The wealthy want a piece of the crypto action.

According to a survey by the wealth management consultancy deVere Group, 35 percent of its 600 high-net-worth clients from the U.S., the U.K., France, Qatar, the United Arab Emirates, Spain, Germany, Switzerland, Australia, South Africa and Hong Kong have bought, or soon will buy, cryptocurrencies,

“I believe that there is no longer any doubt that cryptocurrencies in some form are the future of money,” Nigel Green, founder and CEO of deVere Group, said in the survey announcement.

deVere added it will make it easier for clients to do their buying thanks to adding bitcoin cash (BCH) and eos (EOS) to its existing Crypto app. The app has enabled users to buy, sell, store and exchange bitcoin (BTC), ethereum (ETH), litecoin (LTC) and ripple (XRP), among other currencies.

deVere’s announcement Tuesday of the app and the survey results offers additional evidence of rising interest in cryptocurrency as an investment. But that doesn’t lessen the risks.

“I expect that a broader awareness and understanding of the crypto sector will grow exponentially in the next year as the tech that underpins it further improves, as major corporations and financial institutions embrace it and as regulation is further developed,” Green said.

Research firm Nielsen defines the “mass affluent” as households with investible assets of $250,000 to $1 million, not including their personal homes. This group comprises about 11 percent of Americans.

The company focuses heavily on expat and other clients in more than 100 countries. It has more than $10 billion under management.

But some wealth management observers remain cautious in their appraisals. Cryptocurrencies are not investment-grade assets that prudent investors are likely to use to build a robust portfolio with sustained growth, Michael Guillemette, a certified financial planner and assistant professor in the Personal Financial Planning department at Texas Tech University, tells ThirtyK.

U.S. regulators have deliberately not approved fund structures that replicate stocks, bonds and other established assets, he notes, lest the structures imply a market stability that does not exist. “Consumers would have the false impression that it is somehow safer than it is,” he says. Cryptocurrencies counter many, if not most, financial planning best practices in that they are unregulated, volatile and illiquid, he adds.
Speculative Investments

deVere’s rationale for the expanded functionality of its app pivots on customer demand, which is moving crypto further into the mainstream, says founder and CEO Green.

In the U.S., though, Securities and Exchange Commission (SEC) guidelines bar financial firms from selling speculative investments to investors who have lower net worth and thus more to lose, proportionally, if they get carried away.

Research firm Nielsen defines the “mass affluent” as households with investible assets of $250,000 to $1 million, not including their personal homes. This group comprises about 11 percent of Americans.

The SEC defines “accredited investors” as those who are sufficiently sophisticated to understand the risks inherent with complex investing strategies, vehicles and assets. As well, accredited investors must either make enough or own enough to be able to afford to lose money should their judgment fail them. The SEC’s threshold is annual income of $200,000 in each of the past two years ($300,000 for a household) or a net worth of at least $1 million. Accredited investors comprise about 9.86% of American households but hold about 76% of American wealth.

Defining Diversification

Guillemette says some individual investors might convince themselves that by buying cryptocurrencies they are diversifying and distributing risk. But the untested unstructured nature of cryptocurrencies means it’s difficult to vet them and even more difficult to see how they will offset other risks in a portfolio, which is the whole point of diversification, he adds.

One way to get in on the action is to invest in established companies that are building crypto-related lines of business that are managed by seasoned professionals. Investors who want to pursue genuine diversification should stick with real estate investment trusts, commodities, and, if they are accredited investors, managed futures that include traditional currencies and commodities, advises Guillemete. “The technology is interesting,” he says, “But we don’t know which cryptocurrencies will survive even a year.” 
Joanne Cleaver
Joanne Cleaver
Joanne Cleaver is a Chicago-based freelance, business and lifestyles journalist based. Her work has appeared in a number of national and regional publications. Earlier in her career, she was the deputy business editor at the Milwaukee Journal Sentinel.

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