the in the crypto space, we're breaking away in the next 12 months from our firm, which is a warehouse. How do we even get started?


thinking about adding this to our business on the break. Tyrone. Man, great question. I would say, right, where are you landing? That's the first question, right? Are you going straight RAA independent? Are you landing at a whatever, so Terra, LPL, whatever, right? Raymond James. That's gonna make a difference of what you can do, right? So that's the first thing I would say. And I've been, you know, anyone who works with me or around me, I have this conversation every day, all day.


The RIA channel is a little different than the hybrid channel is a little bit different than the BD channel, way different than the warehouse channel, right? There's a lot of similarities, but the differences are glaring. So that would be the first thing. Second thing is what is going to be the makeup of the business, right? At 401, we are non-discretion AUM, right? Which it's what it's called, right? So we're advice only, we don't custody or trade. So I'm assuming these are folks that are going to trade. That are.


maybe like thinking about custody. So I would start to look at that and then say, all right, what are our options if we are going to custody and trade on behalf of clients? Obviously updating ADV and all that stuff. But you would have to look at in for the firm leaders, do they feel that there's qualified custodians out there for them to use? BitGo, Kraken, Coinbase, Gemini, Anchorage, right? Hut Hut Hike. And the other part of it is


How are you gonna build on those assets, right? What is the model, right? If you're gonna build quarterly in advance, quarterly in arrears, this is just gonna be some type of, if there are performance fee, if there's, right? You're gonna have to figure that whole thing out. And then I think the last thing is how do you structure the firm to be able to get compliant and remain compliant? And that's one of the things like this whole process is we're consulting firms on it for one of how to get to that point. So,


client conversations, what tools are you gonna use to be really important because if we're being frank, a lot of the wealth management tools right now are inept when it comes to helping an advisor manage a crypto client base because you're just limited in the data that you get. So I would love to know what your stack is going to look like. And again, I can stop there because I can keep going, right? But I think those are the main things and based on those series of answers.


right? There's certain you know, is that chart was like, No, right? You go, Yes. And then, you know, it's that type of thing, that flow chart to figure out what comes next. All right. Could we roleplay a scenario? We didn't talk about this before the show. But I run into this in my consulting practice. And let's also talk about afterwards how 401 helps firms in this situation. So I'm a breakaway advisor, I'm leaving a warehouse, I've got a decent book of business, it doesn't really matter. I'm going independent, I'm going to custody at Schwab, I'm going to charge


I'm going to charge AUM fees on traditional wealth management business. There will be financial planning fees. I would like to give advice on crypto, but not be the custodian or the trader of it. Where do I start? What are the steps? I would get your favorite magic beans and beads and have a seance and pray for Bitcoin ETF. Right?


I think that's the easiest way and everyone knows how I feel about an ETF, but I do think that's the easiest way, especially if you don't want to custody, you do AUM business, you get an ETF, you can fit it nicely across your book of business, you can trade it, rebalance it, do whatever it is that you need to do. That's the easy answer. If you don't want to custody, the other side of that barbell is what we're doing. You just go fully on chain. I would spare everyone listening to Kryptolese and all of the drama that comes along with that.


So now you have this chasm in the middle where there are some opportunities where you can pair a partner rather, and pair your offering with some of the existing firms that are out there, like an Eaglebrook for instance, where maybe if you wanna do SMAs and you just wanna do Bitcoin or Ethereum, suggest every advisor out there stop at those two, please, for now. So that's what I would do. And then I think once you understand the landscape,


you can kind of get yourself into that. So how do we partner with firms, right? Exactly what we're doing here. So we get a lot, we got a case on Friday. Oh buddy, right? That we're working through now. And I don't wanna give the particulars, but there are a lot of money, like a lot of money. And people are doing, this is a gentleman who's working with an advisor. Advisor's clueless, the client is doing some really awful things because they're not getting advice and guidance on what to do.


for the folks out there, please do not pay taxes to the exchange. They're not, don't do that. But there's some real, and this is the whole thing I've been saying for nine years now. This is what advisors need to know. You can just save your clients from doing things that are hurtful to them. We had another case where, I will say the firm, Creative Planning.


was working with an investor for one, there was a tax situation there that we kind of helped with. In 1.5 hours, we were able to go through that client's whole financial situation around crypto, provide a bespoke look on where they are, and then also show what they should be doing next year to offset those gains and all those other things. We did that because we have the data and analytics to do it.


Very few firms have access to what we have. So we were able to provide that huge value add. We came in, got in, got out. The advisor looks like the hero we're going, right? And creative planning is creative planning. I love Peter Maluk. So I know how he feels about crypto, but I mean, it's an opportunity there. So we do things like that. And then the other thing is, right, gotten some calls from, you know, private wealth divisions of other client has 50 million. What is this key thing? How do we figure it out? So,


We can do that and we come in or it's, hey, I want to prepare my practice to be able to offer this. And we do that rope to soap. And then pretty soon here, we'll have a comprehensive offering at 401 that advisors could just bolt onto. And then it'll be all done for them. We'll have models, we'll have risk scores, fundamental data, everything backed by fundamentals, data, risk scores, we'll have architecture, we'll have all of that.


