The Pomp Podcast - #469 Ric Edelman on RIAs Investing In Bitcoin

Episode Date: January 13, 2021

Ric Edelman is the chairman and co-founder of Edelman Financial Services, LLC, the author of several personal finance books and the host of a weekly personal finance talk radio show called The Ric Edelman Show. In this conversation, we discuss 60/40 portfolios, Bitcoin regulation, Federal Reserve actions, Bitcoin adoption among RIAs, and the new financial advisor certificate program Ric helped launch. ======================= The Stacks 2.0 mainnet is launching on January 14, 2021. Stacks, which you may recognize as Blockstack, is a layer-1 blockchain that uses the Bitcoin blockchain as a secure base-layer and enables developers to harness its power in new ways. Stacks makes Bitcoin more than digital gold, enabling apps and smart contracts on Bitcoin--unlocking innovation, new value, and a new way to earn BTC. Register for the mainnet event here: https://stacks2.com/ ======================= Coinbase Wallets are adding support for .crypto and .zil domains through their partnership with Unstoppable Domains. Unstoppable Domains provides an all-in-one solution for blockchain domains. You can send money using these new domains instead of long Bitcoin wallet addresses, while also storing your domain in Coinbase's collectibles section. Go to unstoppabledomains.com in the dapp browser to register and manage your domains.  ======================= LVL is a new crypto investing platform that I'm an investor in. They allow anyone to trade an unlimited number of times per month for free. They have no trading fees and no spreads in the spot market. If you buy or sell more than $500 in Bitcoin on any exchange, you're spending too much on trading fees. Use LVL to save money and trade as many times you want. https://lvl.co/pomp =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Rick Edelman is the chairman and co-founder of Edelman Financial Services, the author of several personal finance books, and the host of a weekly personal finance talk radio show called The Rick Edelman Show. In this conversation, we discuss 60-40 portfolios, Bitcoin regulation, Federal Reserve actions, Bitcoin adoption among RIAs, and the new financial advisor certificate program Rick has helped launch. I really, really enjoyed this conversation with Rick, and I hope you do as well. Before we get into this episode, though, I want to

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You get to use it for free. How do they make money? they make money by selling other products and services. But the crypto exchange or the Bitcoin exchange is completely free. No trading fees and no spreads. So head on over to LVL.co slash Pomp. Again, LVL.co slash Pomp. Go check it out and let me know what you think. LVL.co slash Pomp. All right, let's get this episode with Rick. I hope you guys enjoyed this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of

Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. all right guys bang bang i've got a very special guest for you today mr rick edelman he is uh the number one financial advisor in the world uh multiple years i would rattle off all the years but there's been so many of them that uh i can't remember them all so thank you so much for doing this sir oh it's great to be with you thanks so much for having me for sure um you've spent a long time and been very, very successful as a financial advisor. Walk us through kind of your story in

terms of how did you eventually get into the business and then how did you grow, you know, such an amazing practice and client base? Well, my wife and I were newly married and like, you know, all newlyweds, we wanted to buy a house and realized we didn't know really anything about that. So we went to a financial planner for help and advice. And he ended up telling us to commit a felony. He told us to lie on our mortgage application to qualify for the loan. And we were aghast. We were infuriated that he would tell us to do this. And it made us realize, you know, getting good effective advice, not so easy. And you know what, we're going to learn how to do this on our own. And then we're going to teach others what we've learned. And that was the basis for

forming our practice. We were in our 20s in a community where we didn't grow up, didn't go to college, had no family. And so we were all by ourselves and started out to basically right the wrong and to provide an oasis, a safe haven for consumers who don't have millions of dollars, don't have access to the fabulous levels of advice on Wall Street, no banks of lawyers and accountants to assist, but folks who are just desperately trying to do the right thing, get their kids through college and save for their retirement, care for elderly parents. And so that was the basis of our firm when we started it back in 1986, 35 years ago, was to provide financial education, to help people understand how money works and how to make it work for them.

And the message got around. We began doing college planning seminars for elementary school PTA groups, young parents with young kids who don't know anything about this stuff. It was back in the 80s, nobody ever heard of financial planning. And so most folks back then never owned a mutual fund. And so word spread and I was invited onto the radio and later television. And so today, I'm the longest running national radio talk show on personal finance. I've written 10 books. I'm the best selling author of all financial advisors in history. We've got about a million copies of my books in print collectively, published in seven languages, I'm a number one New York Times bestselling author. I've been hosting TV shows for decades, most recently a series of specials

