The world of cryptocurrency, NFTs, blockchain, and Web3 can be a daunting one, especially for the uninitiated.
Cryptocurrencies sit at the crossroads between finance and technology and it's important to understand both to do well if you want to invest in it.
For some people, one way to get around this complexity is by hiring a financial advisor, just as they would with traditional assets and investments.
But can financial advisors help with cryptocurrencies or do you need some kind of modern financial advisor specializing in crypto?
Here are the answers to your questions on cryptocurrencies, financial advisors, and more.
What Does a Financial Advisor Do?
Before you go out and hire a financial advisor, it's important you know what they do and what they can't and shouldn't do.
Put simply, a financial advisor's job is to help you put together strategies for investment as well as offer advice on some of your other financial decisions.
This can include things like savings, planning for retirement, mortgages, insurance, taxes, etc. They'll also look to find investment opportunities for you by conducting market analysis.
Before you start working with a financial advisor, you'll likely sit down and discuss what your financial goals are before the financial advisor will let you know what services and advice they'll offer.
In some cases, financial advisors will recommend investments to you whereas others will be tasked with making the investments on your behalf.
Do Financial Advisors Recommend Crypto?
Cryptocurrencies are famously very volatile and it's very common for financial advisors to avoid recommending crypto.
Cryptocurrency as an investment is generally the opposite of the kind of investments that financial advisors are trained and qualified to recommend: safe investments with a track record.
Since a financial advisor's job is to minimize risk when investing, it's very unlikely that your typical financial advisor would recommend it. Crypto is too much like gambling to be suggested as a sound financial investment, especially for risk-averse investors.
This doesn't mean that there aren't any financial advisors who can help you, but your average financial advisor will likely recommend that you stay clear of cryptocurrencies and similar blockchain-based investments.
However, if you've made your mind up that you would like to invest in cryptocurrency and want someone to help you when you do, you do have some options.
Are There Other Ways to Invest in Crypto?
While cryptocurrency mightn't be something that your typical financial advisor would recommend, there are ways to invest in cryptocurrency without buying any cryptocurrency yourself.
For example, you could always invest in the more traditional ways in companies, futures, hedge funds, and crypto-mining EFTs as a way to benefit financially from the growth in these areas without actually having any crypto yourself.
These are investments that some financial advisors would probably feel more comfortable getting behind.
This could also be a safer way to start investing while taking on fewer risks than investing in a volatile asset such as crypto.
Who Is The Best Advisor for Cryptocurrency?
What you really want from an advisor is somebody who not only believes in crypto as an asset that's worth investing in but somebody who's specialized in crypto and is well-versed in how it all works.
Fortunately, there are a couple of qualifications you can look out for when hiring your crypto financial advisor (or simply crypto advisor). The two main ones are the CBDA and the CDAA. Let's see what they are.
Certificate in Blockchain and Digital Assets (CBDA)
The Certificate in Blockchain and Digital Assets is a qualification that can be obtained through the Digital Assets Council of Financial Professionals (DACFP), an organization that was set up in 2018.
The CBDA is the first program of its kind and is worth up to 18 CE credits. This is an online self-paced program and it shouldn't be the only qualification your crypto advisor should have, but it's certainly a bonus if they do have it as it means they're familiar with blockchain technology, Bitcoin, Ethereum, central bank digital currencies, decentralized finance (DeFi), Non-Fungile Tokens (NFTs), Web3, and the Metaverse.
They'll also have the option to study crypto regulation, taxation, and compliance, all things that you'll want from a crypto advisor.
Certified Digital Asset Advisor (CDAA)
The Certified Digital Asset Advisor (CDAA) designation is another qualification for financial professionals looking to learn more about digital assets and crypto. A CDAA will have trained in cryptocurrency, blockchain technology, and decentralized finance in particular.
The designation has existed since 2020 and is offered through a handful of educational establishments and crypto companies.
Who Can Teach You About Crypto?
Crypto is a relatively new thing and even the experts in the field are learning about it all the time. This novelty is what leads to crypto being so volatile and the whole crypto space is a bit like the Wild West at the moment, especially with so little regulation surrounding it.
This means that not only is it difficult to predict where crypto will go in the future, but it also means that the space is very accessible to bad actors.
The prospect of huge financial gains is also very appealing. Cryptocurrencies, NFTs, and other blockchain-based assets draw in people with a lot of experience in investing as well as people with little or no experience.
This makes it very difficult to know who to listen to and with a lot of the discussions surrounding crypto taking place online, it can be hard to find detailed and nuanced discussions or advice; that's not what the internet is famous for!
Some believe blockchain technology is going to completely change the world while others still doubt it. This is why it's incredibly important that you choose carefully where you get your advice from. Specialism is important so make sure that financial advisors are well-versed in crypto and make sure that the people offering you advice on crypto understand finance.
Avoid Amateurs
It can be difficult to ignore advice from the people closest to us, but you also have to remember that the best-intentioned advice can still be wrong.
When a friend or family member offers you advice about investing in crypto, carefully consider much they really know. Even if they're offering you advice on crypto investment to help you do well, that doesn't guarantee their advice is any good.
We regularly tell kids not to talk to strangers, but remember that unverified sources are no good for any kind of financial advice. A tip is only good if you know who it's coming from and that the source is a good one. With every degree of separation between a verifiable source and who you hear it from, the advice becomes worthless.
Seek Out Experts
When you go to get your car fixed, you look to a mechanic. Need a haircut? A hairdresser is your best bet.
With financial investments and cryptocurrency, seek out advice from experts; people with a proven track record of being correct, knowing what they're talking about, and a wide-reaching consensus that they're the right people to listen to.
Whether you call them influencers, thought leaders, experts, or whatever, always make sure that you pick the advice that comes from the right people, rather than just the advice that sounds the best.
After all, it's very easy to listen to advice that promises incredible gains with very little work, but sound investing is rarely that. If something sounds too good to be true, then it very likely is.
Do Your Research
The web is an incredible resource for learning about everything from traditional financial assets to blockchain technology, crypto, NFTs, DeFi, and anything else you want to learn.
Again, the best research is done using verifiable sources and a variety of different perspectives. You must read from sources that are both proponents of cryptocurrencies as well as those that are skeptical so that you can form a well-rounded opinion on them and their investment potential.
Always think carefully about what people are saying, who's saying it, why they're saying it, and if they may have any hidden motivations or reasons to say what they're saying. The world of crypto can be pretty wild so be careful out there!
There are a few cryptocurrencies predicted to do well in 2023, but always do thorough research before investing and make sure that you have an exit strategy.
Where to Find the Right Financial Advisor for Investing in Crypto
A financial advisor specialized in crypto is your best bet for getting good information. After all, they have a vested interest in how your crypto investments perform as their job relies on it.
Much like choosing which crypto to invest in, finding the right financial advisor will take a lot of work.
Carefully research exactly what you're looking for, compare various advisors, and look to reviews and a general consensus on the service they offer.
On Superprof, for example, you can find cryptocurrency classes, financial advisors, and crypto experts to help you navigate these digital assets.
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