Bitcoin's relationship with the financial advisor industry is an underexplored narrative that deserves attention. Notably, the wealth management industry, financial advisors, and family offices control trillions of dollars of capital. Let's delve into the following estimates as of 2023:
- Family offices manage 15 trillion dollars in assets.
- The wealth management industry manages 100 trillion dollars in assets.
- The global wealth management industry manages 103 trillion dollars in assets.
These figures represent the largest collective of controlled capital globally. Drawing from my experience as a former financial advisor, it's clear that the wealth management industry has several misaligned incentives, especially in its relationship with Bitcoin as an asset.
The Flawed Benchmark of the Risk-Free Rate
The entire wealth management and investment advisory space relies on the concept of the "risk-free rate" as the universal benchmark for all investments. This rate refers to the current yield of the 10-year treasury bond. However, for those well-versed in the world of Bitcoin, the idea of a risk-free rate seems preposterous. Yet, for the vast majority of the world, this concept is accepted as fact.
Furthermore, the actual rate is manipulated and centrally controlled by unelected actors. This results in a global economy making investment decisions based on an inaccurate benchmark with no free market ties. The only true "risk-free rate" is Bitcoin's 4-year CAGR in self-custody, which stands at about 30% even in a bear market. This reflects Bitcoin's un-manipulatable monetary policy, the elimination of counterparty risk, and free market price discovery.
Misunderstanding of the CPI
Another issue with the wealth management industry is the widespread misunderstanding of the Consumer Price Index (CPI), commonly referred to as the current inflation rate. Many Bitcoin enthusiasts have argued for over a decade that this figure is manipulated. The CPI's basket of goods is often changed to fit certain narratives. Alternatives to measure inflation, such as the increase in M2 money supply or the Chapwood Index, should be considered.
If we were to ask the average person about their experience with price increases for basic items, they would likely report an inflation rate closer to 20% – 30%. The propagation of these two misconceptions throughout society could potentially lead to the most catastrophic economic disaster we've ever faced.
Fiduciary Responsibility and the Investment Advisory Industry
The investment advisory industry is built on the concept of "fiduciary responsibility." A fiduciary is obligated both legally and ethically to act in the client's best interests. However, the term is often not enforced or respected, leading to misaligned incentives in the relationship between the wealth management space and Bitcoin.
Presently, investment advisors have misaligned incentives related to Bitcoin. However, the approval of a spot Bitcoin ETF in the US could create a significant shift. Financial advisors earn fees from their assets under management. If they want to offer a client Bitcoin exposure at present, they likely need to send that client's money to a separate broker, exchange, or custodian.
The Role of a Bitcoin Spot ETF
While owning shares of a spot Bitcoin ETF is not the same as owning Bitcoin, approval of such an ETF would bring legitimate Bitcoin exposure within the entire wealth management industry's scope. This exposure aligns with the incentives of investment advisors, making it as easy to offer as equities or mutual funds.
Perhaps the most significant advantage is the potential for a Bitcoin Spot ETF to integrate into the existing models that the wealth management industry relies on. Despite their opinions on Bitcoin, even legacy finance representatives must admit that it provides unparalleled diversification in the investment world. Once approved, the Spot ETF will slowly start to work its way into the existing models that make up the world's capital allocation, turning on the entire wealth management industry to Bitcoin as a must-own asset in every client's portfolio.
Frequently Asked Questions
Can I own a gold ETF inside a Roth IRA
This option may not be available in a 401(k), but you should look into other options such as an Individual Retirement account (IRA).
A traditional IRA allows contributions from both employee and employer. You can also invest in publicly traded businesses by creating an Employee Stock Ownership Plan (ESOP).
An ESOP is a tax-saving tool because employees have a share of company stock as well as the profits that the business generates. The money invested in the ESOP is then taxed at lower rates than if it were held directly in the hands of the employee.
A Individual Retirement Annuity (IRA), is also available. With an IRA, you make regular payments to yourself throughout your lifetime and receive income during retirement. Contributions made to IRAs are not taxable.
Should You Invest in gold for Retirement?
It depends on how much you have saved and if gold was available at the time you started saving. You can invest in both options if you aren't sure which option is best for you.
Gold offers potential returns and is therefore a safe investment. Retirees will find it an attractive investment.
While many investments promise fixed returns, gold is subject to fluctuations. As a result, its value changes over time.