for public television. And people like the message that we deliver this educational, unbiased, objective information in an entertaining and fun way, because let's face it, it's a boring subject. And as a result of all that, we've now become the largest investment advisory firm in the nation, we're the largest independent RIA in the country serving 1.2 million households and managing about $230 billion of assets. And Edelman Financial Engines is also now also the largest provider of advice to 401k plans in the country. About 140 of the Fortune 500 are our clients from Boeing, Ford, Land O'Lakes and Delta and so on. And so it's been very gratifying to be able to help so many people across the country. Yeah, it's an amazing story just in terms of

almost accidentally starting a business, right? And kind of seeing a problem going and solving it and then scaling it. Just before we get into some of the things that we're going to talk about around financial assets, markets, and crypto assets, as an entrepreneur, I think a lot of people in financial services don't think of themselves that way, but you obviously have built a business and been an entrepreneur. What's like the one lesson that you wish that you could have told yourself when you first started this journey and, you know, before you had 200 plus billion dollars in assets? Like, is there one lesson that would have been incredibly valuable for you? We learned a lot over the years. A lot of it was confirmatory. The benefit I had is that

I grew up in an entrepreneurial household. My mom and dad ran a small business. And so sitting around the kitchen table every night at dinner and listening to them talk shop was very natural for me to grow up starting a business because I watched my parents do it. And so there weren't terribly many surprises. A lot of it was confirmed. Everything takes twice as long and costs twice as much, for example. And cash flow is king. We all know that lack of cash flow is what wipes out most small businesses. And so Gina and I kept our expenses extraordinarily low. We moved into a one-bedroom basement apartment. We sold all of our furniture, everything we owned to provide as much cash as we could to the business. My very first office space, I had someone who allowed me to go

into their office. And I'm not kidding, they literally gave me a windowsill. So my very first office was a stool along a window. And on that windowsill, I had a telephone and that was it. So you do whatever it takes to get by minimizing expenses to devote all of your energy and attention to the clients you're trying to serve. And if you stay focused on those clients, do whatever it takes to help them, it'll be okay for you too. So, you know, too often people are wondering what's in it for me. That is a deadly attitude. Just take care of the folks you're trying to help. The rest will take care of itself. Yeah, I think that's a great piece of advice, not only for entrepreneurs, but anyone who's trying to build value. You've been doing this

for a long time. And because you've had a lot of success that allows you to do it for such a long period of time, you've probably seen almost everything. And for my friends who are financial advisors, I've heard some pretty crazy stories in the good times. Last year was one of those times that weren't so great in terms of a lot of volatility in asset prices. There was a lot of uncertainty, a lot of kind of chaos. What were some of the things that clients were coming to you and your colleagues, either with concerns or kind of some of the crazier stories that you guys were hearing in terms of the small business owners, those that are self-employed, or even just, you know, kind of your average client? Well, we all know that last year was

unprecedented. Most of us remember 9-11, and we recall the 2008 credit crisis. And many of us go back all the way to the crash of 87 and remember those tumultuous times, the oil embargo in the 70s, the dot-com bubble bursting in 2000. And yet last year, 2020, was unprecedented because it was a health crisis in addition to a financial crisis. And the unpredictability of the pandemic, the unexpected behavior of the stock market is really one for the record books. And there are going to be a lot of PhDs produced with dissertations on all of it. And making it even more horrific and complicated was the presidential election and its outcome, resulting in the horrific violence on the day that the Electoral College was ratified by the Congress. And as we

record this, you know, we are yet waiting for the inauguration and events yet to unfold. So there's a lot of anxiety and a lot of fear and confusion as to what does all this mean? Where is it going to lead? What's the outcome going to be? And while financial advisors like me admonish our clients, remind our clients, handhold our clients to stay focused on the long term, look out 10 years from now, 20 years from now, that's hard to do when the headlines, when the videos that you're seeing on the evening news are so shocking and so polarizing. It's hard to do that. And so what we're finding is that some folks are allowing their political views to color their financial decisions. Those who are very, very angry at President Trump's defeat are therefore becoming

very, very pessimistic and selling their securities because they think the worst. Those who are elated at Joe Biden's election are euphoric and optimistic, and they're increasing their stock allocation. And both of those camps are wrong. In one camp, you're getting too risky with too much stock. The other one, you're getting too conservative and too low in return with too little stock. Both are going to lament it as they reach retirement. So our focus has been to help people separate their political views, their social attitudes from their investment strategy, because when you mix the two, you're normally doing it for the wrong reasons at the wrong times, and the outcome will not be what you wanted. It's so funny, because basically what you're

describing is not only are you a financial advisor, but in some way, you are a therapist, a psychologist, and many other things that don't kind of come with the job description, correct? Well, yeah, we've always felt that way. I mean, we're not professional social workers or psychologists, and we have a lot of clients who are, and they cringe whenever we move onto their turf because we don't have their experience, expertise, or degrees. But you're right. We are often engaging in the human emotion side of things. The joke that I've often made over the years is that managing money is easy. Managing clients is hard. I think that's a great way to look at it. So as you've been kind of shepherding literally over a million clients over the years,

