â€œCrypto in and of itself represents access. It represents freedom. It represents inclusion and digital social justice.â€
â€œOn Purposeâ€ host Tyrone Ross returns from a Thanksgiving holiday to provide an introduction to the macro landscape in the Registered Advisor (RA) industry. As the emerging crypto industry continues to increase its relevance to clients, advisers need to be up to date on topics such as decentralized autonomous organizations (DAO), the metaverse, Web 3, decentralized finance (DeFi) and non-fungible tokens (NFT).
One emerging technology in particular has the potential to transform the entire RA industry. DAOs present a new opportunity for groups to come together and exercise their combined power for the global good. Ross emphasizes that advisers who start learning now will be ready to embrace â€œan industry that is going to rush in new ideas, creativity, wealth generation, financial inclusion, diversity and inclusion.â€
This episode has been produced, announced and edited by Michele Musso with additional production support from Eleanor Pahl. Our theme song is Walk with Swag.
This is what Iâ€™ve been saying, the three Ls: listen, learn and lead. The advisors to do that are the advisors that are going to win. The value of bespoke advice has never been higher.
Alright, welcome back to the latest episode of the â€œOn Purposeâ€ podcast. I am your host Tyrone Ross, fresh off of the Thanksgiving break, I headed home where it was very cold in New Jersey. Hope everyone had a restful, recuperative holiday around family and friends. Thank God Iâ€™m back in San Diego where it is a balmy 70 degrees today. I also want to wish a happy Hanukkah, second day of Hanukkah today for all those that celebrate Hanukkah, and also those that are digging in and getting ready for the holiday season as well. So, so much to cover, so much news happening. I want to use this episode to talk macro landscape in the RA space. I want to pair that with a lot of the things that are all the rage now: DAOs, Decentralized Autonomous Organizations. For those that donâ€™t know what they are, shout to my CDAA family, PlannerDAO folks Steve Larsen, Adam Blumberg, great folks, if you donâ€™t already sign up, follow them and join in the community of what theyâ€™re doing, I think is really special. Iâ€™ve been able to deal with and know Adam for a few years now. Itâ€™s funny, we have a piece that we always talk about called the RIA of the future, that we collabed on, well collabed on a conversation, he actually is smart. So, he sat down and wrote it out. And again, as some of you may know, the CDAA cert, we sponsored a cohort at Onramp for advisors to get educated on all things crypto assets. Adam is, and has been leading the space there as a whole team there, what theyâ€™re doing with the cert now aligns well with what I want to talk about with DAOs and how this is starting to permeate all industries. And I think this is the premier case in the RA space.
So letâ€™s just back up a bit. You know, whether itâ€™s DAOs, or the metaverse, or Web 3, NFTs, DeFi, theyâ€™re all these phrases that advisors are being pelted with at once. And I want to make it clear that Iâ€™ve been saying this, it is just moving so fast, those of us to do this 24/7, 365, that will never leave the punchbowl, have a hard time keeping up with all the projects and all of the new funds that have started to invest in crypto and all of the new DAOs that have started. Also, shout to humanDAO. humanDAO is, again, another decentralized autonomous organization that is looking to help the underserved. Near and dear to my heart, I will more than likely become an advisor to the project still vetting it beloved, what they are doing, and how they are approaching this in light of again. ConstitutionDAO that a lot of folks that I know heard about and seen where there was money raised, I believe it got up to $49 million to purchase a copy of the Constitution. And that money was raised in I believe two weeks, right, with so many different people, small accounts, large accounts, all Ethereum. Thatâ€™s impressive, right?
But, when you look at this, one of the things that came out of ConstitutionDAO was like, â€œOkay, great. Well, now what do you all want to do with this money? You should do something positive with it.â€ But what ConstitutionDAO showed was that you can gather people from anywhere in the world behind a cause and raise a ton of money. And I think thatâ€™s what humanDAO was doing. They want to pair that with what theyâ€™re calling P2E, right, play-to-earn, because gaming is huge right now. We all know Axie Infinity, and all of these different games out there that are allowing folks to earn an income from playing these games. You know, I think a plot of land on Axie Infinity just went for two point something million dollars. Itâ€™s incredible whatâ€™s going on here.
So I know, I just mentioned a lot of stuff for advisors that are just like, alright, we have to worry about end of year tax planning, we have to worry about projecting marketing and budgets for 2022, we have to make sure that we are compliant, weâ€™re still trying to find E&O insurance, and D&O, we have to update our ADVs and form CRS, and really try to figure out how weâ€™re going to get paid on these things. We have to vet custodians, we have to… All these things. Crypto is exhausting. And being empathetic, I absolutely feel you.
