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MassMutual Launches Crypto Subsidiary for RIAs

MassMutual is debuting a crypto platform for RIAs, called Flourish Crypto, with third-party integrations to services from eMoney Advisor, Orion and Envestnet.

MassMutual is launching a crypto investing platform for RIAs that will allow advisors to compliantly access, report on, trade and plan using digital assets, according to an announcement. Called Flourish Crypto, Massachusetts Mutual Life Insurance Company is making the new technology available to the more than 400 RIAs already using Flourish and has a number of big-name integrations.

Flourish Crypto is debuting less than a year after Flourish was purchased by MassMutual. Originally positioned as an acquisition to provide financial planning and cash management solutions to advisors and their clients, Flourish is now opening the door to turnkey crypto investing.

Flourish’s offering will move advisors into the driver’s seat when it comes to providing financial advice and support around digital assets, said Ben Cruikshank, head of Flourish. With “tens of millions of Americans” already investing in crypto, “many advisors feel like they've been left on the sidelines,” he said.

“The solutions that are available just do not meet client demand. They're not efficient ways to access this asset class and really, critically, they don't enable [advisors] to compete with the retail startup trading platforms and exchanges,” Cruikshank explained.

RIAs using the platform will be able to support clients directly owning cryptocurrency, plan and report on the digital assets using integrations with third-party financial planning and reporting providers, take discretion or offer the service as a client-directed account and have visibility into crypto balances, statements and 1099-Bs, according to the announcement. Advisors will also get access to compliance resources, such as sample ADV language and risk disclosures, through a partnership with Compliance Solutions Strategies. Flourish Crypto will use Paxos Trust Company as its custodian and the platform has integrations with major RIA tech providers, including eMoney Advisor, Orion and Envestnet | Tamarac.

“At MassMutual, we believe that cryptocurrencies are increasingly becoming a part of the financial landscape, both as an investment strategy and technological innovation,” said Gareth Ross, head of enterprise technology and experience at MassMutual, in a statement. “We’ve invested in Bitcoin for our own general investment account and are also laying the groundwork for other cryptocurrency offerings and products.”

Bitcoin could prove to be a form of “digital gold” or an inflation hedge, added MassMutual’s CIO, Tim Corbett, in a blog post. The firm, he said, wants to see “thoughtful and prudent regulation” and believes “volatility will decrease as more institutions take positions in the space.”

As of now, Flourish is supporting only Bitcoin, but could add Ethereum “in the next few months,” according to Cruikshank. More “regulatory clarity” is needed before adding additional cryptocurrencies, he added.

With a growing number of educational, technological and compliance-focused resources for advisors interested in digital assets, advisors can only blame their own “laziness” for not working with digital assets, said Ric Edelman, founder of the Digital Assets Council of Financial Professionals. The DACFP has already certified over 300 advisors from around the world in its digital assets educational program. It has a waiting list of over 1,000, according to Edelman. 

“There is now no legitimate reason for advisors not to be engaging in this asset class, on behalf of their clients,” Edelman said of advisors who are still reluctant to engage with crypto. “Increasingly, advisors will be taken to task by clients—as well as regulators—for not engaging [with digital assets], because they have a fiduciary obligation to provide their clients with diversified portfolios.”

If MassMutual is able to deliver on the promises of Flourish Crypto, it will be a major development for advisors, Edelman added. The lower expenses and greater control that direct ownership offers, for example, will be appealing to some advisors. “It will find a place within the RIA community,” he predicted.

With crypto’s ever-open marketplace, there are unique challenges for advisors. One of them is billing. Edelman suggested an approach that would average cryptoassets throughout the quarter based on a daily snapshot. “I don’t know that you gain very much by looking at prices hourly or minute-by-minute,” he said. Billing on a per-second basis is an idea that’s been floated by Flourish Crypto competitor Onramp Invest, as advisors seek to capture the volatility of digital assets.

The custodian selected by Flourish Crypto raises another consideration for advisors. Paxos is not only a custodian, it also launched its own stablecoin, called Pax Dollar (USDP), which is indexed to the U.S. dollar. While stablecoins provide some advantages for those holding digital assets, advisors should be aware of custodians also issuing tokens, said Edelman, who has invested in and has accounts with crypto custodial competitor Choice, a partner to Fidelity Investment's Fidelity Digital Assets.

“You always want independence with your custodian. The ideal is that you are separating conflicts of interest and that you are working with a custodian that is entirely focused on the custodial services,” he added.

In addressing the criticism, Paxos has had a New York State Department of Financial Services trust charter for crypto since 2015 and is authorized to custody both crypto assets and U.S. dollars, according to a company spokesperson. The company has approval from NYDFS to issue USDP and noted that "stablecoin reserves are not comingled with other client cash held in Paxos custody."

Flourish Crypto selected Paxos as custodian because the firm is “a great partner” and “a leading crypto custodian,” said Cruikshank.

Custodial questions aside, MassMutual’s embrace of digital assets should be a wakeup call to any advisors still uncertain about crypto, said Edelman.

“When you have one of the largest insurance companies in America engaging very aggressively in the digital asset space it is a clear sign that this asset class has gone mainstream. It will not be very much longer before it is ubiquitous and it will become a routine part of client portfolios,” he concluded. “There really aren't any valid excuses anymore for advisors to be dismissive of this asset class, either from an investment thesis or from a practice management perspective.”

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