Betterment Tells Clients: Shift Crypto Holdings to ETFs
The New York-based robo platform is closing direct crypto in favor of lower-cost ETFs.
Robo-advisor Betterment has told investors using its direct cryptocurrency investing service that they have a month to convert those investments into ETFs.
The decision to shutter the two-year-old crypto investing platform, which New York-based Betterment announced to platform users via email on Oct. 16, is seen as a sign of things to come that will likely benefit the crypto ETF space.
“Now that the ETFs are here, Betterment can jettison all that and replace the allocation with a far superior offering,” said Ric Edelman, founder of the Digital Assets Council of Financial Professionals and a member of the etf.com advisory board.
Citing the contrast between Bitcoin ETFs with fees as low as 12 basis points and the 1% investors are charged by the Betterment platform that was linked to Gemini, Edelman said, “It’s a win-win.”
“Clients save money, gain improved convenience and better abilities for portfolio rebalancing, and the company gets to eliminate a cumbersome and expensive internal operations function,” he said. “And those crypto bros who want to keep their positions can do so by working directly with Gemini.”
Betterment Nods Toward Crypto ETFs
Betterment declined to comment for this story, but a spokesperson did confirm the accuracy of a report by RiaBiz.com.
The story didn't say that Betterment had recommended a particular crypto fund for clients.
Tyrone Ross, chief executive of 401 Financial and Turnqey Labs, said Betterment’s decision to offer access to crypto currency models was innovative and important two years ago, but since the Securities and Exchange Commission this year approved Bitcoin and Ethereum ETFs, that picture has changed.
“I’m a fan of holding the underlying directly, but for most investors who are not crypto savvy, the best choice is investing through an ETF,” said Ross, who added that he would never advise a sophisticated crypto investor to use a crypto ETF.
“I abhor everything about the crypto ETFs,” he said. “There’s the fees, the fact there is no direct ownership, it doesn’t solve a lot of the issue advisors still have in the crypto space, and it’s just a money grab by ETF issuers.”
That said, Ross expects to see more platforms go the Betterment route of offering access to crypto ETF model portfolios, which he sees as a boon for those ETFs.
“I think you’ll see a lot of platforms that were using companies like Gemini start to move over to ETFs,” he said.
Edelman sees a similar evolution.
“Betterment is not just helping its clients and itself, it’s showing all advisory firms how easy this is to do,” he added. “There’s truly no reason anymore for RIAs not to offer bitcoin and Ethereum to their clients.”
Meanwhile, Chris King, founder of the crypto separate account platform Eaglebrook, sees a future where crypto ETFs and direct ownership in crypto become strategies that advisors turn to when customizing client portfolios.
"As crypto continues to evolve as standard portfolio allocations, we expect advisors to utilize crypto ETFs and crypto SMAs based on which best suits their clients' particular needs," he said.