But this doesn't mean you shouldn't invest in gold. You should just factor the fluctuations into any overall portfolio.
Another benefit of gold is that it's a tangible asset. Gold can be stored more easily than stocks and bonds. It can be easily transported.
You can always access gold as long your place it safe. Additionally, physical gold does not require storage fees.
Investing in gold can help protect against inflation. Because gold prices tend to rise along with other commodities, it's a good way to hedge against rising costs.
It's also a good idea to have a portion your savings invested in something which isn't losing value. When the stock market drops, gold usually rises instead.
Another benefit to investing in gold? You can always sell it. You can also liquidate your gold position at any time you need cash, just like stocks. You don't have to wait for retirement.
If you do decide to invest in gold, make sure to diversify your holdings. You shouldn't try to put all of your eggs into one basket.
Don't purchase too much at once. Begin by buying a few grams. Then add more as needed.
The goal is not to become rich quick. Instead, the goal is to accumulate enough wealth that you don't have to rely on Social Security.
Gold may not be the most attractive investment, but it could be a great complement to any retirement strategy.
How much gold should you have in your portfolio?
The amount of capital required will affect the amount you make. Start small with $5k-10k. Then as you grow, you could move into an office space and rent out desks, etc. You don't need to worry about paying rent every month. It's only one monthly payment.
It is also important to decide what kind of business you want to run. In my case, I am running a website creation company, so we charge clients around $1000-2000/month depending on what they order. If you are doing this type of thing, it is important to think about how much you can expect from each client.
As freelance work requires you to be paid freelancers, your monthly salary won't be as high as mine. You might get paid only once every six months.
Before you can determine how much gold you'll need, you must decide what type of income you want.
I recommend starting with $1k-$2k of gold and growing from there.
Statistics
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
External Links
wsj.com
- Saddam Hussein's InvasionHelped Uncage a Bear In 1991 – WSJ
- Are you interested in keeping gold in your IRA at-home? It's not legal – WSJ
finance.yahoo.com
cftc.gov
law.cornell.edu
- 7 U.S. Code SS 7 – Designation of boards of trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement funds
How To
The best way online to buy gold or silver
You must first understand the workings of gold before you can purchase it. Precious metals like gold are similar to platinum. Because of its resistance to corrosion and durability, it is very rare. It's difficult to use, so most people prefer purchasing jewelry made from it rather than actual bars.
There are two types of gold coins available today – one type is legal tender, while the other is called bullion. Legal tender coins are designed for circulation in a country. They often have denominations like $1 or $5 or $10.
Bullion coin are not intended for investment. However, their value will increase with inflation.
They are not exchangeable in any currency exchange system. For example, a person who buys $100 worth or gold gets 100 grams. This gold has a $100 price. Every dollar spent on gold purchases, the buyer receives one gram of gold.
The next thing you should know when looking to buy gold is where to do it from. You have a few options to choose from if you are looking to buy gold directly through a dealer. First, your local currency shop is a good place to start. You can also go to a reputable website such as eBay. Finally, you can look into purchasing gold through private sellers online.
Private sellers are individuals that offer gold at wholesale or retail prices. Private sellers charge a 10% to 15% commission per transaction. That means you would get back less money from a private seller than from a coin shop or eBay. However, this option is often a great choice when investing in gold since it gives you more control over the item's price.
Another way to buy gold is by investing in physical gold. While physical gold is easier than paper certificates to store, you still need to make sure it is safe. It is important to keep your physical gold safe in an impenetrable box such as a vault, safety deposit box or other secure container.
To purchase gold by yourself, you can visit a bank and a pawnshop. A bank can give you a loan up to the amount you intend to invest in Gold. The pawnshop is a small business that allows customers to borrow money to buy items. Banks charge higher interest rates than those offered by pawn shops.
Another way to purchase gold is to ask another person to do it. Selling gold can be as easy as selling. A company such as GoldMoney.com can help you set up a simple bank account and get paid immediately.
—————————————————————————————————————————————————————————————–
By: Dillon Healy
Title: Revolutionizing the Financial Advisor Industry with Bitcoin
Sourced From: bitcoinmagazine.com/markets/after-an-etf-you-just-need-to-orange-pill-financial-advisors
Published Date: Thu, 19 Oct 2023 15:45:00 GMT
Leave a Reply