So backing up, going back to DAO, and what the whole purpose is of true decentralized power, and a group of folks that come together to make decisions for a greater benefit, if you will. Why I love the humanDAO project is that they want to use this to allow people to play games and earn money. And one of the things that I do love is, what they want to do is have it in homeless shelters so the folks can play games to earn their stay, or get haircuts, or food or whatever. That is awesome. And again, Iâ€™ll stop right here and say, I know homeless folks have bigger worries than playing a game. But if that game is going to lead to them being able to get dental care, fresh clothes, socks, food, training, this is incredibly powerful. And the whole purpose behind a DAO and again, going back to the good folks over at PlannerDAO is taking the power away from one person or one organization that gets to control the outcome. And what they did was take their CDAA cert and put it in a DAO. No one owns it now. So the community gets to determine the course load and the coursework, the community gets to interact with one another and share ideas and learnings from their workings with clients. The community is for the people by the people. So they know specifically what advisors need. They know the challenges. They know the community greater than anyone else. So kudos to Adam and again, Steve Larsen and the folks over there who understood this and will continue to build it out but not without a community.
And thatâ€™s the most important thing, is the community. Whether itâ€™s Discord, whether itâ€™s Telegram, whether itâ€™s Twitter, whether itâ€™s PlannerDAO, whatever it is, you build a community of people who are aligned in interest, and you can do that like never before. And this is where the whole Web 3 things come in where folks go, Okay, well, yeah, we got Twitter, we got Facebook and Instagram. But what if we actually incentivize these folks to be a part of what it is that we are doing? And I think for our RIAs, should the largest RIAs in the country care about DAOs right now? No, they really shouldnâ€™t. Should they pay attention to it? Absolutely. Why? Because the clients are part of DAOs. A lot of your clients contributed ETH to ConstitutionDAO, a lot of advisors. And when I say advise, I mean IAs, the actual RIAs, the entities. Now I have a hard time believing that Peter Mallouk and Creative Planning and the other 100 billion dollar behemoths, shout out to Peter Mallouk, by the way, congratulations on that accomplishment.
But if you look at these folks, theyâ€™re flying above it. Your Fidelitys, your Schwabs, your Pershingâ€™s, theyâ€™re flying above it, and they see it happening. But when you see how folks are coming together, Index Coop, another DAO on-chain indices, this is just powerful, what is happening here. So, if Iâ€™m an RIA, 100 billion, 100 million, do I care about this? Maybe not. Should I pay attention to it? Absolutely. Is it the future of our industry? Yeah.
I tweeted yesterday, DAOs, plus atomic swaps, plus coin joins, itâ€™s going to mean a hell of a lot of improvement for the registered investment advisor space. Iâ€™m not here to rant about those things. But Iâ€™m just here again to talk about this because itâ€™s so incredibly powerful, what is happening here. So when you look at again, decentralized autonomous organizations, the ability to build community, the ability to raise capital, in record time for worthy causes. Now, whether you think again, buying a piece of the Constitution was a worthy cause. Thatâ€™s another story. humanDAO, absolutely. PlannerDAO, absolutely. Now imagine if all of the largest RIAs in the space, your Creative Plannings, is your Beacon Pointes, your Hightowers, your Dynasty, came together and started a DAO and said, â€œAlright, we are going to collectively bring our stakeholders, vendors, clients, advisors, weâ€™re aligning everyone. Everyone has a say now.â€ And what advisors must accomplish to show that they are competent in crypto assets. An advisor must show some depth and study and awareness around annuities. Clients are incentivized to do planning. And also, clients can take that plan with them wherever they go, because that firm doesnâ€™t own that plan, the client does. Clients are incentivized to create a community, along with the RIAs as a community, along with the IAs as a community, to help with philanthropic endeavors or lowering fees or financial education. How about that? Pro bono work?
There should be some credit for this. And the thing for me that I am hell bent on is there should be a designation for an advisor to become specialized in social services. And they hold that designation out just as proudly as they do to CPWA. And these advisors specialize in WIC, they specialize in TAMP, they specialize in SSI, they specialize in any social service program the government has, and they bring that to the community, the DAO community. And then they bring it to the real community, the community of people and low income impoverished areas, rural urban communities to help people get plans, to get ongoing advice and guidance. And the community votes on this, and is incentivized to make it happen.
