Don’t Let Your Clients Buy Bitcoin (or any other cryptocurrency)

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Since its inception in the depth of the great financial crisis, bitcoin’s price has increased by thousands of a percent, withstanding exchange hacks, theft, criminal busts, and heated debate in household discussions. You’ve probably gotten several client questions over the past few years about using their portfolio to invest in bitcoin.

I’m here to tell you why they shouldn’t do that.

If you’re not sure what bitcoin is, this article isn’t for you. Whether you see it as an investment asset, currency, digital gold or a tool for illegal activity is beside the point. It’s been the best performing investment of the past decade, so naturally people want it in their portfolio.

Investor demand hasn’t gone unnoticed, and virtually every bank/investment company is offering high-net worth clients access to bitcoin. Like the old Wall Street saying goes, “If the ducks are quacking, feed ’em.”

I disagree: Here are my top five reasons clients should buy bitcoin on their own, if at all, outside of their portfolio.

  1. Fees

Like most alternatives Wall Street offers, bitcoin access isn’t too good to be true, it’s too good to be cheap. With rampant industry fee compression, firms have found a new offering on which they can upcharge. Morgan Stanley requires a 3% upfront “placement fee,” while the Grayscale Bitcoin Trust charges 2% annually to run their multi-billion-dollar fund. Buying bitcoin through an exchange requires a small one-time commission, which you then hold in your wallet for free as long as you’d like.