Interview with an Orange-pilled Financial Advisor

The financial advisory landscape is currently experiencing a monumental shift, which is going mostly unrecognized by those inside the industry. It’s a shift that will be happening to every industry, but since the shift we’re discussing here is from an easy, analog money to a sound, digital one, the money management industry is ground zero. The shift has been underway for fifteen years; however, it was not until the January 2024 approval of spot Bitcoin ETFs that the industry at large started to notice.

Prior to then, Bitcoin was viewed with skepticism by traditional financial professionals, often dismissed as a speculative bubble or a niche interest for tech enthusiasts. Now, the narrative is changing with a quickening pace. The ETF launch marks the end of the early adopter phase of Bitcoin and the beginning of the institutional adoption phase. We’re in the eerie quiet of the small space between two eras, a vacuum forcing the issue onto the advisors' desks, requiring them to reorient their mental models of Bitcoin and reevaluate its implications for investment portfolios.

The bottoms-up nature of Bitcoin means retail holders could outmaneuver the professionals. In many cases, I believe that those that work with a financial advisor or money manager have managed to acquire and hold Bitcoin in direct conflict with their advisor’s guidance. This has slowed Bitcoin’s adoption and resulted in opportunity costs for clients in the form of lower investment returns. In my opinion, many advisors have done a disservice to their clients in this way.

But some have not. There is a small but growing group that has embraced Bitcoin and recognized the impact it will have on their client’s lives and on their own business prospects. We spoke with Matt Golliher of Vista Investment Partners, one such firm, about his journey in Bitcoin and the hard work he and his company have done to use this technological shift to their advantage.

Clients first started asking me about Bitcoin during its 2017 bull run. That’s the first time I remember taking a look at it. Unfortunately, most of the information I found was presented in the context of the blockchain craze and the initial coin offering (ICO) frenzy that were both happening that same year.

At the time, I could not find the Bitcoin signal through all the crypto noise. It all looked like a classic hype-fueled bubble to me, and I regret to say that’s what I told my clients. Bitcoin’s price crashed after that 2017 peak, and I interpreted that as confirmation that I was right.

Fast-forward to March of 2020. The whole world was locking down for the pandemic, the markets were in turmoil, and Congress was about to pass a $2.2 trillion economic stimulus bill. That’s when I noticed: Bitcoin wasn’t dead yet.

Curious, I decided that I needed to at least understand what this thing was, so I ordered The Bitcoin Standard by Saifedean Ammous. I read the whole thing in one sitting. Then I ordered more books and read those. I devoured every article and podcast on the topic I could find. It quickly became clear to me that if Bitcoin was what it appeared to be, then it would probably be the most important financial innovation I would see in my lifetime. As a financial advisor, I couldn’t ignore that.

It felt like running into a brick wall.

That’s despite having the support of my team, including our managing partner, Brett Guiley, who also became a Bitcoiner in 2020. Even for independent Investment Advisors, a lot of different parties need to cooperate for an advisor to be able to offer a particular service to clients.

The partners we work with to provide custody, brokerage, compliance, legal counsel, and professional liability insurance can’t simply let us do whatever we want. They must conduct enough of their own due diligence to be comfortable supporting us offering a new solution. It took us over three years to assemble all the pieces of the puzzle, but we are now positioned to provide Bitcoin-focused wealth management services.

The most common reaction I used to get when I brought up Bitcoin to a colleague would be a chuckle, followed by a weird look when they realized I was serious. I don’t see the same wide-spread dismissiveness I did four years ago.

I’m also starting to see a growing awareness of the difference between Bitcoin and crypto, blockchain, and digital assets. I think the spot Bitcoin ETFs coming to market have played a role in that.

I think we’re also seeing more open-mindedness toward Bitcoin because of the persistent inflation, fiscal deficits, and ballooning federal debt we’ve seen over the last few years. There seems to be an emerging sense that something is wrong, and perhaps what worked best over the last 50 years may not be optimal for the next 50 years. Because of that, I think more advisors are willing to consider alternative assets, and in the world of alternative assets, Bitcoin is the big flashing lightbulb.

We are still early. For the most part, the same challenges that existed in 2020 still exist today, even though the industry has made progress in some areas.

The biggest thing that hasn’t changed is the view that Bitcoin primarily increases risk. Even among those who are open to it, the overall sentiment is that Bitcoin is a volatile alternative investment that could make sense as a tiny allocation in a diversified portfolio.

That’s a good starting point, but I believe the realization that people buy Bitcoin to reduce risk has largely not found its footing yet.

In terms of asset allocation, Bitcoin may potentially improve a portfolio’s risk-adjusted returns. Based on historical returns, adding just a 1% Bitcoin allocation to a conventional portfolio often produces a clear improvement to the portfolio’s Sharpe Ratio. If you compare Bitcoin’s calendar year returns since 2011 to common indexes for REITs, bonds, equities, and gold, you’ll see that Bitcoin has either been the best-performing asset or the worst every single year. Often by a lot. That can offer unique diversification benefits.

Of course, that’s all based on historical performance. Bitcoin may not behave the same way in the future.

On a deeper level, I would argue that Bitcoin reduces risk because of what it is. From an economics perspective, Bitcoin is not an investment. It does not produce cash flows. Bitcoin is a monetary good. Its value is derived from its monetary properties. Further, it exists completely separate and outside current dollar-denominated financial markets. You can only obtain so much diversification by owning something within this system. A hedge on systemic issues inherent with the current markets can really only be found in something that exists outside that system, like Bitcoin.

