Crypto Funds’ Easy On-Ramp Can Be a Big Problem Without the Right Guidance

It’s important for financial advisors to do due diligence on investing in crypto funds, and on the funds themselves.

AccessTimeIconApr 28, 2022 at 12:50 p.m. UTC
Updated Jun 14, 2024 at 8:08 p.m. UTC

Interest in crypto investments is growing steadily from clients of financial advisors, and those advisors are looking for ways to capitalize.

You want to help your clients, and you’ve even done some research. You learned about some of the investment theses behind bitcoin (BTC) and crypto assets, and you have some knowledge of wallets.

While you want to help your clients allocate to crypto, you’re not ready to set up wallets, or have their funds move off your main financial platform and outside your workflows.

There are plenty of crypto fund options available now, allowing you and your clients to dip your toes in the crypto waters without too much upfront time and resources spent changing processes, tools and amending compliance reporting.

Just as with other investments, you have to do your homework and due diligence on the prospect of placing client investments into crypto funds and on the funds themselves.

First, we need to look at some of the reasons you want to use funds and the potential drawbacks.

Why use funds?

If you are new to adding crypto conversations to your practice, you likely have not yet determined any additional revenue models. You might be in the process of evaluating different relationships with crypto custodians. However, your clients are asking you to help them invest in crypto soon.

Crypto funds, and crypto-related funds can be that bridge to get you to a practice that more natively allocates to digital assets.

Crypto funds are usually available on most traditional custodial platforms like Schwab, Fidelity and Altruist, meaning you can help your clients allocate without leaving the custodian. This also makes rebalancing and reporting much easier, and can fit within your workflows.

You can also use this strategy to add some crypto exposure for clients, while maintaining an assets under management (AUM) business model. Your clients will get to experience the volatility, and you will have the opportunity to see if their interest is in a real allocation, or in speculation based on hype. The conversations you have with your clients during volatile periods in crypto will be especially informative. You will have the opportunity to use some of your knowledge while also assessing how emotionally prepared your clients are for this asset class.

Another benefit to using crypto funds is the fund companies have taken care of those custodial and security issues. Digital assets come with a new custodial or ownership model, which is a technology known as wallets. If you aren’t yet prepared to help clients set up their own wallets and custody their assets, you can essentially outsource that setup to the fund companies. Part of your due diligence now is the security of the fund companies, but you don’t yet have to fully understand, or take on the potential liability of helping a client set up their own wallets.

One last benefit to crypto funds is that they are professionally managed, and can offer some diversification within the crypto space. If your clients want to own more than just bitcoin, you likely don’t have the time or expertise to manage a crypto portfolio. By choosing a fund, you are outsourcing the tasks of research, strategy, and diversification to the more experienced fund management teams.

Why not use funds?

All the positives sound great, so why wouldn’t you just use funds to help your clients invest in crypto?

Investing in crypto funds, whether they are trusts or exchange-traded funds (ETFs), exposes your clients to the price of crypto assets, but it doesn’t entail direct ownership of those assets. The prices of the funds will not always correlate exactly with the price of bitcoin or other crypto assets.

These funds may also charge fees that are higher than the fees you and your clients are used to paying. While the potential returns may be outsized compared to traditional funds, you should be prepared to answer questions from clients and auditors regarding fees.

Part of the ethos of crypto is the idea of sovereign ownership – the ability to have custody and control of your own assets. By moving a client into a crypto fund, you are technically eschewing the purpose of the technology underpinning the new asset class. You are outsourcing a great deal of security and trust to the fund company, and you are subjecting clients to the potential for censorship. This means the government can determine the legality of the assets and the investments within them. Those funds could be heavily regulated or even seized.


If you are looking to add crypto-related discussions to your practice but aren’t completely up to date with your education of the space and your business strategy, funds can be an easy on-ramp to satisfy client demand. Although they are easier than helping your clients directly own crypto, you still need to perform your due diligence in an effort to maintain your fiduciary obligations.

Crypto funds can be the bridge that helps you determine how to build crypto and digital assets into your financial service practice.


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Adam Blumberg

Adam Blumberg, CFP ®, is also co-founder and chief educator for Interaxis, a company trying to bridge the education gap between digital assets and traditional finance. He is a contributing writer for CoinDesk’s Crypto for Advisors newsletter.