Digital asset advisory for RIAs involves providing cryptocurrency and blockchain investment guidance to clients within the regulatory framework that governs registered investment advisors.
RIAs looking to offer digital asset services must address compliance requirements around custody, suitability, and disclosure while building or partnering for the specialized expertise that crypto demands.
The opportunity is significant as client demand grows, but so is the complexity. RIAs can build internal capabilities, partner with specialized firms, or use hybrid approaches depending on their resources and client needs.
The Growing Role of Digital Assets in RIA Practices
Client interest in cryptocurrency has moved from fringe curiosity to mainstream demand. RIAs who ignored this space five years ago are now fielding regular questions about Bitcoin, Ethereum, and digital asset allocation.
The numbers reflect this shift. Surveys consistently show that a significant percentage of investors, particularly younger ones, hold or want to hold cryptocurrency. These are not just retail speculators. High net worth individuals, business owners, and sophisticated investors are asking their advisors about digital assets as part of comprehensive wealth management conversations.
For RIAs, this creates both opportunity and pressure.
The opportunity is straightforward. Clients who want digital asset guidance will find it somewhere. If their current advisor cannot help, they may work with someone else for crypto specifically, or they may move their entire relationship to an advisor who can address their complete financial picture.
The pressure comes from the complexity involved. Digital assets are genuinely different from traditional investments. The custody requirements, tax treatment, regulatory considerations, and market dynamics all have unique characteristics. An RIA cannot simply treat Bitcoin like another equity position and expect good outcomes.
Some RIAs have responded by explicitly declining to advise on crypto, directing clients elsewhere for that piece of their portfolio. This is a legitimate choice, but it risks fragmenting the client relationship and losing assets under management as crypto allocations grow.
Other RIAs have built or acquired digital asset capabilities, positioning themselves to serve clients comprehensively. This requires investment in knowledge, infrastructure, and compliance, but it preserves the holistic advisory relationship that most RIAs value.
Compliance Considerations for RIAs Offering Crypto
Regulatory compliance is the foundation that everything else builds on. RIAs operate under the Investment Advisers Act of 1940 and associated SEC or state regulations. Adding digital assets to an advisory practice does not change these obligations. If anything, it adds complexity.
Custody rules are the first consideration. The SEC requires that client assets be held by qualified custodians. For traditional securities, this is straightforward. Broker-dealers and banks are clearly qualified custodians with established infrastructure.
For digital assets, the qualified custodian landscape is less settled. Some crypto custodians have structured themselves to meet qualified custodian standards. Others have not. An RIA recommending that clients hold crypto needs to understand where those assets will be custodied and whether the arrangement satisfies regulatory requirements.
Suitability and fiduciary duty apply to digital asset recommendations just as they apply to any other investment advice. Recommending crypto to a client for whom it is not suitable, or failing to disclose material risks, creates the same liability exposure as unsuitable recommendations in any other asset class. The volatile nature of cryptocurrency makes suitability analysis particularly important.
Disclosure obligations require that RIAs inform clients about material facts relevant to the advisory relationship. If you are recommending digital assets, your Form ADV should address this. What services do you offer? What are the risks? How are assets custodied? What conflicts of interest exist? Silence on these topics when crypto is part of your practice creates compliance risk.
Advertising and marketing rules apply to how you communicate digital asset capabilities. Claims about expertise, track record, or expected returns need to comply with the same standards that govern all RIA marketing.
Books and records requirements mean you need to document digital asset advice the same way you document other advice. What was recommended? Why? What did the client understand about risks? Proper documentation protects both you and your clients.
For RIAs uncertain about compliance requirements, consulting with a securities attorney who understands both RIA regulations and digital assets is advisable before launching crypto advisory services.
Partnership Models for RIA Digital Asset Access
Not every RIA needs to build digital asset capabilities from scratch. Partnership models allow RIAs to offer crypto services by working with specialized firms.
Sub-advisory arrangements involve partnering with a firm that specializes in digital asset management. The RIA maintains the client relationship and overall financial planning responsibility while the sub-advisor handles crypto-specific investment decisions. This model works well for RIAs who want to offer digital assets without developing deep internal expertise.
