Part 3: How Do Financial Advisors Get Compliant to Buy Digital Assets?

This is the 3rd article in a 3-part series to help Financial Advisors understand how bitcoin offers substantial benefits to a modern portfolio



key takeaways

  • This compliance burden is the reason why large broker dealers have yet to offer direct access to Bitcoin

Compliance & Custody

The biggest questions for Financial Advisors is how to offer Bitcoin to clients and how to custody it compliantly. Given the lack of infrastructure available to Financial Advisors in the way they currently connect and interact to broker dealers and custodians, this creates unique challenges.  

Currently, when a client of an Investment Advisor wants Bitcoin, Advisors are limited to using the Grayscale Trust (GBTC) and paying the avg 18.5% premium over NAV plus 4% fees (expense + management) or getting exposure through a private fund that is less liquid, less transparent and less likely to offer tax-advantages. 

Additionally many of the private funds push products that offer access to an index of digital assets which should be avoided. Bitcoin is the investment and exposure to a broad group of unproven digital assets with no use case creates additional risks to the client and the Investment Advisor that you should avoid. 

There is of course the ability to invest in Bitcoin directly on behalf of clients, but it’s imperative you get yourself compliant, update your Form ADV (the uniform application for an Investment Adviser).  

You need to have a clear understanding of risks, operational workflow and custody solutions. Investing in any of these options offer challenges to FA’s with regulators if you don’t have a clear documented process as to why and how you made your decision. 

Additionally FINRA requires any FA to notify them if they engage in any services relating to Digital Assets however simply notifying regulators won’t keep you out of trouble. It will entail a large overhaul of your Form ADV which could trigger an audit, change or loss in insurance coverage and other platform services. 

This compliance burden is the reason why large broker dealers have yet to offer direct access to Bitcoin and why Investment Advisors are playing catch up in finding compliant solutions to offer clients. 

Should you want to offer Bitcoin directly to clients in both brokerage and tax-advantaged retirement accounts and are comfortable outsourcing your compliance and investment management, you can work with Digital Asset Investment Management through a SubAdvisor or Total Privileged Access Management (TPAM) relationship. 

By being the first licensed Registered Investment Advisor for Bitcoin and Digital Assets since May 2018, we offer a fully regulated and compliant turnkey solution for FA’s and Wealth Managers in separately managed accounts(SMA’s). NYDIG and Fidelity are offering Bitcoin exchange and custody solutions for accredited investors. 

There are promising products in the pipeline, like Onramp Invest, that will provide a data layer that allows Advisors to model, invest, advise, and bill on Digital Assets for Clients 

One by one, large brokers will adjust and offer services for Bitcoin. All the more reason to invest in digital assets in the most compliant way now. 

For the other articles in this series please see:

Part 1: Financial Advisors Must Evolve and Allocate to Bitcoin

Part 2: What Is The Right Allocation to Bitcoin?


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Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

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