The Pomp Podcast - Financial Advisors Are All-In On Bitcoin Now | Ric Edelman

Starting point is 00:00:00 The 2026 Chevrolet Equinox, awarded the most dependable compact SUV in the U.S. by J.D. Power, is designed for your every day. And with available all-wheel drive, you can handle your to-do list with total confidence. Start your build at Chevrolet.ca. Details at JDPower.com. Most advisors today build passively managed, diversified portfolios. They aren't trying to beat the market. They're trying to be the market, right? I just simply, if the stock market is $60 trillion in assets, which it is in the U.S., and the bond market is about $40 trillion in assets. You know, it's worth about $100 trillion, $110 trillion. That's the weighting I'm going to give my portfolio because I'm passively focused. Bitcoin is now about $3 trillion, pushing $4

Starting point is 00:00:43 trillion in assets. That would argue that... What's going on, guys? Today, we got a great episode with Rick Edelman. He is the founder of the Digital Assets Council for Financial professionals and he is a New York Times number one bestseller of 13 different books. The guy's also in the Barron's Hall of Fame of financial advisors. He knows what he's talking about. He's here to explain what's going on with financial advisors. Why are they finally getting excited about Bitcoin? What is going on with the way that they're allocating portfolio construction, the conversations they're having with their clients, and also what some of the mistakes are that people are making. And then Rick tells us why the heck is he recommending to people 10

Starting point is 00:01:19 to 40% in their portfolio of Bitcoin and digital assets, all that and much more. Rick is always fun to have here. And this conversation is no different. Here's my latest conversation with Rick Edelman. All right, Rick, I thought a great place to start the conversation is you come from a world where there's a lot of financial advisors, a lot of wealth managers who they've spent years telling clients, relax. The Bitcoin thing, I see it in the news. I hear people talking about it. It's not prudent to put it into your investment portfolio. Some of them now are changing their mind. Obviously, BlackRock, many of these people are helping do that. But there's still a lot of financial advisors who are sitting there saying, wait a second, I can't tell my clients to go buy

Starting point is 00:01:55 something I've been telling them not to buy for the last couple of years. You've got a pretty unique view on maybe the way they should think about this in changing their mind. Explain. Yeah, that's the one thing advisors care most about, I think, is their reputation. So how do I admit I was wrong? How do I say face in front of a client telling them to buy Bitcoin when it's 110, when I told them not to buy it when it was 20, 30, 40, 50, 60. Kind of hard, right? Like a little precarious situation. I look silly. I lose credibility. I harm my reputation. And advisors are scared about that. So it's easier to stick with the old message of, I'm going to continue to say, don't buy it.

Starting point is 00:02:35 And they'll say that as Bitcoin hits a million. So here's the answer to that dilemma. Here's the thing. Instead of being fearful that you were wrong to tell the client at 50 not to buy, acknowledge that you were right. You were prudent. At the end of the day, you're a fiduciary. You care first and foremost about safety and security for your client. You want to know that their financial future is secure. And if you go back to when Bitcoin was $20,000 or $40,000 or $60,000, Heck, just go back two years ago. We didn't even know who was going to win the election two years ago. We really didn't know if Kamala was going to beat Trump. Money was even money at best, and some argued she was going to win. And we knew that if Kamala won the election,

Starting point is 00:03:23 Bitcoin would be dead because she would preserve the Biden-Gensler regime and their attitude about crypto. Well, who would want to buy Bitcoin in that kind of a scenario? So you were being prudent to your client based on the facts at the moment. Well, fast forward to 2025 and the facts have changed. We now have the Trump administration, which wants to make crypto the focus on the planet here in the U.S. We know that every member of the president's cabinet personally owns Bitcoin, that all the economic appointees are strongly supportive, that a majority of both parties in the House and Senate strongly favor it. We're seeing legislation for the first time. And as a result of the clarity of regulatory and legislative processes, we're now seeing

Starting point is 00:04:09 institutional engagement in a way we've never seen before. And we're only at the very beginning of this, which means due to the new set of facts, we no longer have to worry, is Bitcoin going to be banned by government? Is it bad for the planet? Is it only being used for nefarious, illicit, illegal activities? All of those questions have been resolved, which means now that we know the facts, we know that Amazon is here to stay predominantly as a cloud services provider. We don't have to wonder in 1999, is anybody going to buy books online? It's a different set of facts. So while nobody bought Amazon in 99, every stock portfolio owns Amazon today because the facts have changed. Similarly, that's the case for Bitcoin and other dominant crypto assets, which means you