One of the things that's come up is Bitcoin and cryptocurrencies. And my understanding from kind of the approach that you've taken is you've actually been very forward looking and somewhat embracing of innovation and saying, look, this is an interesting asset class. Maybe walk us through just how did you come across Bitcoin and crypto and blockchain technology? And what is your journey been with this asset class? Yeah, I've always been a planner, meaning look to the future. Where are we going? How are we going to get there? And I'm well known in the financial planning community for being innovative and being a thought leader. I am pretty routinely named on all of the lists of the most influential thought leaders

in our field because I'm always challenging the status quo. Why are we giving that particular kind of advice and why aren't we doing this instead and so on? And I've got a long record over the past three decades of innovations in our field. I have two patents, for example, for financial product innovation. And I invented the first exponential technologies ETF, which was launched by iShares about five, six years ago. And as part of that, I try to spend time with futurists, technologists, scientists, experts in a variety of technology fields. And several years ago, maybe, gosh, it's almost a decade now, I had the opportunity to interview Ray Kurzweil.

I interviewed him for my TV show on public television. And Ray is in the faculty of Harvard. He's now director of engineering at Google. and he is considered by many the Thomas Edison of our age, the Albert Einstein of our age, one of the smartest men on the planet. He has 700 patents, I think. And Ray is the co-founder of Singularity University along with Peter Diamandis. Peter's the guy responsible for the first privately funded spaceflight ever made. And Ray encouraged me to go to Singularity and to attend the executive program, which I did in late 2012.

I then became an investor in Singularity University and a lecturer there as well. And at Singularity, I learned all about these exponential technologies, AI, robotics, nanotech, biotech, bioinformatics, 3D printing, big data, fintech, edtech, and, of course, blockchain and Bitcoin. This was 2012, and I'd never heard of Bitcoin before. and I was very curious, trying to understand what is this and getting my arms around it. So I spent much of 2013 trying to figure all that out, began investing in early 2014. So I was one of the relatively early adopters to Bitcoin. First as an academic exercise, but later beginning to

realize there's a there there. And what I quickly learned were two things. Number one, most financial advisors are oblivious to the blockchain and digital assets, which I think is a disadvantage for themselves and their clients. And second, the crypto community is inventing some pretty nifty whiz-bang products and services. The blockchain is going to prove to be one of the most powerful, innovative technologies, I believe, since the internet itself was invented. And we're only just now beginning to see its impact. It's going to have transformative effects on commerce on a global scale in all industries. Virtually every major bank in the world is developing blockchain technology. Governments around the world are all experimenting with digital coins. Many have

already begun to roll them out. China, Sweden, and the Bahamas, for example, with many others along the way. The Fed is doing a lot of research. And so my exposure to all of this led me to ask a simple question of all these experts I was talking to, what does it mean for personal finance? And they couldn't really answer that question. They were showing me the whiz-bang techno stuff they were building, self-driving cars, for example, and nanotech robots that'll be traveling through your bloodstream and things like that. But they couldn't explain the impact on personal finance. And that was my research for much of the last decade. And I finally figured it out. And it culminated in my publication of my most recent book, The Truth About Your Future,

which is a deep dive into exponential technologies, what they are, how they work, and what does it mean for your personal finances, investments, taxes, mortgages, insurance, career and college, homeownership, even marriage and estate planning. And that book was debuted on the New York Times business bestseller list and made me realize that financial advisors need to get on with the program. They need to understand all of this so that the advice they're giving their clients is advice for the 21st century, not advice rooted in the 20th. A very famous quote is that companies that were built for success in the 20th century will fail in the 21st. And we're already seeing that. If you look at the biggest companies in

America, they didn't exist in the 20th century. You're looking at companies like Twitter and Google and Amazon, compared to, for example, Kodak, which filed bankruptcy the very year that Instagram was sold for a billion dollars. And so we have to understand these new exponential technologies. And Bitcoin is one of the most tangible ways that ordinary investors can engage in these from an investment perspective. And so I created ReAdapt, the RIA Digital Assets Council, as a way to provide education and knowledge for the financial advisory community to help them understand these technologies, to determine whether or not they should incorporate them into their clients' portfolios, and if so, how to go about doing that, and how to bridge

the crypto community to the advisory community, because it's the crypto community that's making all these nifty whiz-bang products and services, but it's the advisory community that are the gatekeepers to investors and their assets. So Redact is the bridge to bring the two of them together. And we've launched a certification program to help advisors get the knowledge they need and then to be able to demonstrate that they've become experts to their clients by holding the certificate in blockchain and digital assets. So it's been very, very exciting as we've been developing all of this for financial advisors. So today, the financial advisor community, I think that you really highlighted, like, they knew nothing, along with everybody else in the world knew nothing about this technology.