The sub-advisor takes discretionary authority over the digital asset portion of the portfolio, makes investment decisions, and typically handles custody through their established relationships. The RIA focuses on integrating crypto allocation into the broader financial plan, coordinating tax strategy, and maintaining the holistic client relationship.
Referral arrangements are simpler but create more separation. The RIA refers clients to a digital asset specialist for their crypto needs while continuing to advise on traditional assets. This keeps things cleanly separated but fragments the client relationship and may result in less coordinated advice.
Turnkey asset management programs, sometimes called TAMPs, have emerged in the digital asset space. These platforms provide RIAs with model portfolios, execution capabilities, custody relationships, and compliance support. The RIA uses the platform’s infrastructure while maintaining their client relationships.
Platform solutions from custodians allow some traditional RIA custodians to offer digital asset capabilities integrated with their existing platform. This can simplify operations by keeping traditional and digital assets in a unified view, though the depth of crypto capabilities varies significantly across platforms.
Firms like Digital Wealth Partners work with RIAs through partnership models that allow advisors to offer digital asset services to their clients while relying on specialized expertise for the crypto-specific elements.
The right model depends on your client demand, internal capabilities, and strategic vision. Some RIAs start with referral arrangements and evolve toward deeper integration as their comfort and client needs grow.
Custody Solutions for RIA Clients
Custody is perhaps the most operationally complex aspect of offering digital asset services to RIA clients.
Traditional RIA custody is straightforward. You work with an established custodian like Schwab, Fidelity, or Pershing. They hold client assets, provide reporting, handle trade execution, and integrate with your portfolio management and reporting systems.
Digital asset custody requires additional considerations. Not all traditional custodians offer crypto. Those that do may have limited asset support or separate workflows from traditional holdings. Specialized crypto custodians exist but may not integrate cleanly with your existing technology stack.
Qualified custodian status matters for compliance. If you are advising clients on digital assets, those assets should generally be held by a qualified custodian to satisfy custody rule requirements. Understanding which custodians meet this standard and which do not is essential.
Our guide on how to evaluate digital asset custody providers covers the security, regulatory, and operational factors to consider when selecting a custodian. For RIAs specifically, you should also evaluate integration capabilities, reporting functionality, and how the custodian handles the multi-advisor scenarios common in RIA practices.
Custody for specific assets varies. Bitcoin and Ethereum custody is widely available. Other assets like XRP may have more limited support depending on the custodian. If your clients hold or want to hold specific assets, verify custody availability before committing to a custodial relationship.
Some RIAs use multiple custody relationships, perhaps one for traditional assets and another for digital assets. This works but creates operational complexity around consolidated reporting, fee calculations, and client communication. Evaluate whether the benefits of specialized custody outweigh the complexity costs.
The distinction between institutional custody and retail solutions matters particularly for RIAs. Retail solutions that might work for individual investors may not meet the compliance, reporting, and operational standards that RIA practices require.
Due Diligence Requirements
RIAs have due diligence obligations when recommending any investment, and digital assets are no exception.
Product due diligence for cryptocurrencies involves understanding what you are recommending. What is the asset? How does the underlying technology work? What is the use case? What are the risks specific to this asset? An RIA recommending Bitcoin should understand it at a deeper level than a casual investor.
This does not mean every RIA needs to become a blockchain engineer. But you should understand enough to explain the material characteristics and risks to clients in plain language. If you cannot explain why an asset has value and what could cause it to lose value, you probably should not be recommending it.
Manager or platform due diligence applies when using third parties for digital asset services. If you are using a sub-advisor, what is their track record? What is their investment process? What are their credentials and resources? If you are using a custody platform, what is their security infrastructure? What is their financial stability? These are the same questions you would ask about any third-party service provider.
Ongoing monitoring is required, not just initial due diligence. Digital asset markets evolve rapidly. Regulatory status changes. New risks emerge. An asset or service provider that passed due diligence two years ago may not meet your standards today. Regular review processes should be part of your compliance program.
