The Last Trade E065: Navigating Custodial Risk with Rich Kerr

Jackson Mikalic (00:02.041) All right, everyone, welcome back to The Last Trade. Today we're joined by Rich Kerr, president of OnRamp Managed Wealth, and of course joined by my co -hosts Jesse Myers and Michael Tanguma. How's everyone doing today? Michael (00:15.652) Doing good. President of Managed Wealth and host of the famous Wake Up Call Show. Rich Kerr (00:16.282) Really good. Jackson Mikalic (00:22.296) That's right. Yep. Every Monday morning. Rich Kerr (00:22.336) yeah, yeah. Thanks for the plug. Thank you for the plug. Yeah, I mean, get to get to chop it up with Mark Connors. I mean, you can't ask for a better format than that. That guy keeps me laughing and I learn all the way through. So it's quite an enjoyable show. Michael (00:39.982) How has that been going? I know it's not the direct topic we're here for, but just curious, any learnings for the past? Like I want to say, it's been a month to two months total. Big findings. Rich Kerr (00:48.738) Yeah, it's actually been two months and I think one of the fun parts about speaking directly to financial professionals in particular, Michael, is you can bring in people that have all sorts of different, know, adjacencies or are actually in the RIA space themselves and hear their points of view and what are their challenges, what are they struggling with, what are the opportunities opportunities that they see and how do they wish to exploit them and you know either support the RIA community if they're an adjacency or if they're in the business itself trying to think through you know how do I grow with it and what are the risk factors that I need to be thinking about and how did I work with my compliance you know partners and actually develop an investment thesis that we could bring in Bitcoin and hold it and secure it properly for clients and so it's It's been a lot of fun just kind of talking with professionals around the myriad of things that they have to go through in order to actually implement a well thought out strategy with Bitcoin and why it's important. does it speak to them to bring it forward and what and more importantly what does it bring to their end clients and so you know there's a whole host of different topics that we get to get to play with and different professions. professionals in the industry, whether they be investment consultants or RIAs, compliance people or RIA consultants. I mean, we've had a chance to speak to a little bit of everybody and give a different lens to how does Bitcoin ultimately adopt. mainstream and and you know accelerate and scale inside of all of these businesses and so I think we'll probably play with some of that today because I think you know, Jesse wrote such a great piece around Bitcoin and custody and Rich Kerr (02:56.566) and the evolution of custody and then also a little bit about some of the threats that live in the space today that have been around for since the existence of Bitcoin. And so there's a couple of different ways that we're going to talk about that. And those are really important conversations to the financial professionals that we're speaking with every day. So excited about being here to join and maybe share a different perspective. Michael (03:22.647) Awesome. Jackson Mikalic (03:23.949) Yeah, I appreciate that Rich. As someone who's been following your show, The Wake Up Call, it's been really interesting just from how you've curated the guests and the way that the dynamic between you and Mark, I think it's very unique because there are so many different shows in the Bitcoin space, but I really haven't found anything quite similar to what you're doing with Mark by focusing specifically on the managed wealth family office, traditional finance, just kind of the broker dealer, guess the entire wealth management community. And I really would encourage anyone who has an interest, whether they work in that industry directly professionally, or they're just curious to hear about some themes there, definitely check it out. It's every Monday. And we'll certainly be talking about some of those themes today. But Rich, I appreciate you bringing up the piece that Jesse wrote recently titled, Everyone's a Scammer. It is a timely piece. because I don't know about you guys but I get calls. nonstop. And it's always been like that, but it has really ramped up. And even just yesterday or the day before, I forget at this point, I wanted to answer a call just to confirm my bias to see if it was people trying to indeed steal my Bitcoin. to not to my surprise, it was someone. So I called them out early on in that conversation and the person admitted, yes, I want to steal your Bitcoin. And then we left the conversation there. So, Jesse, it's a it's a well -timed piece. Michael (04:48.132) Okay. Jackson Mikalic (04:53.547) Really, I had the chance to read through it this morning and really enjoyed it. So maybe we could just hand it over to you to talk through some of the main points there. Jesse Myers (05:01.406) Yeah, yeah. And first of all, so bitstein wrote everyone's a scammer many years ago and and so Michael (05:09.24) Ten years ago to the date, I found out Brian told me to take Jack today. Yeah. Jesse Myers (05:13.482) wow, I didn't realize that. That's awesome. So that's why we went with Everyone's a Scammer, part deux, part two. And yeah, this piece has been something I've been meaning to write for