There's then this eureka moment, hey, this is going to be important. Then there's this education journey, which you're being a huge proponent of and really facilitating. And then there is kind of the allocation, the client conversations, and the execution, if you will, of the strategy. Help us understand where exactly would you put most financial advisors today? Are we in the, we just had the Eureka moment and now there's education? Are we, no, we've been being educated for the last two or three years and now we're close to execution. Is there maybe a distribution of those different kind of points in the spectrum?

How do you just look at like, where are financial advisors when it comes to cryptocurrency? We're still very, very early. We are in a slow metamorphosis. It is accelerating, but it is still very early. up until relatively recently, I'd say within the last year or two, advisors were largely in the camp of, I don't believe it, that this stuff is either a fad or worse, a fraud, that Bitcoin is nothing different from beanie babies and tulip bulbs. And if you look merely at the volatility of Bitcoin over its 12-year life, yeah, it's easy to look at it as a tulip bulb.

And we've seen a lot of stories of fraud, Silk Road and Mt. Gox and others. But those go back 10 years ago. That's not the Bitcoin world of today. There has been a massive metamorphosis in the infrastructure, in the echo space that exists. And what people thought of 5 or 10 years ago, which was probably accurate, with an attitude that this won't last, it will eventually go to zero, it's a fad, it won't sustain, that is shifting. And the attitude is now morphed among the financial advisors I talk with, of I thought it was going to go away, to now it looks like it's going to stay. And since it's going to stay, I probably better figure out what this is. So advisors aren't yet happy about Bitcoin, they're not yet in favor of Bitcoin, but they

do grudgingly admit, it looks like it's going to be here to stay. So my clients are asking me increasingly about it. I better learn what it is so I can answer their questions intelligently. You know, in the old days of just telling them, stay away, it's a fraud. Well, that answer is not cutting it anymore. And they need to be able to be more communicative and informative for their clients. And so advisors, I wouldn't yet say are on board. I wouldn't say that advisors are, for the most part, enthusiastic or optimistic or willing participants, I'd say their skepticism remains high, and that's healthy. But they are willing to acknowledge they need to learn more to either prove or disprove their skepticism. And I don't care what their conclusion is. If you want

to walk away hating Bitcoin, fine, I don't care. But just make sure you're doing it with an informed decision, not out of a bias that is uneducated. And that's my only goal, give you the knowledge, the education, the information, and then you'll make your own decision, and that'll be the right decision for you and your clients. I think it's so important in today's society, right, of whether it's politics, whether it is social issues, or it is financial assets, kind of this idea of understanding all of the information, understanding all of the different perspectives on an issue before you make your decision. That lesson could be used in many, many different facets of our society, for sure. So it's good to hear that that's kind of the approach that you're taking.

What are the obstacles in your mind, whether they're market structure issues or regulatory issues, or maybe just uncertainties that you think most financial advisors are either hung up on or paying attention to? Are there certain things where you're saying, hey, you know, there's this regulatory issue, and when this gets resolved, there will be, you know, 10% of advisors will then kind of rush into the industry? Or is it harder to actually identify specific things? And it's more so just to take time and education in a generalized manner? Well, there are several issues and some of them are related and

others are not. There are practice management issues, for example, how do I buy this for my clients? I mean, there isn't a Bitcoin ETF, that would certainly make life simple and easy, wouldn't it? That doesn't exist. So what are the products and services that exist out there that I can recommend for my clients? So that's one is how do I do it? Related to that is the regulatory side. How do I comply with my obligations as a fiduciary, as a licensed financial advisor regarding my KYC and AML obligations, for example. How do I track the investments that I provide to my clients? How do I integrate it into my portfolio? How do I

rebalance that account? How do I bill on it? How do I get paid for doing this, by the way? How do I handle the record keeping and tax reporting? So there are some fundamental practical aspects of practice management that advisors are concerned about. They also need to know, what are the products? And where do I go to do this for my client? What are the risks of having the money lost due to theft or fraud or hacking or the service provider going out of business because they aren't financially stable? You know, so where can I custody with safety? And along the way, how do I know that I have price integrity? And in fact, those are the two fundamental issues remaining with the SEC and their deliberation of examining applications for

