Love them or hate them, stablecoins are here to stay.

The GENIUS Act, signed into law earlier this month, mandates that crypto issuers back stablecoins with liquid assets, register with federal authorities and comply with anti-money-laundering laws. It represents possibly the largest step toward legitimizing crypto in the eyes of advisors, and experts say it will make more of them hop on the stablecoin train — particularly since many haven’t considered crypto for client portfolios due to their past volatility and “Wild West” status.

Advisors were also hesitant to invest in crypto because some clients see it as “internet gambling” — something the new bill could change, said Zoltan Pongracz, CFP of Third View Private Wealth. “I’m a huge crypto advocate, but I’ve been hesitant to talk with my clients about it,” Pongracz added. “This adds guardrails, so advisors will become more comfortable speaking about it.”

Stable Hand

The GENIUS Act requires stablecoin issuers to back their currencies with assets like cash or US Treasury securities on a one-to-one basis, with the goal of reassuring crypto skeptics that the kind of scandals and losses of previous coins — à la Sam Bankman-Fried — won’t happen. Drew Boyer has witnessed the uncertainties of crypto firsthand, having had family members who “lost everything” to unregulated coins; he said he first tried to “laugh away” the crypto craze but has since accepted digital currencies as a useful way to alleviate US debt concerns. “[The bill], conveniently for our government, creates a new purchaser for US Treasury bonds and bills,” he said. The new law states that:

• Stablecoins can only be issued by “permitted payment stablecoin issuers,” a status that firms can apply for as bank subsidiaries or by appealing to a federal or state regulator.
• Issuers must regularly disclose information about their stablecoin reserves, redemption policies and custodians.

Stablecoins are also a big step toward digitizing manual transactions. Soon, even things like homeownership could be handled via stablecoins, Pongracz said. “How we transact is pretty antiquated when you look at the tech that’s out there, and stablecoins are a big step in that since not everyone wants to own a super volatile asset,” he added.

AM-StabL. Since stablecoins are not considered commodities or securities and therefore not subject to the Investment Advisers Act of 1940, advisors who deal with issuers also have to be aware of the requirements for dealing with them, such as robust accounting systems, technical infrastructure, and compliance with legal orders, said Jon Glass, a partner at SolomonEdwards who specializes in money-laundering regulations. That, and making sure their knowledge is up to date. “Many mid-size to smaller advisors have a lack of understanding of what the difference is between a stablecoin and other types of digital currencies, what’s regulated under the act and what’s not regulated,” Glass said. “I think it will take investment advisors some time to catch up.”

You can’t spell “advisor” without “A” and “I.” For that matter, you can’t spell “fiduciary” without them, either.

Today, that statement might seem preposterous. But recent surveys show that over half of advisors see generative artificial intelligence as having a place in investment decision-making, and many also expect their jobs to change because of it. A prominent economist who studies AI, MIT’s Andrew Lo, also told Bloomberg earlier this month that the technology will likely be capable of running money in a fiduciary capacity within five years. That, he told the publication, would be “agent AI where we have agents that are working on our behalf and making decisions on our behalf in an automated fashion.”

Generative Generation

Just under half (48%) of 113 advisors surveyed in April by Interactive Brokers agreed with the statement “generative AI will redefine the job of financial advisors within five years.” Another 25% were neutral, with 27% disagreeing, according to the report, which was published last month. More widely, advisors have been using AI for tasks like meeting notes, and 62% of those in the survey said that AI will make them more efficient (only 8% disagreed). And when it comes to advising clients, 51% said AI has a role (40% were neutral and 9% disagreed).

The CFP Board published an ethics guide on AI for advisors earlier this year, noting that advisors “must account for AI limitations and risks, including inaccuracies or ‘hallucinations.’” The technology has a lot of potential for investment-related research, such as aggregating information or pulling in data sources that an advisor wasn’t aware of, said Sara Cortes, assistant general counsel at the CFP Board. “The main consideration for advisors using it for investment research and selection specifically is to really understand what assumptions and estimates might be going into that AI and what the data set is, how the machine learns,” she said. “The thing they really need to keep in mind … is that they’re ultimately responsible for the investment selection in the client’s best interest.”

Most investors are leery of AI, but there are demographic differences, data published in July by FINRA show:

• Only 20% of investors said they would be interested in getting financial advice from AI, while 21% weren’t sure, and 59% would not want such advice.
• Men were more receptive to that than women (25% versus 14%), as were younger investors and non-white investors.

Trust the Smart Robots, but Verify. Just as there are risks associated with AI, there are risks with not using the technology and becoming aware of its benefits and limitations. “We want advisors to feel empowered to use this as a tool,” Cortes said. “The risks are relying a little too much on the AI and not listening to that voice inside your head saying ‘there’s something a little bit off about this,’ and trusting that.”

Surf’s up … right after this client call.

Whether it’s summer vacation, spring break, or even just the weekend, everyone needs time off, and in wealth management, that can lead to conflicts since clients increasingly expect that they should be able to reach their advisor at a moment’s notice. With a little bit of planning and boundary-setting, however, advisors and clients can come to a middle ground where no one’s water-skiing lesson is interrupted to discuss market moves.

Ring, Ring

Technology helps. Whether it’s through emails, phone calls, video chats, or in-person meetings, clients have more ways to access their advisors today than ever before. And that access is key for long-term relationships:

• Nearly 90% of client reviews about advisors focus on relationship quality and emotional factors, while just 10% focus on investments and portfolio management, according to a recent study from Wealthtender, a platform that helps people find advisors.
• The report also found that one of the top priorities for clients is having advisors who are easy to reach and responsive to questions.

Real-time access to an advisor is common at family offices. “Those are the people who are like, ‘I need the answer yesterday,’” said Chad Maggard, managing director of family office services at Johnson Investment Counsel. His solution? A second-chair advisor who maintains the office while he’s away. “He’s a rising star and can respond to our clients just as well as I can,” Maggard told Advisor Upside.

That always-available mindset is showing up in smaller, traditional firms too, sometimes at a cost. “I actually left my job where this was an underlying expectation,” said Omen Quelvog, founder of Formynder Wealth Management. Now solo, he sets clear availability guidelines upfront, which he said clients appreciate. “While I love being an advisor and I love my clients, I also love my time on holidays,” he told Advisor Upside.

Gotta Do What You Gotta Do. Even with boundaries and other colleagues in place, surprises happen. “I was in Spain when a client called about a market dip and a cash-raise for unexpected expenses,” said Dennis Huergo, an advisor at Wealth Enhancement. “I stepped away from a wine-tasting to talk them through it and loop in my team stateside. That’s just part of the job sometimes.”