Starting point is 00:04:55 can say to your client prudently, confidently, legitimately as a fiduciary, I told you not to do it before because the risk was too high. The risks have largely been diminished and we can confidently engage in this asset class because it is now mainstream with full government support. When you think through that conversation, is it better for somebody who previously was telling, whether you're a financial advisor or just talking to your friend, if you were the one who was saying, don't buy it, should you initiate the conversation or should you wait for them to initiate the conversation? Oh, I would take the aggressive, I would take the initiative. I would definitely engage in the conversation to say, hey, I've been telling you for the past number of years

Starting point is 00:05:39 that Bitcoin was too risky to be a legitimate exposure in your portfolio. The facts have changed. And as a result, my analysis has reached a new conclusion. That's my job for you as an advisor, is to constantly monitor the markets, to evaluate what's going on, to determine if what you have been doing is what you ought to continue to be doing. And what I have concluded is that we now need to re-evaluate and reposition the notion of Bitcoin in a portfolio. It's no different than your mortgage. At a given moment in time, I would tell you to refinance your mortgage. Why? Interest rates have changed. Well, why did I tell you to buy that mortgage when interest rates were so much higher five

Starting point is 00:06:22 years ago? Because that's the way it was. And that was the best deal at the time. The deal's gotten better. Now you ought to refinance. Does that mean I'm saying I made a mistake telling you to buy when interest rates were higher? No.

Starting point is 00:06:32 The circumstances have changed. The environment has changed. And as a result, a new opportunity has emerged. It's the same thing with crypto today. So let's say you've got a client, right? And let's walk through how these people are thinking about in terms of the financial advisor and wealth management group. So I'm talking to a client and they're fully invested.

Starting point is 00:06:51 Everything's going up. Why would I not be fully invested? Now I say, okay, let's put a allocation to Bitcoin. How do we think about how much to add to it? And where does that money come from? Are we selling a gold? Are we selling, you know, grandma's artwork? Are we buying, you know, taking from stocks?

Starting point is 00:07:09 Like just walk me through kind of how people are thinking through this in that world that is now driving quite a bit of inflows into Bitcoin. it's far simpler answer than most people fear. And it's the fear that is preventing folks from engaging because they don't know how to do it. And as you pointed out, do I take it from the artwork or what other asset? Grandma's artwork. Grandma's even worse. Or do I borrow money to do it? I mean, and people are just overcomplicating it. It's really very simple. Most advisors today build passively managed, diversified portfolios. They aren't trying to beat the market. They're trying to be the market, right? I just simply, if the stock market is 60 trillion in assets, which it is in the US, and the bond market is about 40 trillion in assets, you know,

Starting point is 00:07:55 it's worth about 100 trillion, 110 trillion in those two assets. That's the weighting I'm going to give my portfolio because I'm passively focused. Bitcoin is now about 3 trillion, pushing $4 trillion in assets. That would argue that Bitcoin is about a 3% allocation compared to stocks and bonds, which means if you truly believe in passively owning the market, you ought to have 3% or 4% allocated to crypto. If you don't do that, you're essentially saying that you don't believe in it, you think it's going to fall, and that means you're effectively shorting. And that's an active management decision. You don't short any other asset. Why are you shorting Bitcoin? And why are you making an active call? You're doing it

Starting point is 00:08:45 by accident. You're doing it inadvertently because you haven't really thought it through. So the simplest answer is that everybody pretty much should have a 3% or 4% allocation to Bitcoin. If you want to make a more assertive, active-focused decision, you would increase the allocation beyond three on the basis that most are projecting that Bitcoin will continue to outperform all the other asset classes for the next five years. And that would argue for an increased over-weighted allocation, which is one of my premises. But even if you toss that aside and you want to remain passively focused as a diversifier, you should have a three to four percent allocation. Where does it come from? It's real simple. You own Bitcoin the way you own

Starting point is 00:09:30 IBM. You're not lending to IBM. You're not buying an IBM bond. You're owning it as a stock. That's an ownership asset. You're owning Bitcoin as an asset. That means it comes from your equity sleeve. So if you're 60-40, for example, you would now become 57-40-3. So 3% I think makes sense in terms of if it's 3% of the market, I just want to own the market, right? But I got here, i brought facts with me right i got evidence uh a paper that you wrote it's got your name on it says uh i feel like i'm in court right now presenting evidence uh the death of 60 40 and why your crypto allocation should be 10 to 40 those are way bigger numbers than three percent yes uh where's 10 to 40 come from and by the way 40 coming from you when this came out you can go

Starting point is 00:10:20 back and watch the video i had a field day on the internet i said wait a minute rick edelman says 40 percent. Okay. Now I can stop saying 1% because Rick Edelman says 40. I was going to say what he says. Yeah. It kind of, the paper kind of blew up the internet. It's gotten several million hits and cause yeah, nobody has said 10 to 40, let alone a guy like me. So, you know, have I gone crazy? So the premise of my 10 to 40 is something that kind of most people have missed. You didn't miss it, but most people did. And that is the longevity argument. We are living longer than ever before. I've been in the aging field for many decades. I was on the advisory boards of Stanford Center on Longevity, the Milken Institute Center for the Study of Aging, MIT's Age Lab I've