Documenting your due diligence creates a record that demonstrates you fulfilled your obligations. What did you evaluate? What sources did you rely on? What conclusions did you reach? If a recommendation is later questioned, having contemporaneous documentation of your due diligence process is valuable.
For many RIAs, the due diligence burden is a reason to partner rather than build. Specialized firms that focus exclusively on digital assets can dedicate resources to due diligence that a generalist RIA cannot match. Leveraging that expertise through partnership may be more practical than replicating it internally.
Client Education and Communication
Digital assets require more client education than most traditional investments. The technology is unfamiliar. The risks are different. The media coverage creates both excitement and confusion.
Setting expectations upfront prevents problems later. Clients should understand that cryptocurrency is volatile, that past returns do not predict future results, and that material losses are possible. This is not about discouraging investment. It is about ensuring clients make informed decisions with realistic expectations.
Explaining custody is often necessary. Traditional investors rarely think about how their stocks are held. Crypto investors need to understand that custody matters, why it matters, and how their specific custody arrangement works. For clients choosing between custodial options, education about the tradeoffs between self-custody and institutional custody helps them make informed decisions.
Tax implications deserve explicit attention. Many clients do not realize that every crypto transaction can be a taxable event. Setting expectations about tax reporting complexity and potential tax liability avoids surprised clients at tax time. For high net worth clients, proactive tax planning should be part of the advisory relationship.
Ongoing communication about digital asset holdings should be part of regular client interactions. Market conditions change. Allocations drift. New opportunities and risks emerge. Keeping clients informed maintains trust and ensures they remain comfortable with their positions.
Documentation of client education protects both parties. Records showing what was explained, what risks were disclosed, and what the client acknowledged can be important if questions arise later about whether the client was properly informed.
Some RIAs develop standardized educational materials for digital asset clients. These might include an overview of how cryptocurrency works, an explanation of custody options, a summary of tax considerations, and a description of specific risks. Having consistent materials ensures all clients receive baseline education and creates documentation that education occurred.
Building a Digital Asset Practice
For RIAs who want to develop significant digital asset capabilities rather than simply accommodating occasional client interest, a more strategic approach is warranted.
Assess your starting point honestly. What do you and your team actually know about digital assets? What infrastructure do you have? What is genuine client demand versus perceived opportunity? What are your compliance gaps? An honest assessment prevents over-investment in areas with limited demand and under-investment in genuine needs.
Develop expertise deliberately. This might mean dedicated study time, industry conferences, professional certifications, or hiring someone with existing expertise. The depth you need depends on how central digital assets will be to your practice. An RIA making crypto a core offering needs more expertise than one simply accommodating existing client holdings.
Build relationships with service providers who can support your practice. Custodians, technology platforms, compliance consultants, and tax specialists all play roles in a functioning digital asset practice. Identifying the right partners and establishing relationships takes time.
Update your compliance infrastructure. Form ADV disclosures, compliance manuals, supervision procedures, and documentation templates all need to address digital assets if you are offering crypto services. This is not optional and should happen before you begin advising clients on digital assets.
Start with a manageable scope. You do not need to support every cryptocurrency or offer every possible service on day one. Beginning with Bitcoin and Ethereum custody and basic allocation advice is more realistic than trying to launch comprehensive crypto services all at once. Expand scope as your capabilities and client demand develop.
Measure and refine over time. Track which services clients actually use, what questions they ask, what problems arise, and what competitors are doing. Use this information to improve your offering continuously.
Consider whether partnership makes more sense than building. For some RIAs, the investment required to build meaningful digital asset capabilities exceeds the likely return. Partnering with specialized firms like Digital Wealth Partners allows RIAs to offer comprehensive digital asset services without building everything internally.
The right approach depends on your specific practice, client base, and strategic vision. There is no single correct answer, but there are better and worse fits for different situations.
Whatever approach you choose, the key is moving forward deliberately rather than reactively. Client interest in digital assets is not going away. RIAs who develop thoughtful capabilities now will be better positioned than those who continue to defer the question.
