Ric Edelman is the co-founder of Edelman Financial Engines, the host of Ric Edelman Radio, and co-founder of the Digital Assets Council of Financial Professionals. He sat down with Hannah Moore, CFP®, to discuss what advisors need to know about the game-changing impacts of bitcoin and blockchain technology.

The basics: bitcoin, blockchain, and digital assets

As a bitcoin enthusiast since the early days of the technology, Ric believes it’s urgent for the advising profession to get up to speed on this powerful asset class.

In his opinion, bitcoin and blockchain technology are probably the most impactful innovations for commerce since the invention of the internet itself. However, Ric believes the vast majority of financial advisors are unaware of this. Without understanding this complex market, advisors can’t provide clients with effective advice on where these assets might best serve their needs. 

To help bridge this knowledge gap, Ric partnered with other experts to form the Digital Asset Council. Together, they advise financial professionals, educational institutions, and regulatory agencies on how to understand and work with blockchain-based assets.

To help us join the conversation, he explains key terms:


Invented in 2009 by Satoshi Nakamoto, bitcoin is a digital currency that does not depend on a government or central bank. It was intended to replace government-issued currencies and is maintained on a peer-to-peer network. The brilliance of bitcoin is the technology that allows it to be traded and tracked with iron-clad authentication, preventing any kind of forgery or tampering.

Blockchain technology: 

The technology that tracks the ownership of digital assets is called blockchain. There are many types of currencies on the blockchain system, including bitcoin, etherium, litecoin, filecoin, and many others. New currencies and digital assets are being developed every day.

Digital currency vs. digital assets: 

Although some consider bitcoin a currency, Ric disagrees. He says, “Bitcoin has a value ascribed to it by the marketplace, like stocks, bonds, real estate, baseball cards and rare stamps. That makes it a very intriguing investment thesis, but renders it worthless as a currency. So Bitcoin is not considered a digital currency, but a digital asset.” 

However, Ric explains that there are several “true” digital currencies called stable coins, which are tied to government currencies. These are digital assets that are designed to replicate the value of existing currencies, whether it's the dollar, the yen, the euro, etc.

Distributed ledger technology:

Another term for blockchain is distributed ledger technology. Ric describes it as basically a public spreadsheet detailing each successive owner of a token (i.e. serial number) that represents a unique digital asset.

He says, “There's only one rule: when you put data on the spreadsheet, you enter data into a cell. But once the data is there, it's permanent. Everyone can see it, but no one can change it. Nobody can copy, destroy, delete, amend, or interfere with a token.” New owners can be added, but the ownership history can never be removed. That’s what makes the blockchain network so secure.

Why finance will never be the same

Aside from creating a lot of buzz (and some disappointment) for early adopting investors, bitcoin and other digital assets haven’t made a huge impact on the way we handle money. Yet.

But Ric believes it’s just a matter of time. At the moment, about a third of American small- and medium-sized businesses now accept Bitcoin as payment. The real earth-shaking effects will come when digital currencies get adopted for major purchases.

“To give you a practical application of how this would work,” Ric says, “let's say that you buy a house. It's a physical asset. But your ownership of that asset is represented by a piece of paper called a deed.”

In blockchain terms, there’s one cell in the spreadsheet that represents you, and there's the deed, which is assigned a token number that is put into the cell next to you. Now you're connected, you're linked in this chain, and it shows that you own the house represented by your deed token. 

When you decide to sell your house, a buyer purchases the deed. “They now get entered in the next cell, and you are all linked in this chain. The blockchain allows for the transfer of a deed from a seller to a buyer within the network. And because the data is permanent, it's immutable. It's authenticated, so that we know the transaction is legitimate.”

Consider this: not only is the blockchain transfer of assets totally secure, but it’s also instant. That has huge repercussions.

Ric says, “Thanks to authenticating your deed, you don't need to buy title insurance, and you don't have to spend three months trying to get your transaction to settle, because you settled it instantaneously on the blockchain. And you can save all that money that you would have paid to a title settlement company.”

As you can imagine, this is going to be massively disruptive. It's estimated about 20 million American jobs are being threatened by blockchain technology. And, according to his own research, services that manage trust exchanges between buyers and sellers will become obsolete.

What financial advisors need to know

You will need to understand blockchain technology well enough to explain it to your client and to advise them on whether digital assets belong in their financial plan. Ric recommends that you prepare for questions like these:

What is blockchain? 

What is bitcoin? 

How does it work?

What are the investment opportunities?

How do I construct a portfolio featuring these investments?

How do I buy them?

Where do I buy them?

What are the vendors, custodians, and exchanges?

How much of the portfolio should I put into it?

What's the impact on the risk/reward profile of the rest of the portfolio?

How does this affect the Sortino ratio, and the Sharpe ratio?

Why does it affect drawdown?

How do I rebalance with these assets?

How do you collect your fees?

How do you report?

How do you manage the tax issues?

How do you manage it from a regulatory and compliance perspective?

How to get certified in blockchain and digital assets

If you’d like to be prepared for your client’s questions about digital assets and are looking for a certification, The Digital Asset Council has created a certificate program with continuing education credits for the CFP® and several other financial advising designations. They’re offering a 50% discount for FPA members.

The first half of course explains use cases and implications of blockchain tech and it’s many connected products, including non-fungible tokens (NFTs). The second part covers practice management including investment strategy, portfolio construction, taxes, and regulatory responsibilities.

Whatever you do, don’t put your head in the sand. Challenge yourself to get up to speed on digital assets and stay on top of professional regulations as they form. You’ll stand out with your expertise as clients become increasingly curious about this new frontier of finance.

What You’ll Learn:

  • The difference between bitcoin, block chain, digital currency, and digital assets
  • Why blockchain tech is going to change everything in finance
  • What you need to know to stay relevant and help your clients
  • How you can get certified in digital asset management

In this episode of YAFPNW, Ric Edelman and Hannah Moore, CFP®, discuss:

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