ETF, custody. How do we know the asset will be well cared for, safe? And number two, price. How do we know that the price is legitimate, that it's fair, that it isn't being manipulated? Because it is largely an unregulated environment. And the industry has to demonstrate to the SEC that both of those issues have been resolved within the community. I am confident that the SEC will grow comfortable with that at some point and say okay to a Bitcoin ETF, which will unleash a variety of products in the marketplace. And that'll be good for investors to have something under the purview of SEC regulatory oversight will be a whole lot better than the Wild West that often exists. But the financial services community is not waiting for the SEC to do that. We already have

a wide variety of products and a number of very established exchanges. Fidelity is engaged already with Fidelity Digital Assets. You have companies like Kingdom Trust, a qualified custodian with $19 billion in assets that allows you to buy, own, and trade Bitcoin and other digital assets, even in an IRA account. You have a number of private placements that will allow you to invest as little as $25,000. You have to be an accredited investor for these kinds of products. But you also have securities like GBTC, ETHE, and BITW, the Grayscale Bitcoin Trust and Ethereum Intrust and the Bitwise Top 10 Crypto Index Fund disclosure. I'm an investor in Bitwise. And these allow you a more diversified approach than just buying one coin or another. So there's

a wide variety of opportunities already in place. It's just that advisors aren't aware of them. And they don't realize that the industry has grown up a lot in the last five years. And what advisors think they know about Bitcoin is, for the most part, outmoded, outdated information that's no longer valid. And as a result, they're doing themselves a the service and their clients by not learning more about what the opportunities are today. And so you, again, as I mentioned, are very, very forward thinking. You've really embraced this as one of the potential things that will be important in the future, along with a bunch of other technologies and industries. I know that you've invested, I'm not sure personally or through the

business into Bitwise, we're an investor there with you. And there's a couple of other companies that you've made investments in uh what are you doing for clients in terms of is this still hey i'm able to learn i'm meeting people i'm getting educated i'm educating other financial advisors and we're waiting for some regulatory clarity before we really have a clear plan uh what to do with client assets um or are there things that already you're comfortable with and clients are asking for and interested in uh that you're able to help them put into the portfolio like how do do you think about here's what we're actually doing today for clients in crypto? So at Edelman Financial Engines, we have a very specific methodology of managing money, and we choose

to limit ourselves to 40-act products, ETFs, and mutual funds. And there's a real simple reason for that. The vast majority of our clients are not accredited investors. They're middle-class Americans, hardworking folks who don't have millions of dollars to invest. And for these folks, the approach that we use for money management is appropriate and in their best interests. And so we are waiting for an ETF to come along to provide for our clients. And in the meantime, because there is still a little bit of a Wild West environment out there, dealing with folks and organizations that most people have never really heard of, we are providing a focus of education. So the advice we're giving our clients is number one,

don't invest in this space until you have the knowledge. Bitcoin and other digital assets do not behave like any other financial assets you are ever familiar with. They have nothing in common with the stock market, the bond market, the oil market, the real estate market, the gold market has nothing in common. So you need to get educated first and foremost. That will help you determine if you want to go beyond that. And if you do, which we're not necessarily recommending, limit your investment to just 1% of assets. I'm the guy who invented the 1% allocation strategy for Bitcoin. And the reason I did that is because many financial advisors are fearful of putting clients into a position with 5% or 10% of assets, because that's what you would normally do with a

client portfolio. If you're not going to do 5% or 10%, then why are you even bothering? It's pointless to do just one. And that's true for stocks, bonds, and real estate and gold, but it's not the case with Bitcoin. A 1% allocation can in fact have a material impact on the portfolio. But if it goes broke, if it blows up on you as it yet may, the 1% isn't going to destroy you financially. It'll be annoying, but not devastating. So the 1% allocation can dramatically lower the risk while materially increasing the return of a portfolio, thanks to the fact that Bitcoin is a non-correlated asset. It's not really negatively correlated. It is non-correlated. And if you truly believe in diversification, a non-correlated asset is

exactly what you want to improve your diversification. So education first, 1% allocation if you're going to proceed at all. Make sure you plan to hold it for a very long time, and I mean years. And finally, don't be surprised if you lose at all, because that is the nature of the uncertainty of this emerging asset class. So that's the message we're giving our clients. And we're focusing on educating as we've been doing for our 35-year career, helping people understand how all this stuff works so they can make informed decisions that are best for them. Yeah, it's fantastic to hear you say this because I think you're spot on in terms of the non-correlation. There's also this element of potential asymmetry. And so a small allocation

can drive a pretty material impact. And then the diversification, there really is no other asset that at least currently provides some of those elements all in one asset. Talk to me in terms of when you look at crypto and Bitcoin, there's a big focus on get off zero, get in the game, get some exposure if that's what you want. But also what's happening with the rest of the portfolio. You know, 60-40 has served as the standard for years and years and years. There's one side of the argument that says, hey, 60-40 is still kind of the default and maybe you need some customization from there, but that's still a pretty strong, you know, kind of framework to use. There's other people who say, you know, are you crazy? 40% of the portfolio in bonds that are,

you know, negative on a real basis. You have to completely move away from that and 60-40 is dead. There might not be kind of a one size fits all answer here, but just how do you think about that debate and the multiple perspectives in light of the customers and clients that you have today? Yeah, we have to evaluate based on the individual client circumstances. Goldman Sachs announced earlier this week that they think U.S. Treasury is going to be negative for the next three years, negative returns. So you have to ask yourself, gee, do I really want to own bonds in this kind of environment? Well, it's a silly question, because if you don't own bonds, then where's the money? It's either literally in cash, earning 0.0%, or it's in something else. It's in stocks, where we know the risks associated with that.

