A LinkedIn post from Bonnie Treichel, Chief Solutions Officer with Oregon-based Endeavor Retirement, about Fidelity’s plan to add Bitcoin in 401(k) investment menus is getting attention from advisors, many expressing an emphatic “no” at the idea.
“I think this is just creating havoc for advisors,” Treichel, a self-described “advisor to advisors,” said when asked about cryptocurrency and specifically Fidelity’s announcement.
“You might have someone in the C-suite who says, ‘Hey, I want this,’ and they might have more disposable income or retirement plan assets to play around with,” she added. “They then want to know why they can’t have crypto added to the retirement plan. The fiduciary responsibility response doesn’t always sit well, and you’ve got the HR manager trying to explain it to them. It often puts that HR manager and the plan committee in a difficult position.”
Fidelity can make Bitcoin available in 401ks, yet they are not the fiduciary making the recommendation, which falls on the plan sponsor.
“In the middle of last year, there was the announcement with Coinbase and their relationship with ForUsAll,” Treichel explained. “That was different coming through the brokerage window with only a 5% cryptocurrency allocation allowed. But those making it available in a non-fiduciary capacity is very different than when you’re the plan sponsor or advisor left holding the bag as the fiduciary.”
Several advisors have asked if they should immediately make crypto an excluded asset in their advisory agreements. While emphasizing she’s not providing legal advice, she said to avoid extreme measures today because Fidelity Bitcoin isn’t available yet.
“However, consider how advisors and RIAs will handle this on a go-forward basis, because it will be coming up fast, and it probably won’t just be Fidelity,” she concluded. “It’s thinking about how it will affect your policies and procedures, how it will exist in your advisory agreement, and will you carve it out?”
LinkedIn logic
“One month after the DOL said to exercise ‘extreme care’ before considering the addition of a cryptocurrency option in a 401(k) plan’s investment menu for participants, Fidelity announced plans to allow investors to put a bitcoin account in their #401k,” she wrote in her post. “What’s this mean for advisors and plan sponsors?”
She offered three insights:
- Like it or hate it, cryptocurrency is coming to a 401(k) near you! Fidelity is the first to do it, and though many are skeptical, Fidelity won’t be the last. Getting up to speed on the basics of crypto and the #DOL guidance (link in comments) is a must.
- Discuss in the plan’s investment committee and develop a strategy that aligns with the plan’s stated investment objectives (or IPS). Again, keep in mind the DOL’s guidance that suggests the exercise of extreme caution – even in a brokerage window. If you consider adding crypto, work with an ERISA attorney and be sure to document the process.
- Develop a participant communication strategy or talking points for participants who request crypto in the plan. For example, be prepared to help participants who read The Wall Street Journal article understand why they might not be able to have crypto in their plan today.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