Anyone on Earth with an internet connection can use Bitcoin, and no authority controls access to the Bitcoin network. That means Bitcoin is a global asset. Unlike traditional investments, Bitcoin’s performance does not depend on the success of any particular company, country, or market.

We formed a new Investment Advisor entity as a division that will focus on delivering clients a Bitcoin-dedicated advisory offering. We fired our broker/dealer, who was actively hostile towards Bitcoin, interviewed many, and found one that would allow us to incorporate Bitcoin into our operations. We had to find new E&O coverage and hired a new compliance team plus additional in-house staff who had done some work to understand Bitcoin. We onboarded additional custodians and made significant investments in new technology that helps us bridge between the Bitcoin market and the legacy financial markets.

This all took more than three years. We learned a lot of lessons along the way, but we’re confident we’re on the right path. We can now pursue our primary goals: 

1. Provide the best wealth management experience for Bitcoiners who also own traditional financial assets

2. Help our clients acquire and hold real Bitcoin and not just proxy products like the ETFs.

3. Provide the best independent Investment Advisor for other orange-pilled advisors to plug their businesses into.

I believe Bitcoin is a massive threat to the wealth management industry. Much, if not most, of the wealth management industry exists because our currency bleeds value over time. As a result, in order to protect themselves from monetary dilution, would-be savers are forced to figure out the complexities of the securities markets on their own or to hire someone to help them.

Most clients I’ve worked with in my career are not investors. They’re savers. These clients are not trying to deploy capital at risk to empower productive economic work—which is what an investor does—but to preserve their purchasing power and retire someday.

Bitcoin makes it possible to save money again, which means Bitcoin is a direct competitor to everyone who manages money for a living. I believe Bitcoin will change the nature of what it means to be a financial advisor, and the advisors who succeed in the in decades ahead will be those who can offer competitive Bitcoin financial services.

It depends on their situation.

If someone lives on a pure Bitcoin standard, gets paid in Bitcoin, pays their bills in Bitcoin, and holds 100% of their wealth in Bitcoin, that person probably doesn’t need a financial advisor.

However, most Bitcoiners aren’t there yet. There are a variety of reasons why Bitcoiners may choose to continue owning traditional financial assets.

They may be unwilling or unable to tolerate Bitcoin’s volatility for 100% of their wealth. They may have a spouse who is not as convinced about Bitcoin as they are. They may want help minimizing their taxes or protecting their family if something happens to them.

The future will likely bring a broader array of Bitcoin-native investment products, which will offer advisors more tools to tailor exposure to their client’s needs. These could include more sophisticated ETFs, mutual funds, and derivative products, providing both exposure to Bitcoin’s price movements and opportunities for hedging and risk management. As we transition to more of a medium of exchange use case for Bitcoin, there will be new and innovative ways clients can utilize their Bitcoin, which may impact the rest of their financial lives.

It’s these types of scenarios that working with an advisor aligned with their client’s financial interests and having a deep understanding of Bitcoin can add tremendous value.

For one thing, it forces them to pay attention. Before the ETFs, it made more sense for advisors to ignore Bitcoin because they couldn’t offer it to their clients anyway. But now that Bitcoin is “on the shelf, ” dismissing it is a lot harder to justify, especially if clients want it.

The spot ETFs also endow Bitcoin with a level of perceived legitimacy that it’s never had before in our industry. The ETF issuers include some of the most respected, well-known names in the business. Financial advisors will still have differing opinions about Bitcoin, and some of them may continue advising against it, but I think the days of Bitcoin being viewed as some weird, fringe financial experiment are over.

I expect the ETFs to play a similar role for Bitcoin as dialup did for the internet. By piggybacking on existing telephone infrastructure, dialup gave millions of Americans their first user-friendly access point to a new network, but over time, it was replaced by network-native internet solutions.

Similarly, by piggybacking on existing financial infrastructure, the spot Bitcoin ETFs have given millions of Americans their first user-friendly access point to the Bitcoin network. Over time, though, I expect the relevance of the ETFs to diminish as network-native Bitcoin solutions continue to develop and mature.

The main drawback of ETFs is counterparty risk: You have to trust someone else with your Bitcoin private keys. As Bitcoiners know well, “Not your keys, not your coins.” I hope that risk never materializes with these ETFs, but it is a legitimate risk that investors should be aware of.

Ultimately, I expect Bitcoin-native solutions to outcompete the ETFs for a simple reason: Bitcoin is digital money. Bitcoin ETFs are not. If digital money is a profound innovation (and I believe it is), then you will be able to do new things with it that were previously impossible, like micropayments. Over time, I believe owning actual Bitcoin will become more useful for more people compared to holding a Bitcoin ETF.

Matt Golliher is a Financial Advisor with Vista Investment Partners. He lives in Richmond, IN, with his wife, Devra. Matt became a Bitcoiner in 2020. Along with educating his clients, colleagues, and community about Bitcoin, Matt focuses on helping Bitcoiners who need traditional wealth management and financial advisory services. If you have any questions or would like to contact Matt, you can do so using the contact information below.

Email: matt.golliher@vistainvestment.net