Starting point is 00:11:00 worked with. And all the scientists in the study of aging and longevity are pretty much in agreement that if you're alive in 2030, forget about your age, if you're alive in 2030, odds are good you'll live to age 100 and beyond. We, thanks to medical advances, innovations, AI, robotics, 3D printing, big data, nanotech, biotech, bioinformatics, for all these medical advances, we are rapidly curing the leading causes of death, as we've been doing for the past couple of hundred years. A hundred years ago, ercipolis and pyemia were two of the five leading causes of death in America. Those people never even heard of them. Exactly. 50, 75 years ago, tuberculosis was the leading cause of death. We wiped that out. Cholera was the leading cause of death. Today, it's heart

Starting point is 00:11:44 disease, respiratory illness, cancer, diabetes, obesity. We're rapidly curing all this stuff. And you know what's funny? All of those are from abundance, usually, instead of kind of starving our bodies. Exactly right. It's being way overweight that's creating these illnesses. And we're figuring it all out. And over the next 20, 30 years, we're going to cure all that stuff. We'll have new things that kill us, but these will be gone. And it's contributing along with we're not smoking like our parents or drinking like them. We have better exercise, lower stress, better relationships. All of that is contributing to our longevity in an unprecedented level, meaning you're going to live really long, which our society isn't used to

Starting point is 00:12:24 because it's never happened before, nor has our economic model. The notion of retiring at 65, living to 85, that works. But if you retire at 65 and you live to 105, is your money going to last as long as you do? The answer is, for most Americans, no, which means two things. Number one, you're probably going to have to work longer than 65. Retirement is a 20th century innovation that won't exist in the 21st century, partly because you'll be bored to death, but largely because you need the money. Second, you need to get your money growing on to offset taxes and inflation. And inflation is the key. We all know the debasement of the currency because of inflation. We know of monetary policy. We see our federal deficit and the federal debt. We know that

Starting point is 00:13:03 overabundance of cash is death for asset growth and development. So we need to shift. And that means the 60-40 is dead. We need to go to 80-20. You need to not only have more in equities, you need to hold them longer than ever. Instead of that glide path that has you reducing equities in your 60s and 70s, you need to hold 80% of your portfolio in equities into your 80s and 90s. That's revolutionary. It's unprecedented. Most advisors are unfamiliar with this. And if you're going to have 80% of your money in equities, a 10% crypto as part of the 80, that's not a big deal. Yeah, it doesn't seem as big of a deal. We'll be right back.

Starting point is 00:14:30 of all digital assets and will soon be reborn as the foundation of a united crypto world follow bitcoin os on twitter at btc underscore os and be early to bitcoin again follow bitcoin os on twitter today at btc underscore os all right so this paper though again uh the death of 6040 when i saw those were the first words i read in this paper and i immediately said oh that's why I like Rick because I've been saying for quite a while now that I don't know when it just flipped for me. I said, wait a second. The thing that everyone is told is the safest, which is their cash and their bonds are actually maybe the riskiest thing that they own. Because if you look at TLT, it's down 50% over the last five years, cash has been destroyed, lost 30% of its

Starting point is 00:15:13 purchasing power since 2020. I mean, just like everything you look at, you're just like, wait a second, 40% of the portfolio that most people are told to go and buy is in things that are pretty much being engineered to lose value over time. And here's the real problem that most of us don't know, Anthony, is that I've been in this business since 1986, and I'm one of the old farts in this industry. Most advisors have been doing this, like me, for 30 or 40 years or less, which means our personal experience starts somewhere in the 1980s or 1990s, meaning we haven't done a lot of studying of financial history from the 50s, 60s, 70s. We don't pay a lot of attention to the 1970s when we had double-digit inflation. We had 18% mortgage rates, 15% inflation. We had oil embargo

Starting point is 00:16:03 where you can only buy gas every other day of the week, limited to five gallons. We don't remember that stuff because we didn't live it. We were teenagers at best, not even born for many of us. And we pay attention to our adult life. For me, it was graduating college in 1980, the Reagan revolution. Interest rates in 1982 peaked. And from 1982, we're talking 50 plus years, from 1982 to the present, interest rates have generally done only one thing. They've gone down. We went from 18% down at one point to near zero. We all know that as interest rates go down, the value of bonds goes up. So think about this. You were able to buy a bond with a 12% coupon and the bond rose in value. Amazing. Why wouldn't you have 40% of your money

