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Advisers told: Don't ignore crypto

Financial advisers should expand their repertoire to be able to offer advice on cryptocurrencies, one expert says.

Thursday, January 25th 2018, 6:00AM 4 Comments

by Susan Edmunds

The electronic currencies have been in the news over recent months due to the headline-grabbing rise in value of Bitcoin.

It is just one of the many currencies in circulation.

At the end of 2016, a Bitcoin was worth about US$700. Now, it’s just under US$11,000 after a spike up to more than US$19,000.

Many people who are new to investing in any type of asset have been attracted by the price movements in Bitcoin and other cryptocurrencies, and piled into the market looking for quick gains.

University of Auckland associate professor Alex Sims, who is completing a project on the regulation of cryptocurrencies, said some people would be investing money they shouldn’t. Advisers had a role to play to help.

"Other people will not invest when it may be a good thing for them to do... it would diversify their assets, although it should be just a small percentage of their investments. Some wealthy people and organisations are investing in cryptocurrencies and it is hard to justify why the general public should be effectively excluded from such investments. Indeed, not providing advice may back fire."

She said if financial advisers could not offer advice on cryptocurrencies people might put in more money than was prudent  - "They hear all the get rich stories, and/or they may keep those cryptocurrencies in risky places and even lose them."

Simon Hassan, of Hassan and Associates, said he fielded “quite a few” queries in the month before the Christmas break. “None that I know of bought.”

But other advisers said there was little demand yet.

Nigel Tate, of Nigel Tate Financial Planning, said cryptocurrencies were viewed with scepticism by his clients.

“Most of my clients are not at all interested in this and only a few have asked questions directly, I have discussed the structure and they view these as a form of pyramid and see little value for their portfolios given the downside risk.”

Sonnie Bailey, of Fairhaven Wealth, said he had not had a single question about cryptocurrencies from clients. “Which I’m a little surprised about but I think it has something to do with the types of clients I seem to attract.”

Cryptocurrency exchange is not an activity that requires a license but the FMA says those arranging cryptocurrency transactions are operating a value transfer services and have obligations as a broker.

Tags: bitcoin cryptocurrency financial advisers FMA investment Nigel Tate

« Options emerge for licence-averse advisersNew Zealand values most stretched in world »

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Comments from our readers

On 25 January 2018 at 11:23 am Paul Brownsey said:
Good story and pleased to see those quoted AFA's with a sensibly skeptical outlook to a commodity with no intrinsic value. Of course we all wish we had bought a $1000 worth of BTC when it was trading at $5, but buying something purely based on the "greater fool theory" is not an investment and I am yet to see someone credibly explain why bitcoin and blockchain tech has inherent value.

This article is a really good reality check on blockchain and the fact that no-one has actually found a compelling use for the tech:

https://hackernoon.com/ten-years-in-nobody-has-come-up-with-a-use-case-for-blockchain-ee98c180100

And how safe is your bitcoin?
http://time.com/money/5056652/the-70-million-bitcoin-hack-was-the-4th-largest-breach-in-cryptocurrency-history/

Here is what the Winklevoss twins do to keep their bitcoin safe - kind of defeats the purpose of an electronic currency.....

https://www.businessinsider.com.au/winklevoss-twins-cut-up-key-to-protect-their-bitcoin-fortune-2017-12?r=US&IR=T

There are plenty of stories of people making money riding the Bitcoin rally/bubble and thats fine, but "investors" should keep bitcoin where it currently belongs - next to your lotto ticket or with your TAB account.
On 1 February 2018 at 1:10 pm AFA Muggins said:
The reality is that Cryptocurrencies are not much different than our fiat money system with nothing actually backing it, other than everyone holding hands and hoping for the best – in both cases.

With Goldmann Sachs setting up a trading desk for cryptos, obviously they smell profit to be siphoned.

It will be harder for New Zealand ‘investors’ to deposit and withdraw funds, with New Zealand’s only deposit/withdrawal AND exchange facility (Crytopia), having its banking operation being shut down by one of the major banks this coming week.

One has to question what is going on there.
On 2 February 2018 at 10:02 am Tash said:
There is a massive difference between Cryto currencies and real money. Real money is legal tender and you can pay your tax with it!
On 3 February 2018 at 10:06 am AFA Muggins said:
@Tash,
You may want to review my comment again, with the comparison I drew.

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