And we know that this is fueling some of the market's increases in 2020, the lack of options. You can buy stocks and earn a 2% or 3% or 4% or 5% dividend, as opposed to putting money in a bank CD where you earn 0.0%. So it's partly a lack of options for investors. And it's partly recognizing that we're not about to see a dramatic increase in interest rates anytime soon. The Fed says they're going to keep rates this low for the next three years. So it's a conundrum.

The only way to answer it, I believe, is on a client by client basis. There is no one size fits all. I don't think in Edelman Financial Engines that it is a 60-40 typical exposure. I think we're probably closer to 65-35 on average. But it's, I don't think, it's sort of like, you know, how many babies is in the average household? I think the average number of children is 2.3, but nobody has 2.3 children, right? So the averages are one thing, but the reality is something different.

So while we talk about 60-40 or 65-35, that's all just fun conversation for you and me. The fact is, what is right for the client specifically? And for the portion that will be in bonds, because yes, you do need to have a bond exposure, The key is, what are those bonds? Are they long-term, intermediate, or short-term? Are they high-quality or high-yield? Are they corporate or government? Are they U.S. or foreign?

That's really the key issue, is what is the asset allocation within the bond portfolio? And how can you manage that portfolio through an effective rebalancing strategy that allows the portfolio to not only complement the stock side, but to enhance the returns and reduce the risks along the way? So I don't think it's a question of in or out, yes or no. I think it's a question of how do you construct a sophisticated, diversified asset allocation model? How do you manage it effectively between rebalancing and dollar cost averaging in line with a client's goals, attitudes about risk, need for liquidity, and so on? It is very obvious that you've been doing this for a very long time because the devil is in the details. And the nuance, I think, in terms of 60-40, should I have bonds, should I have not, is one question. But as you laid out, kind of the different ways you can just cut the asset allocation to bonds can drastically change that answer.

Is that also true in terms of nuance when you look at Bitcoin and kind of the crypto industry in terms of whether it's different vehicles, different types of assets? Or do you think that right now people are making a very binary, should I get exposure, should I not? And we're not yet at the point where people understand the nuance well enough to start making, you know, hey, should I get exposure to the grayscale GBTC product publicly traded? Here's the pros and cons versus, let's say, the bitwise, you know, kind of top 10 index type structure. How do you see that conversation playing out at the moment? It's a weird one. It's a weird conversation for two reasons. One, it is largely all about Bitcoin.

And if you want, we can toss in Ethereum. And the reason is that Bitcoin has 75%, 80% of the market. You know, if we look at, there are 5,000 coins out there. A lot of them are fraud. A lot of them are fad. Most are going to fail, disappear, go away. 1,000 of them already have. So out of this huge array, there's Bitcoin with a 75%, 80% market share.

Ethereum has another 10% or 15%. So between those two, you're pushing 90% of all the money in digital assets in those two coins. And I'm not even going to bother going into why those two are so big or why those two are the dominant and what makes the two of them different. Why do you need both? It's not Coke and Pepsi, by the way. They are radically different.

So you could just simply buy Bitcoin, call it a day. If you want diversification, you could use the Bitwise top 10 crypto index, which gives you the 10 biggest coins cap weighted. But again, Bitcoin and Ethereum are 70, 80, 85, 90 percent of the index. The other eight coins are tiny compared to those two. So you could do that if you wanted. And then the question becomes, how do you buy Bitcoin? Do you go buy Bitcoin directly from an exchange, somebody like Coinbase or Gemini or Kraken? or do you buy Bitcoin via a security like GBTC? Or do you buy it from a private fund like at

SkyBridge Capital or at Galaxy? Or do you do a more exotic trading strategy with Multicoin or some of the other funds that are doing long short, they're doing active market timing and trading? That's where you get into the details. And I think for most ordinary mere mortals who are just getting into this for the very first time, just a flat investment into Bitcoin, simple, plain, easy, via a security, a private placement, a fund offered by a VC or hedge fund or directly at a custodian is sufficient. They're all birds of a feather. They're all going to pretty much move similarly in results, accepting for fees and the timing of when you bought and sold, but it's the rising tide, lifting all boats on a tidal wave, flooding them all. So