This is special. This is what DAOs allow. So itâ€™s not up to the CFP Board. Itâ€™s not up to the CFA Institute, itâ€™s not up to the American College, itâ€™s not up to the SEC. It is not up to the FINRA. It is for advisors by advisors, but ultimately it is controlled and owned by the people. And thereâ€™s this large movement now of advisors who are dependent on this emerging space, because of all of the inflection points that are happening here. Thereâ€™s 72 million Gen Z, the oldest are 24. The oldest Millennials are 40. And theyâ€™re still being referred to as kids. They grew up with bitcoin, by the way, they were 27. So thereâ€™s a lot of inflection points here where folks are rallying behind causes, philanthropy and ESG. And all the things that matter to them. This is what DAOs allow. Keeping up with the DAO Joneses, if you will.
So, by keeping up with the DAO Joneses, we now have something that all advisors can take part in to effect change in their local communities, with their clients, for their clients, for the industry, but ultimately, for the world. That is powerful. That is something that we know is going to happen. Iâ€™ve been saying for the longest time, that five years, 10 years from now, the financial services space will be the most beloved space in the world. This is going to help that because we touched the one thing that everyone needs, which is money. And crypto in and of itself represents access. It represents freedom, it represents inclusion, digital social justice, if you will, Shout to my Bitcoin Maxi, my Bitcoin mafia. This is why Iâ€™m such a proponent of bitcoin, bitcoin has changed my life. It has changed the life of my family, the awareness of it alone changed my life and my familyâ€™s life. So what DAOs do is finally give everyone an opportunity to have a say, and truly align interests, right? Thereâ€™s this saying they teach you when you come in through the program and the wirehouses, right was part of the PMD program.
They talked about the AUM model. And they say, hereâ€™s why the AUM model is so powerful because you sit on the same side of the table as the client. Mr. Mrs. Client, I do well, when you do well, you donâ€™t do well. I donâ€™t do well, okay. But this is truly aligning yourself not only with your client, but the best interests of the industry, the client, their family, the community, all stakeholders involved benefit. And a beautiful thing is due to smart contracts, all of this stuff can be coded so no one can change it. And thatâ€™s the beauty here. Code software. Yes, humans write the code. Yes, thereâ€™s human input. But again, not until there is consensus. By the way, consensus is not truth, just consensus, we all agree. And that should be something that is ongoing, a living organism, if you will, shout to our last episode, with Jeff Garzik. More is coming. By the way, if you havenâ€™t listened to that, stop this, go listen to that and come back.
Living organism, something that is growing, something that is evolving, something that gets more attention than it would otherwise because everyone is aligned with seeing it through. Itâ€™s not me, itâ€™s we. Right? Team. So what DAOs allow the RIA space to do. Registered independent advisor, independent, maybe it moves to RAAs: registered autonomous advisors. This is incredibly important to understand what is at stake here. Not that every advisor should be running out and terrified, this may be an issue right now, for their business or as a threat to the business. Itâ€™s not itâ€™s an add on, it is something that makes your business more amenable to change, more amenable to a new and burgeoning class of investor, but more importantly, to an industry that is going to rush in new ideas, creativity, wealth generation, financial inclusion, the diversity and inclusion that the industry has failed on anyway, but more representative, and equitable, these are all incredibly important things that we should get aligned on.
And I think this is super important, that we know, advisors care about, and is the reason you became an advisor to serve. This is what our industry does. This is what we do every day for people, to help them achieve their financial goals. Thatâ€™s incredibly important. So to that end, I think one of the things that I think is important here is I encourage every advisor listening to this, to look at some of these projects. ConstitutionDAO, humanDAO, PlannerDAO, of course, and look at these projects and look at whatâ€™s happening here. These are powerful things that are happening. So the other thing is also, itâ€™s just another way to become conversant with your clients. And just bring this into the conversation not because youâ€™re doing anything with it, or you know, youâ€™re a part of one or you understand theorem and on chain analytics, and how you know, these governance tokens work, itâ€™s not about that. Just bring it into the conversation. â€œConstitutionDAO thing was pretty cool.â€
But anyway, I just wanted to come over really quickly and talk about this very important thing that has happened there right now again, just to kind of keep in your mindâ€™s eye, not something to rush out and change but just be aware of because thereâ€™s some really cool things happening. All right, you all know to drill, any value in this you found whatsoever, run over to nokidhungry.org. Feeding America right now again, we know inflation is nuts. Folks need help. No Kid Hungry, FeedING in America. Any local organization by you absolutely, positively help out if you can. Also, Crypto for Advisors, the CoinDesk newsletter, sign up, shout to my whole CoinDesk family for how theyâ€™re pushing forward in this space as well. For all of the RIAS out there, everyone that is a part of the advisory board and I started with my good family over CoinDesk, I will see you all on the next one. Until then, love and light to you all, give and it shall be given unto you. I appreciate you.