Michael Christian Advincula springs into action when clients inquire about crypto and NFTs.

Cryptocurrency and non-fungible tokens (NFTs) are not usually the traditional financial advisor’s expertise, but clients have been inquiring about these new financial products as cryptocurrency transactions and interest in NFT-based play-to-earn online games and collectibles are growing. Advincula shares his advice concerning learning about these digital products and educating clients.

How do you answer clients inquiring about these emerging products? What are the factors they should consider?

Since crypto and NFTs are new developments, financial advisors have to educate themselves. I always tell my clients that I’m no expert, but I’ve done my research, and this is what I know at the moment. 

I believe that crypto and NFTs are here to stay. Eventually, these products will be treated like traditional stocks and other investment opportunities, impacting how insurance companies allocate and manage investments.

While my answers to crypto and NFT-related questions are as a generalist, I remind my clients that the traditional checklist for usual investments still applies: the return on investment, market volatility, liquidity, tax implications, and the client’s understanding and comfort level in the product. Among these five considerations, the last one is crucial, as it will significantly influence investment performance.

Let’s take cryptocurrency in the Philippines. The return on investment is attractive, and volatility is erratic, which can be a pro or con, depending on the investor. Tax implication-wise, the Central Bank of the Philippines is doing its job to tax these types of investments. Returns will depend on the investor’s knowledge of the market. If the investor knows how the system makes money for him and understands the risks involved, he can explore the crypto market. 

Any tips for financial advisors looking to learn about these emerging products?

While insurance companies do their best to teach us about these new products, our duty as financial advisors is to do our research. Go the extra mile by consulting IT experts and asking them about blockchains or seek investment brokers’ inputs regarding crypto’s value. How does it compare against stocks? Financial advising requires continuous learning. After all, it is our job to present the best financial solutions to our clients. If NFTs and cryptocurrency provide excellent returns, we need to study and include them in our recommendations to clients.

Michael Advincula is a four-year MDRT member from Makati, Philippines. He can be reached at mike_advincula@manulife.com.ph.