Starting point is 00:16:52 in that as a safeguard against equities? This is why everybody had the mantra you just mentioned, you should have a lot of bonds. And people have begun to believe this is how bonds always work. The answer is no. This is how bonds work in a declining rate environment. But look at today's economy, look at today's budget crisis, look at today's macroeconomic scenario. Bond interest rates are very low today relative to the 70s, although there's talk of them being cut by what, 75 basis points? I mean, nobody's talking about interest rates going to two or to zero. Odds are due to the economic crisis in our country, due to the fiscal problems, odds are high over the next decade that rates will go up, not down. And if rates go up,

Starting point is 00:17:34 bonds lose value. If rates go from 4% to 6%, bonds will lose 50% of their value. In that scenario, why would you want to have 40% of your money in bonds? It makes no sense, which further argues for an increase in your equity allocation. I'd much rather have a stock with a 4% dividend than a bond with a 4% coupon. Why on bonds at all? That's a good question. You could clearly make a case for not having much, if any, with one primary purpose, and that's liquidity. If you need access to cash, we always argue there's going to be a market downturn at some point that could last 20% or 30% and a couple of years, and you need money to survive, pay your bills, live your life. If you lose your job or have a major medical crisis or a kid's got to

Starting point is 00:18:23 get bailed out of jail or get into repab, you need cash. So have enough cash reserves so that you don't have to sell your other assets while they may be low in price. That's the only reason to maintain cash as a cushion for liquidity purposes. Beyond that need, there's absolutely no justification for it. Now, another thing that we've been talking a lot about recently is gold. And I'm a Bitcoiner, right? I understand gold. I understand why people like gold. But I look at Bitcoin as gold with wings, right? It's like it goes up a lot more than gold. But central banks, they've been buying a lot of gold they love gold um and i've seen now a couple of different times depending on people like to change the timelines a little bit but approximately the last 25 years

Starting point is 00:19:04 gold and equities have been about the same return right sometimes gold's a little ahead sometimes equities but gold has done much better i think than people who would say hey owning productive assets should destroy the gold more it's done better than people want to admit correct and so I start to think like, well, maybe the 60% or 80% allocation to equities, like leave that where it is and, you know, never bet against America and kind of all that stuff. But the other 20 to 40% gold, Bitcoin, you know, these other assets all of a sudden seem like they could be good replacements for the bonds that are pretty much engineered to lose value. I won't argue with that at all. And I will take it a step further. The very people who argue

Starting point is 00:19:43 that you ought to own Bitcoin as part of a diversification effort. Well, doesn't that apply to gold too? I mean, why is it that some people are arguing that it's a choice between Bitcoin and gold? I am like you, I prefer Bitcoin and I have, you know, I don't have much of any precious metals allocation. But there's no denying that it's a legitimate asset class that many around the world believe in it very heavily and gold's not going to disappear. So if you truly believe in diversification and you like the idea of opportunistically rebalancing and tax loss harvesting i don't understand what the argument's about you know what i tell the gold bugs they don't like it too much but i'd say look we're brothers in the fight right the sound money fight

Starting point is 00:20:26 i got you it's just you guys are bringing bows and arrows and we got guns but at the same time we're arguing the same fight it's the enemy of my enemies my friends 100 so but but you it's uh i love talking to the uh all the the kind of gold and precious metal folks because they really understand the Fed and the debasement. I mean, all the things that the Bitcoiners like to talk about, actually, the gold bugs have been talking about for decades, and I think have been all over it. One other thing that I think has surprised maybe that world is gold is up 70% since beginning of 2024. This is an asset that's supposed to be pretty stable, right? It kind of grinds up. There's no 70% anything in 18 months. That would be more something like a Bitcoin return. Now,

Starting point is 00:21:06 Bitcoin has done better than that. But seeing that type of volatility, does that attract the financial advisors, or do they kind of get scared of that and say, oh, I liked that gold thing until it went up 70%. Now I can't put it in a portfolio. Sadly, too many advisors are susceptible to the same problem of too many of their clients, which is behavioral finance errors. People love to buy high and sell low, the opposite of what we're supposed to do. And advisors are supposed to be objective, analytical, disinterested, because it's not my money, to be able to avoid those mistakes and help their clients avoid those mistakes. But too many tend to follow the trend. Too many buy after something rose or sell after something fell.

Starting point is 00:21:54 And so looking at gold and its big gains over the last 18 months, it increases in interest levels when it really shouldn't. People are buying it at the wrong time, in the wrong amount, for the wrong reason. My attitude is you shouldn't be buying or selling opportunistically based on what's happening today. You should be engaging in modern portfolio theory and the efficient frontier. You should be building a diversified portfolio, holding it forever with periodic rebalancing and tax loss harvesting, buttressed by dollar cost averaging, and leave it at that. And that's how you're going to win.