And on top of all of that is financial planning. So we're working slowly and diligently to get all of that done. But there's nothing that any advisor in the country is going to come across crypto wise, I have a question that we can't answer. So really not to help you talk your book, but it seems like if you're serious about providing digital asset recommendations, you're better off partnering off with someone just like you would be when it comes to estate planning or complex tax issues, if your core competency is wealth management.


Yeah, 100%. And again, I don't I don't use the term book anymore, but I don't really believe in talking your book here is like, you don't have to use us. We don't care. Like you just get a COI in your corner. And I was saying this when I was filming my CE things with the American college. We are at the point in crypto right now where advisors should go, okay. My mentor, Merrill always says this, I don't care what it is, have an opinion, an informed opinion. And if you either don't like it, or don't want to deal with it, or it's too risky, or outsource it.


So you should have a professional or team that you say, Oh, Mr. Mrs. Client, you have a $5 million Coinbase account. That's fantastic. Let that be the last thing we say about it in this meeting. I'm going to set up time with Jay. Jay is going to walk you through on chain custody, right? Like, I don't care who it is. I just think it needs to happen. We live it. We drink it. Like the, the, the client to just the case that we got last week, I never talked to the advisor. We didn't know him.


He was just like, hey, this is the guy, right? And they reached out to Eric and Eric is gonna, we're gonna put something together to help them out. That's what we care about, right? Because we like the proverbial book, again, we don't have, like we're doing everything we're doing in crypto, we're doing for ourselves and for our clients. And ultimately people that know me, what I'm building and doing is for the entire $120 trillion space of wealth management to make it better.


And I had a bunch of conversations last week, Global Head Wealth Management, JP Morgan, Anil Arora from the founder of Yodlee, a lot of really smart people. And just to give them my perspective on what this means for wealth management overall. And I've learned now to have those conversations constructively, I get zero pushback. Because I think if you lead with solutions and tools and are pragmatic in your approach from a compliance regulatory angle.


as opposed to here's this NFT, if you buy it, that's out. So anyway, I think that's where we are. That's what we do. But whether it's 401, whether it's you, whether it's whoever, the good folks at Arbor Digital, there's a bunch of folks out there that are helping advisors do this. We just happen to be really, really deep in it. And our reputation precedes us. So we're blessed to have that respect and honor and the space. So you reference the American college.


And I know you've been doing some work with them. Tell me, what do advisors need to know about what you're doing with the American College? Incredibly excited about this partnership. I approached them about, and anyone who knows me, I always try and bite the biggest piece of the elephant first. So I approached them about doing a designation for crypto after I had a bunch of advisors over the years DMing me asking if I'm doing anything with any of the larger providers.


And shout out to Lindsay Lewis, who is on the advisory board of 401. I reached out to her and let her know what the thought process was. I spoke to some of the folks there and they're like Tyrone, easy, baby food before the rib eye, my man. So we are starting with a CE course that'll be available in January. I believe announcement of this will go out later this month. And we've partnered with them 401 and the American College of Partner to provide this. So I was there last week. I recorded three 50 minute modules.


going through the financial planning aspect of crypto. Shout out to Eric Smith, my CIO and partner for one. He helped me out there when we got into the deep, deep, deep, deep financial planning questions and all of that to kind of add a lot of nuance there that certified financial planners would want to hear. But we're really excited about it. It's engaging. The cool thing about it is I was being thrown questions off camera. So as it's not like a...


I'm sitting there and reading this whole thing and the slides and charts and all that. They're going to add some graphics and everything later, but it's really me talking to the advisors, talking about different things that I've experienced, that we've experienced at 401 and in a really deep dive in the last module about what does it mean around the financial planning aspect of crypto. So we're excited about that. My goal is to start with this CE. We work on some type of certification next.


And then the bigger thing is I would love to do a designation with the American college. So they were really excited as was I. So I'm excited for everyone to see this. I think everyone will enjoy it. It's not your normal CE videos there. So that should be out soon. So we're excited. Excellent. I like it. You got to start with baby steps, but even you still think big. You got to think big. You got to start with baby steps. Absolutely.


So let's go back to the ultimate baby step. A financial advisor, not a breakaway, just any financial advisor who's like, all right, I gotta start paying attention to this crypto space. Tyrone, you get to recommend one resource. What is it? TR 401 on Twitter, search. Search whatever you want. There's years of history there. I'm kind of serious, but just go search.


crypto and my app and Twitter, but I digress. You're not wrong by the way. One resource, one resource, probably crypto assets by Jack Tater and Chris Berninski. I think that's a great place to start. Again, I know, blast me what I'm about to say. I've said it before. I think this is gonna be the intelligent investor of the crypto space. I really do.


