Schwab's crypto line forces advisors to pick a side

Charles Schwab, the custodian most RIAs call home, has drawn a clear line on digital assets: direct crypto trading is not on the firm's radar 'at this time,' and 'investors should view these currencies as a purely speculative instrument,' according to Rob Farmer, Schwab's managing director for corporate communications. Asked whether Schwab would join the consortium behind Facebook's Libra, CEO Walt Bettinger deferred the answer 'out in the future a little bit,' as he told Fortune.com. Tim Welsh, president of Larkspur, Calif.-based consultancy Nexus Strategy, reads that posture as habit: 'Walt got his job by being the king of the status quo,' Welsh told RIABiz. 'Until [Schwab's] biggest advisors demand they do something, they will continue their sleepwalk through innovation.'

That caution stands in contrast to Fidelity, seven years into its crypto efforts with a reported 200 employees on the project, and to TD Ameritrade and Pershing, both dealing themselves into the trend. RIABiz puts crypto's total aggregate market cap at $300 billion—small next to custodians' core business and, as RIABiz frames it, a 'great big R&D expense' for Fidelity that may never pay a dime.

Because Schwab's RIA platform neither trades nor custodies crypto, any client allocation to digital assets has to live outside that relationship—through a separate digital-asset custodian, or by moving the sleeve, or the account, to a firm that supports it. Each route adds operational drag, another vendor to vet, and another account to reconcile; for an RIA built on a single-custodian model, crypto becomes an operational test, not just a portfolio call.

Fidelity has spent seven years and 200 employees betting advisors will ask for crypto; Schwab is betting they won't ask until the market forces the issue. The advisor who wants the asset has to pick a side, and how long Schwab's biggest advisors stay quiet will determine how long that side exists.