Starting point is 00:22:29 Your client's going to win. Takes the emotionalism out of it. systematize it strategize it create rules and follow the rules you've set it is funny how um there's a lot of data points uh i think fidelity did a study a long time ago that uh the people who had the best performance like lost their password or died right um there's this book uh this guy wrote um called just keep buying right it's basically just like literally just keep buying things gonna go up um and there's almost this like algorithmic nature to it which is interesting because that's kind of a promise like the robo advisors but the i mean they've been successful

Starting point is 00:23:04 but they haven't wiped out i would actually argue probably the financial advisor and wealth management industry is bigger than ever now um how do you think about you know kind of all this technology and everything that's like supposed to have this very negative impact but it seems like actually the industry you've come from is doing better than ever yeah and and it's nonsense to think that automation is going to eliminate the human factor they said that when atms came out the elimination of bank tellers. There are now more bank tellers employed in America's banks than ever, despite the ATMs. They're simply doing different work, better work, more interesting work, better paying work, similar to the robo advisors. There's really no way that anybody is going to

Starting point is 00:23:43 deal exclusively with a robo because what it does is too limited. There are too many things you need done that a robo, at least yet, can't do. So robos and humans are working together. We're seeing the blending this technology. Robinhood has CFPs on staff, and we're seeing this across the board. My firm that I founded is the largest REA in the country. We bought the first robo ever built, Financial Engines, the largest robo advisor. It serves over a million people. We merged it and matched it with the human advisors of Edelman Financial. So we're going to continue to see this growth and development. It isn't that, oh, there's a fear of advisors, AI is going to put me out of business. No, it won't. It's the advisor using AI who's going to put you out of business.

Starting point is 00:24:26 So you need to recognize that the merger of technology and humanity is the key to our future. I want you to help me talk to my brothers in Bitcoin, which is they constantly, and I do this as well, so I'm guilty, talk about debasement of currency, which is a real thing. We just talked, gold bugs we talked about for decades. You have a unique view that you shared with me that I think is uh uh maybe highlights what are you trying to accomplish by talking about the basement right and your point i think is around these financial advisors it's not a good strategy to tell them to buy bitcoin because of debasement but explain why yeah we all know the debasement argument uh the crypto bros as i'll lovingly refer to everybody uh has been using this as its basis ever since the

Starting point is 00:25:10 satoshi white paper this was the argument satoshi made in in the genesis block that was a political statement about debasement. And that's the basis on which the original crypto engagers loved Bitcoin, that it was immune from debasement. We've seen what's happening with inflation, monetary policy, fiscal policy. We know the size of the federal debt and deficit. This argues that debasement is present. It's going to persist. It's going to get worse. You need to protect yourself. Therefore, Bitcoin. That argument, although completely true about debasement. Doesn't work in the financial advisory community. It doesn't work for investors. And this is what the crypto community fails to understand. I did a post on LinkedIn last week. It's gotten

Starting point is 00:25:55 over 19,000 hits so far on this point that you're right about everything you say about debasement and the need to get out of cash. What the crypto community fails to understand is that the financial advisory community, Wall Street as a whole, has been saying that for decades. We know that inflation's bad. We know that you are having your money eroded. That's why we've been telling our clients forever to diversify out of cash into more productive assets that can get ahead of the tax and inflation curve. So debasement is a reason to get out of cash. It's not a reason to get into Bitcoin. You need to give me other reasons, additional reasons. Because your argument is, if I'm getting out of cash, I can buy real estate, I can buy gold, I can buy Bitcoin,

Starting point is 00:26:42 I can buy equities. There's a bunch of things that can be the solution to the debasement thing. Bitcoin is not necessarily unique in that case. Exactly. Now, Bitcoin has a great many arguments, attributes that justify a big investment in it. Debasement's not one of them. Mm hmm. Well, what do financial advisors think about all these other coins? Like I've seen on television, my friend Jan Van Eck went on and he called Ethereum the Wall Street token. Now, oh, that's a killer. I said, I'm not a big fan of Ethereum, but that's a killer. That's a killer phrase. I was going to go. I've seen Tom Lee, right, do a great job, go on, talk about kind of the yield generation from staking, all this stuff. And I always, in these moments, I'm like, man, I wish that wasn't such a good, you know, sales pitch, right? But how do our financial advisors think about this stuff? So, two things.