I recommend it a lot. I think that's a really good place for advisors to start. If I may add another, because I was, I kind of go back every once in a while. Today one in crypto, cause I go way far. I'm so far out now. I just like going back to day one. And yesterday I spent an hour or two just going back through Andreas on Tanapoulos, his YouTube page, how simply he explains the concepts. I honestly don't believe that there's anyone on earth.


that explains anything as simply as succinctly as he does. It's incredible for beginners just to go and listen to him speak and narrate what it is, why it works, why it's important. So those are the two things that I think is a great place to start. And I would put those one B after at TR401 search crypto on X. Sorry, Elon.


Before we launched, I asked you to kind of give me some things that were on your mind. And one thing that really caught my attention was this idea of the potential for a qualified custodian coming. I know you can't give a whole lot of details, but I think this would be important. What do advisors need to know about a potential project like this? One is I am first, I've approached the SEC first before doing and building anything. Had a conversation with Hester and her folks.


had a conversation with the investment management in custody division. I've assembled the Avengers, like the elite of the elite to work on this with me. We've been meeting, we've just been whiteboarding or whatever, and it's going to be for investment advisors. Like, that's it. We're not doing it for hedge funds or whoever. This is going to be built for advisors. What do financial advisors need in qualified custody?


and all of the little nuanced things that don't exist, we're going to build that. The other thing is this, I wanna build it so that it's a fishbowl, meaning we're gonna be fully transparent. No matter where you stand in a room, you're gonna be able to see through the other side. Our counterparties, how we secure things, what we're doing from a backend architecture standpoint, segregated accounts, right?


different account types, insurance, beneficiaries, statements, all these things. And we're gonna be very transparent about it. I think the name we're gonna go with is Polucity, P-E-L-L-U-C-I-D-I-T-Y, maybe, that may change, but that's kind of what I think is a really cool name. It just simply means clear and transparent, but it's a really cool, and you got that, you know, itty-a-ditty, it's like fidelity. So Polucity, kind of keep that familiarity.


But we're excited. We've got the team together. I think it's going to be right about five of us to start Backgrounds in crypto backgrounds a traditional custody backgrounds and biz dev and foreign exchange and Lot of different things. So I think I've assembled the right team to do it And it's gonna be for again strictly for advisors everything advisors need nothing. They don't so we're excited All right Tyrone this question comes


from me, as someone who believes that precious metals makes for a nice piece to have fully diversified portfolio, whether it's gold, whether it's silver, to help against currency devaluations and times of duress. For you is this? Is it gold or crypto? Or is it gold and crypto?


I think this is a personal thing, but I would say gold and. I think it's good to have some silver, some gold. I do, right? But also I think there's a reason to hold Bitcoin as well or Ethereum if you want, right? But I definitely think it's Bitcoin added to that. I don't think there's why you can't be diversified within the alt portion of a portfolio.


that may again, maybe it's a total of a half a percent or whatever, but the mix of those, I think. So I think it's both. As much as folks know, I'm very punch drunk crypto hippie and everything should be crypto all the time. I do think there's a for those that are that are really well versed diversified long term investors, right? All weather if you will, Hello Ray Dalio portfolios, I think it's good to have the mix of those those three or those two.


right on different asset classes in there. Yeah, I agree 100%. In fact, I bet if crypto was around 40 years ago, and Dali was building the all weather strategies for institutions, crypto would be a piece of it just because of the diversification benefits that it brings. Yeah, for sure. All right. Everybody knows we take this show and we cut it into clips posted out over social media over the preceding month. By far our most popular clip on financial advisor TV is the final word.


with Tyrone at the end of crypto office hours. Tyrone, what's the final word this month? The final word is humanity. I haven't had the opportunity to speak on this publicly based on where I feel like I sit in the industry and everything that is going on. But I think the word is humanity. I think we have lost the lack of appreciation for human life.


in America. What happened in Israel is terrible and unjustified and horrible in any time frame, a format or any way. It was horrible. But the thing is, there are other people on the other side of that as well, the folks in Palestine, it has nothing to do with that, and mainly children.


And I'm not here to debate people on who's right or who's wrong or who deserves it or this, that or whatever. Humanity, children, children. I saw a video of a man in a hospital, the mother was dead holding an embryo. That is horrible. And if there is a particular organization anywhere in the world that is responsible for that type of death and scourge of children anywhere in the world, I condemn it


all of my being. So whether there are suffering in Palestine or suffering in Israel, suffering anywhere.


and it results in a lack of humanity, of just what it means for human life. I think we need to get back to that. And prayers for everyone in that region, especially for the innocent people that were attacked unjustly. It's awful, the visions of it. But when I sit and think and to see the discourse on social media and how people are being so cruel and the things that they are saying, to me, it just means that in 2023, we have lost the lack.


of meaning for what it means to be human and what it means when a life is taken, especially for children who didn't even get a chance to fulfill their destiny. So I will leave it there. We need a lot of prayers and understanding right now. And again, prayers to all those in Israel and all of the folks that are going to be killed in Palestine as a result of the stupidity of Hamas. So I'm off my soapbox.


appreciate everybody watching crypto office hours with Tyrone Ross. Tune in we'll be back in three weeks. If you have any questions and you're not able to watch the show live, please just DM me on social media either at my personal handle or financial advisor TV. And we'll bring it up on our next episode. Tyrone Thanks again.


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