By Dorothy Hinchcliff, FA-mag.com - Well-known and outspoken advisor Ric Edelman chastised Vanguard's CEO Thursday for saying the investing giant will never offer a fund focused on Bitcoin.
“He will be eating those words,” maintained Edelman about the comments made by Vanguard CEO Tim Buckley. “It’s the dumbest statement I’ve ever heard anybody make.”
Edelman was speaking before thousands of advisors as a participant on a featured keynote panel, “Fintech, Innovation and the Next Generation of Financial Services,” at TD Ameritrade Institutional’s annual conference, LINC 2018, in Orlando, moderated by Dani Fava, TD's director of product strategy and innovation.
“We see these statements coming out of Wall Street from these 50-year-olds plus, and I’m one of them. Executives on Wall Street are in total denial about cryptocurrencies specifically, and blockchain generally,” Edelman continued.
They are in “denial” because they don’t understand the technology, Edelman said. “I’ve seen people equate Bitcoin to the tulip craze and Beanie Babies, which is really bizarre, and they said it was an insult to the tulips.”
He added advisors need to do more to learn about cryptocurrencies such as Bitcoin and blockchain, an internet system that, in part, promises to create a public digital ledger for all kinds of financial transactions made using cryptocurrencies. Because transactions are transparent, blockchain reduces, if not eliminates, fraud.
“Everyone is hearing about these ridiculously high [cryptocurrency] returns of 2017,” Edelman said, “and we’re getting questions about it, and the typical response from advisors is, ‘It’s a fad. It’s a bubble. It’s a fraud. It’s too risky. Stay away, etcera, etcera.’”
But advisors should not think that these exponential technologies are things we’ve seen before, Edelman said. “We have to recognize that consumers are asking these questions and they want a better answer than ‘I don’t know anymore about it than you do.’ That’s not what an advisor does, and advisors need to understand it, get educated on it, and then be able to make an informed decision as to the appropriateness or not for the benefit of that client, as opposed to simply taking the head-in-the-sand kind of approach because they don’t know any different.”
But Tim Hockey, TD Ameritrade’s president and CEO, said he is seeing a shift, a bigger effort on the part of Wall Street executives to have a fuller understanding of these technologies. For example, 90 percent of SIFMA’s subcommittees are gathering at least some information on cryptos and blockchain, he said.
“It is so much the Wild West to figure this out right now. So I take issue with what Ric said in one context. This is such a broad topic that absolutely there are bubbles and frauds on one end, and then there is completely legitimate transformative technology on the other. And because it’s a new space, people can’t figure out the difference between the two.”
Hockey added that so much froth and energy attracts some bad actors. “Those bad actors might color the entire perspective for people. Why? Because they deal in a world of anecdote. They lock on that anecdote and say it’s bad or it's good. It’s a range. Like anything else, it will sort itself out over time. It will mature. The winners will come out and the losers will fall by the wayside. But you cannot ignore the transformative nature of the underlying technology.”