Starting point is 00:27:35 First, Tom and Jan are brilliant. They're right. They're talking Wall Street's language, meaning the financial service industry's language, meaning the advisor's language. And that's how they will win the hearts and souls of that community, which will enable them to get engagement and adoption in a way the crypto community has failed because they keep harping on debasement. Or the government's going to fail. Yeah, or the government, all those Armageddon scenarios. So they're right to do that. The issue is that most advisors and most of their firms continue to lag in their crypto knowledge, their fundamental understanding of

Starting point is 00:28:15 this. Most are still unable to explain in plain English with brevity, what is blockchain? What is Bitcoin? What is Ethereum? How do the two differ? Most aren't there in their knowledge set. That's the focus, my entire focus at DACFP, the Digital Assets Council of Financial Professionals. We're just the crypto educator. We're not managing money. We're not endorsing or supporting. We are simply teaching advisors and their firms what this stuff is so that you can communicate effectively to your client, your strategy, whatever you choose that to be. And so Tom and Jan are correct, but they're a few paces ahead of the average advisor. So when they say Ethereum is the Wall Street of crypto, I don't understand what Ethereum is and I don't know what that phrase means.

Starting point is 00:29:02 So I need to have more- Do they just buy the market, like the financial advisor? Do they just say, hey, give me the top five coins or whatever, I actually don't want to make a choice? Or do they go, let me buy the biggest one and then, okay, a couple of months later, let me buy the second biggest one. How do they think about the allocation? So at the moment, when people make their first investment, it's Bitcoin. It's the oldest, it's the biggest, the biggest brand, the best known. Might not be the best in terms of future growth, but that's not relevant. It's the one everyone is familiar with. Even institutional investors, it's where they go first. So if crypto does fail, Bitcoin will be last man standing.

Starting point is 00:29:37 So that's the first place they go. And the Bitcoin ETFs made that incredibly simple and easy and accessible, available within the advisor's practice management model. And when you have big names like BlackRock and Fidelity and Franklin Templeton making these products available, let alone crypto specialists like Bitwise, it makes it simple and easy for the advisor to do it and to explain it to their client. You don't have to understand Bitcoin to be able to buy the Bitcoin ETF. And so that's the first choice. But then they begin to realize, wait a minute, I'm a believer a diversification. And all I did was give my client a single asset ETF. How does that match up with my diversified attitude? And that's when they start looking for something different. And

Starting point is 00:30:18 now we have the Ethereum ETFs, which again, made it easy to go beyond. And now we need to understand the difference between the two. And that helps the advisor seek out learning more. And that's what we do with a lot of our education, our CBDA professional designation, becoming certified in blockchain and digital assets teaches you all of this so that you understand the difference between blockchain, Bitcoin, and Ethereum, and now Solana and other major coins so that you can understand, oh, I really want to do build a diversified crypto portfolio the same way I do my stocks. And the crypto community and the asset management industry have come together to say, yeah,

Starting point is 00:30:53 we're going to build an array of ETFs that are increasingly allowing you to engage in a variety of strategies that match your goals for your client, whether generating income or minimizing risk through buffer ETFs, combination ETFs where I can get more than one asset in a single fund, so it's convenient and easy, et cetera. So the attention level is growing, curiosity level is increasing, the engagement level is therefore going to follow.

Starting point is 00:31:23 And we will find over the next few years that everyone will be up to speed the way they ought to be. And there's a race to make that happen right now because we all know that who's first wins. Today's episode is brought to you by Polkadot. Polkadot offers secure, scalable, and decentralized blockchain technology that perfectly aligns with the needs of innovative projects. It was developed by Gavin Wood, one of the co-founders of Ethereum and the creator of Solidity. Polkadot aims to build an internet where users have full control over their data and their applications. Polkadot offers tons of unique features, a shared security model, along with a new auction model and significant implementations like ASIC banking.

Starting point is 00:32:00 Given these characteristics, it's easy to understand why Polkadot is gaining more and more traction in the cryptocurrency world. Some people even are talking about it as the AWS of Web3. Now, companies such as Mythical Games, Astro Network, and over 50 other independent blockchains with hundreds of applications already leverage Polkadot's technology to power their platforms. If you're looking for a reliable, scalable, and cutting-edge solution, Polkadot seems to be the top choice for industry players. Go check them out today at Polkadot.com. Now, what about staking? Because staking is pretty, like, you know, you mentioned earlier, liquidity, cash flow, all these components. Staking feels like it's in the new world, but it kind of has this like old world tie to it where I know a lot of people who don't know anything about coins. All they hear is you can make 8%. They're very interested, right? And so how is that kind of being accepted or thought about? So there are two schools of thought. Some argue that you're getting 4%, 6%, 8% yields. You certainly ought to do that because over a 10-year period, you're going to double the

