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The path to advising on digital assets


It's a bit beyond the yarn had at your Sunday barbeque now, isn't it?

Digital assets like bitcoin have now made enough noise to be adopted by everyone from a tweet-mad Musk, now to our very own Matt Comyn at the Commonwealth Bank.

2021 has been the largest year to date for the adoption of digital assets and it has meant at Monochrome Asset Management we've started to ask questions of how many Australians actually understand the asset class? How many will rely on professional advice? Can they even access professional advice on the matter?

Not many. Many. And almost.

Naturally, the next question is what can we do?

We knew intuitively when we launched Monochrome that there were people that really got digital assets, there were people that thought they did, and there were those that really didn't.

As we all know there is plenty of misinformation on digital assets flying around the ecosystem. And there are also people stuck in a mindset that doesn't allow them to even see the potential of the asset class. Responsible investors look at all assets with an open mind to discover where there's value for them and their clients.

We know that digital assets are becoming institutionally researched. We've spoken with institutional asset consultants, as well as large institutional investors, and some very smart people have started to discuss what the purpose might be of bitcoin in a portfolio.

But we're aware the environment for making investment recommendations is poor. There's a yawning gap where consumers are asking about digital assets, but advisers are hamstrung because it's not effectively covered by regulation. In fact, the release of ASIC's REP 705 - Response to submissions on CP 343 Crypto-assets as underlying assets for ETPs and other investment products on Friday 29 October was fantastic news for the industry, because now  we have, as it's been described, a new asset class. And now, Licensees can investigate how to accommodate digital assets for the first time.

Along the way advisers have asked 'Why are you doing this? We can't advise on the asset class.' Well, the answer is we know you can't, but those conversations are still going to take place. We want to help advisers be equipped and envisaged that, at some point, the regulator would catch up, and they are!

Our intuition was there would be demand for an education resource for advisers about digital assets. We then partnered with Financial Standard to conduct further research confirming our suspicions and showed 77% of respondents have had conversations with their clients on digital assets in the last 12 months, and 89% of advisers have said that they're not equipped to respond.

With suspicions confirmed, our firm has established a new arm of the business, Monochrome Research, to do two things.

Firstly, to provide a safe place for the advice and investor communities to explore the potential of digital assets. And additionally, anticipating that the regulations would catch up, we wanted to establish CPD content to allow advisers to have informed conversations with their clients on digital assets once they completed the content.

The current environment for an investor going out on their own to gain exposure to digital assets can be a dangerous place, particularly without proper direction.

We've always known the advice community would be a white knight in this; a filter of misinformation, and that they'd advise their clients as they do so well with all other asset classes. The first step in this process is providing advisers access to quality information they can trust as being fact-based, useful, and applicable to their practices.

Our FPA-accredited foundation content currently on the Monochrome website is aimed at providing advisers the building blocks to begin understanding this asset class. The five modules aim to answer key questions including:

- What is bitcoin and where did it come from?

- How to value bitcoin?

- What are the next steps for regulation?

- What are the ethical concerns when discussing the asset class with clients?

- And of course, how can one gain exposure?

We've already had dozens of advisers complete CPD accreditation work through Monochrome Research. And we want to encourage the advice community to continue this. We're now keeping an ear to conversations around the asset class, then creating additional content to inform them.

We believe this makes Monochrome one of a kind when considering all the players in the digital assets management space. We're committed to providing the tools to effectively deal with this asset class, not just access it.

For example, some providers may develop just an ETF but that's it. Monochrome wants to ensure our investment offering is packaged with the right content and information to empower our clients.

We want to give the advice community not just the car, but the manual and advanced driving course that goes along with it.