I don't really think at the end of the day, it's going to matter a hell of a lot. It's really interesting to kind of hear that perspective, because I think that you're directionally correct for sure of, you know, just getting exposure is probably the most important thing. It's kind of like in a portfolio, the asset allocation may be more important than the security selection, you know, or likely is. Same thing here of just actually allocating something to the space, you know, absolutely. The last thing I want to talk about is there's a lot of financial advisors who listen to this podcast. They want to learn about Bitcoin and cryptocurrency. And you have this certificate course really targeted right at the financial

advisors and helping them get educated. So maybe take just two minutes and help explain a little bit about this course that you've created and kind of why financial advisors could benefit from actually attending? I think it's a fantastic idea, but would you just tell us a little bit more about it? We're very excited about it. It debuts in Q1. We're expecting it to launch around March 1st. We have hundreds of advisors who have enrolled so far in the inaugural class. It's a 10-module certification program. It's an online self-study at your own pace program, 10 modules an hour each. There will be CE credits for the course. It's $4.99 to enroll. With each module, there's a quiz. And when you are finished with all 10, you are awarded the certificate. If you fail one of the

modules, you just retake the quiz until you pass. It's a 70% pass rate. And the first five modules are on blockchain and digital assets, deep dive, understanding what they are, how they work, the impact they're having in the financial services sector, in the global currency marketplace, etc. The second half of the modules are all about practice management, understanding the taxation and regulation, understanding how you include them in your practice management, how you deal with record keeping, tax reporting, rebalancing, the different products that exist in the marketplace and the differences between them and understanding how to communicate this with clients and how to incorporate it into your practice. So that by the time you go through these

10 modules, which you could cram into a weekend if you felt like it or spread it out over several months as your choice, you will have the working knowledge you need to be able to talk intelligently with your clients, answer their questions, and determine, most importantly, whether or not this is for your clients or not. And you'll know which vendors in the crypto community are your favorites for use by your clients, depending on the approach that you and they want to take for exposure within your portfolios. So we're very excited about the program. And you can enroll right now at our website at riadac.com. How do you spell that just so people know? It's R-I-A-D-A-C, the RIA Digital Assets Council, riadac.com.

Awesome. Before I let you go, I always ask everyone the same three questions. The first one is a little bit more serious. What is the most important book that you've ever read? And you've written so many great books. So maybe let's do one that you did not write, but that you've read and it's had a major impact? Well, uh, of course the Bible has to be number one. The number two is probably stereotypically, uh, Atlas Shrugged. Uh, I'm a huge fan of Amarand. Um, and, uh, I'm a big, uh, I, I read a lot of early American history. So there are a huge array of books that I've read, uh, about our founders and about the period of our nation from the 1650s, all the way up to the 1820s. And so it's hard to pick any one of them. But I do subscribe to

the theory that those who refuse to remember their history are doomed to repeat it. I agree for sure. Second question is sponsored by a company called Eight Sleep. They've got this amazing sleep mattress that I've been sleeping on, and I've been spending way more time trying to sleep. So what is your sleep routine and kind of how, if you've been doing this for 35 years, there's an element of sustainability of just being able to not only grow the business, but just survive. How has maybe your sleep schedule changed over time, right? When you're on the windowsill starting the business, it may be different than today, but just how do you think about sleep and how that's evolved over the years? Well, God cursed me with needing lots of sleep.

You know, I keep hearing about people who can get by on four or five hours and I wish I could because of the productivity you gain from the extra three hours, but I need a solid eight hours. I'm really happy with 10. It's terrible. I don't always get it, but I usually do. And the real focus is that a lot of folks spend a lot of hours in bed, but they're not necessarily sleeping or sleeping well. And the amount of turmoil in your covers when you wake up in the morning determines how restful your sleep really was. And so what I've learned is that the best way to get a good night's sleep is to go to bed exhausted. A lot of folks I discover go to sleep out of boredom. They've just been watching TV or reading a book or they got nothing else to do. So

they'll turn off the lights because it's that time to go to bed. And so it's hard to turn the brain off because you're just not exhausted. So my attitude is to work really hard, play really hard and sleep really well. So go to bed exhausted. And that is a pretty good indication you're going to get a good night's sleep. Yeah. The three things when I started focusing on this one was exactly that making sure I used the Apple watch and just said, Hey, if I close all my rings on my Apple watch, that means I did a lot of physical activity and therefore I'm probably tired. Two was being much more intentional about eating and drinking and not kind of doing things right before you go to bed, you know, probably shouldn't eat cookies or anything like that. And then the

last thing was this eight sleep mattress and they make it cool. So basically it can, you know, really sleep in a cold environment. And I didn't understand how impactful that was. And as a kid, you just basically think of, Hey, I just go to sleep with whatever the temperature of the house is. But I guess in terms of getting deeper REM sleep, did the cool technology really work? So it's pretty cool to see, you know, once you become intentional about this, actually being exhausted and ensuring you get the sleep, it actually makes you more productive during the day as well. So it's- We've had one interruption lately. We got a dog three months ago and she has been jumping on the bed

and that has been something we're trying to deal with. So, but it adds to the fun. I love it. The last question I have for you and then you'll get to ask me one to finish up is a little bit more fun. Aliens, are you a believer or a non-believer? Oh, it's fact.

