Wealth Strategies for Financial Advisors in 2024

2024 Wealth Game: Top Strategies for Every Financial Advisor

Although extreme volatility can make investments in cryptoassets alluring, investors and financial advisors should exercise caution. Enter stablecoins, a unique class of decentralised digital currencies traded on the blockchain. In contrast to their more volatile counterparts, stablecoins are pegged to real-world assets like fiat currency, gold, or U.S. dollar bills, ensuring significantly reduced volatility.

This article is a brief guide for financial advisors considering stablecoin investments.

Why Financial Advisors Should Consider Stablecoins in 2024

Stablecoins are a subset of digital currencies engineered to minimise volatility by pegging their value to a reserve of assets, often traditional fiat currencies. Stablecoins have the stability of fiat money and the privacy and security of cryptoassets, making them an attractive alternative to their more volatile competitors. 

According to CoinDesk, the stablecoin market is expected to soar to $3 trillion in the next five years. In June 2023, stablecoin trading volume increased by 16.6% to reach $483 billion. This marked the first monthly rise in trading volume since March. The surge in trading activity was attributed to the submission of spot ETF applications by various TradFi companies. If the spot ETF applications are approved, which is likely, we believe trading volume may increase further. 

Given their growing significance and potential profitability, financial advisors should think about incorporating stablecoins into their client offerings.

Advantages of Stablecoins for Financial Advisors

Below are some of the key benefits of using stablecoins as a financial advisor:

Instant Settlement

Stablecoins facilitate instantaneous settlement, enabling faster and more efficient transactions. Picture a scenario where a business owner receives payment in stablecoins; the funds are instantly available in their wallet; this eliminates the need for intermediaries, streamlines transactions, and reduces associated fees.

Lower Fees

Financial advisors set up processes for clients to avoid traditional banking systems by leveraging stablecoins, leading to lower transaction fees. This cost-saving benefit is particularly impactful for small businesses and entrepreneurs, offering a competitive edge.

Global Accessibility

Stablecoins provide a reliable alternative for individuals in regions plagued by high inflation rates. For example, Turkey’s annual inflation was 50.51% in March 2023, and Argentina’s was 104% in the same month. Since then, stablecoins have gained popularity in both nations as a means for people to store value independently of their respective banking systems, which can be quite volatile. Financial advisors must recognise the potential of stablecoins to provide financial stability to individuals globally.

Adoption of Blockchain Technology

Widespread acceptance of stablecoins signifies a broader acknowledgement and utilisation of blockchain technology. Major players in the financial industry, including Visa, PayPal, and SocGen, are embracing stablecoins for more efficient value transfers. This acceptance paves the way for increased digital asset adoption in traditional finance.

The Role of Stablecoins in Portfolio Stability

Financial advisors must understand the importance of stablecoins in maintaining portfolio stability. Stablecoins act as a bridge between the traditional financial world and the digital economy; their low volatility makes them less risky than other cryptoassets, positioning them as a strategic tool in risk management.

Revolutionising Banking Efficiency

Stablecoins are impacting the banking sector by streamlining payment systems and enhancing cross-border transactions. While stablecoins present opportunities for efficiency improvements, financial advisors must also grapple with the regulatory and monetary policy challenges associated with their adoption.

Risk Mitigation in a Digital Economy

As the world transitions towards a more digital economy, the demand for digital money offering stability, security, and efficiency will likely grow. When making this change, financial advisors play a crucial role in making sure clients' portfolios are well-suited to use stablecoins for risk management.

Regulatory Considerations

Financial advisors should be aware of the regulatory developments surrounding stablecoins. Clear and consistent regulations are essential to boost confidence and promote wider adoption. As stablecoins continue to play a more significant role, financial advisors must stay informed about upcoming regulatory changes.

Leveraging Stablecoins in Financial Strategies

Incorporating stablecoins into financial strategies requires a nuanced approach. Financial advisors should consider their client's risk tolerance, investment goals, and the broader economic context when recommending stablecoin utilisation. Here are some considerations for financial advisors:

Research and Due Diligence

When advising clients on stablecoins, financial experts should familiarise themselves with the assets that support these digital currencies. The credibility of the issuing organisation and the transparency of their reserve management are critical factors to evaluate.

Risks and Rewards

While stablecoins offer stability, financial advisors must convey the potential risks to their clients. The value and trust in stablecoins can be affected by regulatory uncertainties or the mismanagement of reserves. Decisions must be based on a fair evaluation of risks and potential benefits.

Integration into Financial Portfolios

Financial advisors should strategically explore the integration of stablecoins into clients' portfolios; this may involve allocating a portion of the portfolio to stablecoins to act as a stabilising force, especially during periods of high volatility in traditional and digital asset markets.

Financial Advisors: Learn More About Stablecoin Integration

As financial advisors navigate the complexities of digital assets, stablecoins emerge as a powerful tool for portfolio stability and risk management. The unique characteristics of stablecoins, including instant settlement, lower fees, and global accessibility, position them as valuable assets and an attractive client offering for financial advisors globally.

To learn more about the utility of stablecoins for financial advisors, contact us to arrange a meeting.