Starting point is 00:33:04 profits that you otherwise would have generated potentially. So why not stake? On the other hand, again, with many firms and their advisors not knowing enough yet about how all this works, there's a lack of knowledge, therefore a lack of confidence. And there are some risks to staking, as we know, that you could get wiped out if you have a problem in the staking pool. So some are balancing the risk-reward about this, meaning they're not staking at all, or they're only staking a portion of their allocation, which again fits in with the diversification model. Staking will become increasingly common over time, and the ETFs that are going to be providing staking are going to, again, make it more convenient with reduced

Starting point is 00:33:46 risk and cost, further increasing the engagement level. So in the future, we're going to see that you can do with crypto everything you can do with TradFi. You want to hedge? Do you want to inverse? Do you want a 2x? Do you want income? Do you want appreciation? Do you want tax benefits? You can get all of that in the equities and options markets today. And you're pretty quickly being able to get all that in crypto too. When you talk to these advisors, what are like the last obstacles that we need to overcome. You mentioned a couple of times, like there's like some basic educations, you know, like what is it? Okay. Those people have to go kind of through the steps everyone else did, but the people, when you go and you talk to them and they understand this stuff,

Starting point is 00:34:27 they could have that conversation with their clients. They're allocating for their clients. What are they worried about? Or are there things that are still kind of the, um, the hills that need to be climbed in their eyes? Aside from the obvious, you know, as you said, get the current facts. Stop saying that Bitcoin's bad for the planet. That's just so out of date. Please stop saying. Let me tell you about the dollar. Stop saying that, you know, Bitcoin's only used for illicit activities and sex. Let me tell you about the dollar. So let's let's make sure your facts are current. That's the basic level set. We get that. There are two major issues that we have to overcome today. The first is our compliance department. Many advisors are now ahead of

Starting point is 00:35:08 their firms and they want to allocate to crypto. They want to use the ETFs or other strategies in the world of crypto. And their compliance departments are still stuck in the past with their own lack of knowledge. And they're not saying yes to the approval of the products. And the advisor who wants to do it, who in fact is doing it personally in their own account, isn't allowed to do it for their own client. That's crazy. It is crazy. But look at it from the CCO's perspective. If I am a chief compliance officer and I say yes to letting you do Bitcoin, et cetera, and it blows up, I could get fired. I've got career risk at stake. What's my incentive for saying yes? That's a big obstacle. So we've

Starting point is 00:35:55 also got to educate the CCO and by extension, the C-suite, not only just the CEO, but the chief investment officer, the risk management and legal general counsel department, the sales and planner advisor training department, and the HR department. We've got to get them all up to speed to let them know it's safe to get in the water. All you got to do is establish the strategy, create the swim lines, the swim lanes, and provide the training to your advisors so that you don't have to worry anyone's going to step off reservation. That can all be done, but that's a key element. So advisors are increasingly coming to us saying, can you please talk to my CCO because they're not letting me do what my client is asking me to do? And it's frustrating to everybody. That's one major thing.

Starting point is 00:36:40 There's one other major thing that's equally important. Advisors are doing an increasingly good job at getting the knowledge they need to engage. They're becoming familiar with the space. They're becoming familiar with the products available in the space. And they are ready to allocate. And their firms increasingly are saying, yes, these Bitcoin ETFs are increasingly available on platforms. And it's now up to the advisor to say to the client, let's allocate, let's reshift the allocation in your portfolio a little bit and allocate to these Bitcoin ETFs. Now they're running into a new obstacle. The client, who is equally stuck in the past of the fad and fraud nonsense news of years ago, maybe 10 years ago. They're still citing Mt. Gox.

Starting point is 00:37:26 They don't want to say yes. And here's the dilemma. The advisor's running this model in their head and they're saying, let me think about this. I want my client to allocate 3% to Bitcoin. If I say that to my client, they may get so angry that they fire me and I lose the whole account. why do I want to risk my client relationship for a 3% allocation? And the advisor shies away from even bringing it up because of client bias due to the client lack of knowledge and education. So what we're equally telling the advisors is not only do you have to persuade the CCO to let you do this, you have to equally educate your client as to why they should let you include this in the portfolio. How does that work? Do you just walk up and you just have a picture of Larry Fink and

Starting point is 00:38:16 You know, like, well, Larry said it's good. And then you're like, and now, you know, Jamie Dimon, he's cool with it. And you just like show a couple of people that they would respect. And it's all about like pointing to people who have changed their mind. Or is it more of like an economic, you know, math argument? It's all the above, Anthony. It can't hurt by you looking at big brand names saying the leaders in these fields are used to say it was bad from Larry Fink to Warren Buffett to Jamie Dimon to Donald Trump. In 2017, they were all saying Bitcoin was bad and would fail.

