by Stephane De Baets
Financial advisers and money managers are used to answering questions about individual securities, indices, ETFs and many innovative private placements.
However, with Bitcoin leading the way through its dramatic rise and subsequent volatility, the cryptocurrency has crept into traditional conversations in the financial world. Just last May, JP Morgan created and held the position of head of the Crypto-Assets strategy, a clear departure from the reluctant position that many traditional groups took over when the digital currency began to take hold.
As customers ask questions, the burden is now on consultants and their companies not only to intelligently answer each question, but also to start identifying coin offers and investment structures that could be beneficial to those representing. As the Internet boom nearly 20 years ago, the old world and the new world of financial products are converging, and it is better to be prepared.
Understanding the future of currency
One of the most traditionally held beliefs in investment is that it is better to have money for you, generally in the form of long-term investments, than for many individuals with a High equity (HNWI) means real estate and other assets that value income.
A currency has never been thought of as a means of depositing wealth, but something that is exchanged between two parties during a transaction, with each side representing a certain assigned value. This evolving point of view of what currency is and what is ultimately what pushed innovation at the base of Bitcoin, the popular cryptocurrency that has now significantly increased the value.
However, many cryptocurrencies appear to have a completely arbitrary value based on online supply and demand. This is worrying for some, and because of many investor questions, which has led to more common money offerings supported by assets such as real estate.
Evaluate credible online markets for currency exchanges.  One of the first things that financial advisers need to know is how to deal with issues related to exchanged currencies. Unfortunately, there are still very murky waters when it comes to coin exchanges, which has placed more than a couple of black eyes on the sector. That said, there are digital markets for token goods offers (TAOs) that facilitate the opportunity to invest in transparent and adequately controlled offers. To do so, many exchanges are supported by a credible and affiliate broker-dealer that is both SEC and FINRA registered. Financial advisers and due diligence officers must carefully review these platforms and their marketing structures to ensure that customers are only involved in offers for which there is both transparency and long-term vision.
How do cryptocurrencies make money?
This is a first standard question from customers to their consultants. The answer is not overly complex, but it is worth stating that simply listing an offer and getting a currency to exchange is one thing, but sustainability through the memorization of wealth through the digital currency should be the main objective. for fund managers and their investors.
HNWIs are very familiar with alternative investments, particularly those that relate to real estate and other long-term assets. They know that direct investments can mean a lot of paperwork, loans with a bank, etc. The cryptocurrency offers provide investors with direct access to investment products, which is not surprising given the global trade trend of disintermediation or the reduction of the use of intermediaries between two parties. For this reason, educating customers about the added value of cryptocurrency can very well include the reference to lower initial fees, which are well known for influencing long-term returns.
In addition, asset-backed offers should be positioned exactly for what they are: exposure to an investment class not unlike many others that you and your client have probably reviewed, but one designed to provide investors with transparency and liquidity . It is the belief of many that the popularity of digital currencies that lack a business or a fundamental product to support the value of their coins, clearly shows that there is an appetite for those based on traditional fundamentals such as capitalization and dividend yield .
Questions on liquidity.
Ah, liquidity – the source of many frustrations and countless hours spent in creativity faced by investment sponsors. The real estate sector, for example, is widely recognized as a source of income that values business. One of its few drawbacks has historically been represented by its liquidity characteristics, something that many REITs and fund managers have tried to equip with their offers. Now, through the offer of tokenised real estate, cryptography has begun to establish itself as a potential means of providing liquidity to investors.
When any form of investment class becomes substantial in size, liquidity players always pay attention. Coin offerings that are backed by financial assets make a liquidity event much more possible, especially when valuation increases are so transparent and easily traceable. As with any investment vehicle, advisors must carefully review all information in the prospectus to ensure that they understand the liquidity characteristics of the supply of coins, including block periods and, of course, the banking processes in relation to the exchange on which the offer is hosted.
Cryptocurrency is that it could only represent the intersection of the old world of investment, providing investors' exposure to traditional asset classes and the new world of innovation and transparency of fintech. Like any trendy investment concept, financial advisors and fund managers need to approach cautiously, but also aware that there may be significant opportunities for their clients to be the first to adopt.
Stephane De Baets is the founder and president of Elevated Returns, an asset management company that manages assets in a wide range of service sectors, including hospitality, real estate and a number of brands of consumers.