Innovation | 10.05.21
MassMutual Makes Bold Leap Further Into Crypto
With Bitcoin surging back above $50,000 and cryptocurrency increasingly mainstream, Massachusetts Mutual Life Insurance Company has launched a crypto platform. A titan of the advisory industry going all-in on crypto represents both a watershed moment for the industry and a sign of the times.
The soup-to-nuts service is called Flourish Crypto.
MassMutual bought Flourish, a fintech startup, from Stone Ridge Holdings Group. That deal closed in the first quarter of 2021. At the time, some 350 RIAs were using Flourish to access cash management solutions.
Last week, according to an announcement from MassMutual, the Flourish Crypto service was officially launched. It’s a partnership between Flourish and crypto startup Paxos, which is best known for helping PayPal branch into crypto. Paxos supports the execution and custody side of the new Flourish service, which is aimed primarily at advisors who have clients that want to invest in Bitcoin.
Advisors Left On Sidelines
"Cryptocurrency investing has gone mainstream," Flourish's top executive, Ben Cruikshank, said during a recent Yahoo Finance podcast. "But financial advisors have largely been left sitting on the sidelines."
Stemming from conversations with Flourish’s base of financial advisor clients, the new service reflects a new reality – advisors having to constantly field questions about crypto – while lacking resources for crypto compliance, research, trading, accounting and reporting, leaving them unable to compete with an explosion of new retail offerings.
“We believe that cryptocurrencies are increasingly becoming a part of the financial landscape, both as an investment strategy and technological innovation,” said Gareth Ross, head of enterprise technology and experience at MassMutual, in a public statement accompanying the launch of Flourish Crypto.
Additionally, MassMutual's CIO Tim Corbett, in a blog post timed to last week’s launch, stated that Bitcoin could turn out to be a form of “digital gold” i.e. an inflation hedge.
MassMutual believes “volatility will decrease as more institutions take positions in the space,” according to Corbett.
In the last week of September and first week of October, as the third quarter came to a conclusion with growing uncertainty about inflation and the economy, BTC soared by 20% as reportedly large institutions took up positions.
Cruikshank, in the Yahoo Finance interview, explained the origins of the new turn-key crypto offering custom-built for financial advisors.
Operating independently from its parent, Flourish’s team members reported hearing, on a daily basis, from advisors who told them that existing crypto trading platforms, while plentiful, were just not necessarily a good fit for them.
Cruikshank was a former sales head at online wealth app Betterment, working in its business-to-business (B2B) division.
Since last December, he's been leading the Flourish platform's efforts to expand relations with RIAs.
Increasingly, this segment is becoming much more receptive to the concept of digital money, which was relegated to the pay-no-mind list even 18 months ago.
No More Excuses
The Digital Assets Council of Financial Professionals (DACFP), through its digital assets educational program, has already certified more than 300 advisors from around the world, according to DACFP founder Ric Edelman. The program now has a waiting list of over 1,000, according to Edelman.
Pointing to a growing number of educational, technological and compliance-focused resources, Edelman said advisors who are interested in digital assets are running out of excuses; sheer inertia isn’t one of them.
“There is now no legitimate reason for advisors not to be engaging in this asset class,” Edelman commented of advisors who are still reluctant. “They have a fiduciary obligation to provide their clients with diversified portfolios.”
MassMutual’s Corbett, in his blog, declared the firm has come to view BTC as “a potential store of value over the long-term.”
MassMutual made that view abundantly clear last year by making a $100 million investment in the largest digital asset, as measured by total market capitalization.
BTC has, as of early October, a market cap of more than $900 billion or about one-tenth of the size of the total market for gold.
MassMutual invested in Bitcoin for its own general investment account. The firm also seemed to be putting down a marker as it prepared the groundwork for a crypto push.
“Bitcoin’s unique characteristics, including digital scarcity, known supply growth, transfer characteristics and hard cap on the total number of tokens, open the possibility that it may serve as a kind of ‘digital gold,’ with the potential for significant price appreciation,” Corbett said. “At the same time, the asset class is new and still undergoing price discovery, with significant volatility, uncertainty and risk. We believe that the volatility will decrease as more institutions take positions in the space, but it will take multiple market cycles before we have robust data to further describe the characteristics of the investment, such as correlations to other asset classes or whether it will serve as an inflation hedge.”