Starting point is 00:38:49 Harvard's endowment said Bitcoin is more likely to go to zero than to hit $100,000. And they just bought $100 million worth of Bitcoin at $116,000 a pop. So you can start there saying everybody has looked at the new set of facts and re-evaluated. And what I would like to do is, with your permission, Mr. and Mrs. Client, I would like to share with you the new set of facts. And would you allow me to do that for you without my worry that you might fire me? Just say it. Just say it. I haven't mentioned this to you because we've talked about Bitcoin in the past, and you've been pretty clear that you don't want to talk about it. You don't want to own it,

Starting point is 00:39:29 and you don't like it. My job as your fiduciary to look out for your best interest, to help you get the returns you need for your financial future security. I have re-evaluated through my continuing study of the markets generally and crypto specifically. I think there is this new conversation that could be had, but I'm afraid to bring it up because I'm afraid you might fire me. Can we talk about it without my being worried about that? And if at the end, you don't want to allocate, perfectly fine. But I want you to have all the facts so you can make an informed decision. That is professional. It's mature. No client would react negatively to that. And it'll allow you to engage in a conversation. And I believe more often than not,

Starting point is 00:40:15 the client will respect you for what you're doing. You're demonstrating professionalism. And I'll bet more often than not, they'll agree to allocate. And even if they don't, so what? You did your job. Yeah. Well, it also kind of goes back earlier, right? It's having the conversation and, you know, financial advising, I'm not a financial advisor, I'd be a horrible one. But it seems like it is part you're saying, hey, here's what I think you should do. But also it's like they're making decisions, right? And so it's influence, but it's also kind of direction. And how do you do both of them at the same time? It's like the psychology of it is very fascinating. That's the key word, isn't it? Psychology. We study intently the issues of

Starting point is 00:40:54 behavioral finance. I've often said in our practice, managing the money is easy. Managing the client is hard. Getting the client to do what they need to do at the very moment they need to do it is really hard. It's easy to get the client to onboard, give you their assets when we're in a bull market. Getting them to continue to hold that portfolio when we enter the bear market is much more challenging. And that's the real job of the advisor. Don't be a clerk of saying whatever you want to do, Mr. Client, is what I'll do. You don't want to buy Bitcoin? Fine, I won't give it to you. Wait a minute. Your job as an advisor, as a fiduciary, isn't to clerk the sale. Your job is to give advice that is in the client's best interest. And if your research and

Starting point is 00:41:36 analysis has reached you to conclude that Bitcoin in the portfolio is in the client's best interest, then it's your job to persuade the client of that. And if you aren't able to persuade the client, then go find another career. What is your focus kind of moving forward for the next 12 months or so? I know you've got DACFP and you're doing a lot of the education stuff. Is there anything else in the industry

Starting point is 00:41:59 that you're really spending time on or excited about? Yeah, I'm doing two major things in the industry. Number one is longevity and aging, helping advisors understand how this is changing every aspect of the advice they give from financial planning to college planning to estate planning to philanthropic planning and so on uh the other major piece is that my next book is coming out my 14th book in december uh on college uh and i want to rewind it's like goat

Starting point is 00:42:25 talk right there yeah my next book 14th book you wrote 13 books already uh i yeah my last one in 21 was the truth about crypto yeah i read that one that debuted at number one at amazon and was named book of the year by uh the society of business journalists and so now my next book is on college. I aimed at teenagers because we all know college is broken. 25% of freshmen drop out, less than half graduate in six years. And yet they all emerge with student loan debt. And we know that they're going to the wrong school. They're choosing the wrong major. Many shouldn't be going to college in the first place. And so my book is designed to help break that cycle so that their college experience is a successful one. So you're not trying to convince

Starting point is 00:43:05 them not to go to college. You're trying to make them more informed on where they go and what they study. Yeah. It's not an anti-college book at all. It's how do you make your college experience successful? I like that. And that's the key. What we have to understand is that over 50% of college students suffer from depression and 12% have suicidal thoughts and 2% have acted on it in the past 12 months. Two thirds, two thirds of college students know someone who has tried to commit suicide. This is four times the rate of the general 18 to 24 year old population. There's something wrong, clearly, with college today. But if you understand how college works and how you can make it work for you, your college experience can be what it's supposed to be, set you on the

Starting point is 00:43:48 path of success in life. And that's what the book is about. Here's how to do it right and how to avoid the pitfalls that can cause you to do it wrong. And it engages parents, high school guidance counselors, college admissions officers with the teens so that everybody wins. where can we send people to find you on uh on the internet uh at dacfp.com at linkedin at x but dacfp is d-a-c-f-p.com correct uh and i'm pretty much you know easy to find you know bitcoiners you got to spell stuff out sometimes for them love you guys love you guys all right thank you so much for doing this we'll do it again in the future look forward to it

The Pomp Podcast - Financial Advisors Are All-In On Bitcoin Now | Ric Edelman

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