There's no question that there's life on other planets. I spent, one of my hobbies is astronomy and I've gotten to know some pretty smart folks in the field of astronomy and Jane and I collect old astronomy books as a hobby. There is no question, there is no doubt that there is life on other planets. The problem is that they are so far away

that we do not know how or when we will ever be able to communicate with them because of the distances. So technology has not yet been invented to be able to communicate with them. But to suggest that in this entire massive universe and frankly, multiverse, to suggest that we are the only ones that exist

is an incredibly arrogant, egocentric attitude that I don't think any self-respecting professional astronomer would subscribe to the notion that we're alone. I had somebody come on the podcast, I think it was two years ago now. And he said this one sentence that just is seared in my brain. He said, every human asks two questions at some point in their

life. One is what happens when I die? And the second is, are we here alone? And for whatever reason, I think that's a great framework because I think that the second question of, are we here alone? You know, 10, 15 years ago, people probably had a harder time believing and kind of thinking about it. Now though, I tend to think that the majority of folks say, yeah, it's probably true that uh but it's also it's also irrelevant because of the distances so the real question about aliens is are we being visited by aliens are we going to be visited by aliens are they going to take over i think that's science fiction again because of the incredible distances involved i don't think people fully understand what a light year is uh and because it's really

hard to comprehend the distances are so astonishingly vast uh so no i do not believe that aliens are visiting us or ever have, and I don't think they're going to any more than we're going to be able to visit them, at least not in the conceivable future. Yeah, it makes sense to me. You could ask me one question to finish up. What question do you have for me? Well, who's the favorite person, and this is not a self-serving question, I'm going to let you off the hook and say you can't name me, but who was the best, what was the most fun interview, the best memorable interview you every day um this one is gonna be a weird answer but uh there's a guy um mckenzie who came on uh who nobody in the world knows who he is he literally dm'd me on twitter uh as have

a bunch of people and they said hey i'd love to come on the podcast i'm just a regular guy um and if you're ever looking for somebody who's just a regular guy to kind of tell their story um i would uh be more than willing to do it for whatever reason i've ignored you know literally 50 plus people who have said that. And when this guy DM me, I just said, yep, it's time to finally do kind of a normal person, if you will. And so I brought him on and he does flooring in Canada for a living and literally kind of, you know, in his town, he's the flooring guy. And it was one cool just kind of hear his story with Bitcoin and digital assets and kind of how he learned about them and why he was intrigued. But he said a single line that I think really summed up

most people who are listening to this podcast, actually, in fact, probably most of your clients as well, which was he said, look, I'm not trying to take over the world. I'm just simply trying to provide a better life for my kids. Right. And it just hit me over the head. He said, you know, I have the pleasure, as I'm sure you do as well, of talking to so many ambitious, successful, you know, wealthy, powerful, influential people that you forget, like that's actually the outlier, right? As people have that aspiration, most people, they say, look, I don't need to take over the world. I just wanted a happy life and a better life for my family. And so I think that in some, you know, kind of crazy world, the guy who was the one least expected to have the best

information or kind of the best advice, I just really hit home. So I'd have to go with him. You know, I talk with listeners to my radio show constantly. I, you know, trade emails with them all the time and communication with our clients frequently. And I can tell you that the so-called man on the street, you know, the, the everyday American, they are the smartest people on the planet and we learn from them all the time. So my listeners are the ones who ought to be hosting my show and instead of me doing the talking, they ought to be. So that's a great experience that you had. That's, that's brilliant. Yeah. Where can we send people to, uh, to find you on the internet or find out more about the work that you guys are doing? Um, if, uh, if they're interested.

Well, you can learn about what we're doing for financial education in the area of digital assets at Riadac.com, R-I-A-D-A-C, Riadac.com. And if you want to learn about the advice and services we provide for financial planning and investment management, then go to RickEdelman.com for Edelman Financial Engines. And that's spelled RiceDelman.com. I love it. Rick, listen, thank you so much. You're an absolute legend. Just thank you for really kind of pushing, I think, the pace of adoption and frankly, innovation when it comes to financial advisors with Bitcoin and digital assets. You're doing a fantastic job and we'll have to do it again in the future. I'll look forward to it. Thanks very much.