It was a busy week for cryptocurrency news, just as CoinDesk hosted its virtual Bitcoin for Advisors conference.
Speakers at the event agreed that while there are technology advances to help advisors integrate crypto assets into client portfolios, there’s still a number of unresolved issues advisors are facing.
Michael Kitces, chief financial planning nerd at Kitces.com, drew a line between blockchain technology, which he said he’s “super bullish on,” and cryptocurrencies, where he “still struggle[s] a bit with the fundamental investment thesis.”
But financial advisor Morgen Rochard, managing member at Origin Wealth Advisers in Austin, Texas, was very bullish on Bitcoin, saying it’s the only digital asset worth investing in and that there’s still upside to be had.
Max Schatzow, an attorney with Stark & Stark, spoke about navigating digital asset compliance, saying that independent RIA owners have greater latitude in recommending digital assets than employees of financial institutions.
Also this week, Federal Life Insurance Company announced the launch of a new private placement variable annuity that provides broad exposure to Bitcoin and Ether. The company has formed an insurance dedicated fund that will allow investment advisors to allocate a portion of their clients’ variable annuity contract to a portfolio of Bitcoin, Ether and other crypto assets. The fund will be available to accredited investors. The carrier has partnered with Gemini and Onramp to hold and trade coins, as well as WisdomTree to design the investment allocation in the insurance dedicated fund.
Invesco launched a pair of thematic equity ETFs this week providing exposure to cryptocurrency and blockchain equities. The Invesco Alerian Galaxy Crypto Economy ETF (SATO) and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC) started trading in the U.S. this week; both are passively managed and charged 6 basis points.
SATO will invest in companies in both the crypto and blockchain space, while BLKC will invest in the same companies as SATO as well as companies working on blockchain technology not tied to crypto.
Further, both ETFs will also allocate 15% to Grayscale Bitcoin Trust, providing exposure to physically backed Bitcoin, according to Bloomberg.
RetireOne Brings Unbundled Annuity to Fee-Based Advisors
RetireOne, an independent open architecture fiduciary platform built for fee-based insurance solutions, and Midland National Life Insurance Company have launched a zero-commission contingent deferred annuity, Constance, which unlike other fee-based annuities, unbundles the insurance component from its underlying investments. That allows the advisor to manage the portfolio and the assets, which stay at their custodian.
This product costs about a third to one-half that of a traditional annuity, RetireOne said. The fees range from 110 basis points to 200 basis points, depending on whether the client wants rising or stable income in retirement and whether the advisor manages the portfolio with a higher equity allocation.
“The novel part about this is that the assets don't move. They stay directly at Schwab; they stay directly at Fidelity,” said Ed Mercier, president at RetireOne. “And the benefit for the advisor is, instead of having to pay 40 to 80 basis points on average for the underlying variable insurance sub-accounts, I could use my BlackRock, DFA, Schwab index funds, whatever I'm using and I can get single digit product expenses there.”
VanEck’s Newest Moat ETF Adds an ESG Screen
VanEck’s flagship Morningstar Wide Moat ETF (MOAT) has been around since 2012, and now the asset manager is adding to its lineup of moat funds—this time screening for environmental, social and governance factors.
The new VanEck Morningstar ESG Moat ETF (MOTE) invests in companies that Morningstar believes continue to have competitive advantages, or “moats,” that have been screened for ESG risks.
“ESG risks are, after all, business risks,” said Brandon Rakszawski, Senior ETF Product Manager with VanEck, in a statement. “Being able to focus on U.S. companies with both sizable moats and reduced ESG concerns relative to their peers makes MOTE a potentially powerful addition to a core equity portfolio.”
The fund will use Morningstar’s Sustainalytics ESG risk analysis to find companies that are better managing financially material ESG risks relative to peers, and exclude controversial companies.