some time and have struggled to write with a baby, sort of breaking up my usual writing process entirely. But. Rich Kerr (05:15.012) No coincidences. Rich Kerr (05:22.429) Thank Jesse Myers (05:40.07) Everyone sort of felt this recently that there's this uptick of scams going on in the Bitcoin space, in the crypto space in general. And, you know, if you pay attention to Bitcoin Twitter, you've been seeing these little anecdotes pop up here and there and these examples and, and the latest data breach here and, and just a general increase in this kind of activity. so I felt it was a a good time to raise awareness to all the various ways in which people are at risk when they're holding Bitcoin. And I think that people in general, Bitcoiners in general, endangering their future a little bit more than they realize out of complacency. so bringing together these various anecdotes and perspectives to try to paint a picture of, you know, the way things are going right now, people need to take the security of their Bitcoin a little bit more seriously than people tend to. And I kind of want to shake Bitcoiners a little bit and say, like, you you're dealing with potential generational wealth here. Act like it, you know, take the steps that are necessary to treat that asset accordingly. So the piece goes through It starts with an anecdote of someone who left 200 Bitcoin on a paper wallet in their safe, taped to the roof of their safe. And burglars actually got into their house and opened the safe and didn't notice the paper wallet taped to the roof of their safe. So that 200 Bitcoin was saved by a piece of tape, ultimately. But that's a terrible position to be in. and could have just as easily gone the other way, right? If those burglars had noticed a piece of paper taped to the roof of a safe, that Bitcoiner would have lost generational wealth right there. And recently there's been a couple of interviews that Jun Seth, early Bitcoiner, has recorded with these scammers who have been cold calling him. Jesse Myers (08:04.668) Unfortunately, people's information, they're, if they're a Bitcoin or at this point in time, or if they're into crypto at this point in time, several different, companies, information about their clients and customers, has, has been compromised, has been breached and stolen and is now available on the dark web. As a result of that, you know, if you are a ledger customer or I, there's a, a number of other companies that, that, I'm not actually not sure which ones, I, so I don't want to incorrectly say, include a name that, that isn't actually in that group, but I, you know, I know of a, a half dozen that are, that are in there and a, and a few more that I think are in there. the, their customer information has been leaked and now if you're a customer, you might be getting phone calls. To that to your information that's now available on the dark web But who's calling you is people who are pretending to be tech support and they're young American High schoolers really Who are pretending to work for? Ledger or these other companies and and They are calling you today because there's an urgent crisis that you need to fix. Otherwise your bitcoins in jeopardy but if you just follow these steps that that this very cool column collected customer service representative will walk you through, then you will take care of the problem and your Bitcoin will be perfectly safe again. The problem is that if you follow these directions, this is actually not someone who works for tech support for that company. This is a scammer trying to get you to make a hasty decision and focus on an imaginary crisis and try to solve it and hand over your login information in the process in a way that it doesn't feel like you're doing that, but that's what you're doing. And so there's a cottage industry now of these scammers calling all sorts of, everyone on these lists of known customers and they're succeeding. And so that's causing an influx of them. More scammers are. Jesse Myers (10:29.066) piling in to try to do the same thing. To the extent that Jackson's getting calls, because he's on some list, in these interviews, Junseth manages to have Richard showing all of his scam calls that he hasn't picked up recently. So Junseth manages to get, in two separate interviews, these kids to talk about what they're doing and why and what they have been doing and how successful they've been. And they brag about how they've been making 10 to $100 ,000 a day. And if you're stupid enough to hand over your private keys, you don't deserve your Bitcoin. These kind of rationalizations of unscrupulous young men who are trying to make a quick buck. and are telling themselves that they're not in the wrong, you you deserve to be stolen from. and so, so that's what's going on on the social engineering cold calling side of things. There's also of course, tons of, of phishing emails, in the piece I included recently, Swan has had a problem where their email list has gotten out. and, and, two recent phishing emails were sent out that look like they are coming from Swan. and the same sort of format of there's a crisis, you have to solve it, click here to secure your Bitcoin. But if you go down that path, you will actually be giving over the login information for a scammer to take your Bitcoin from you. know, cold call, phone calls, phishing emails, and of course, $5 wrench attacks, sort of this looming threat of if you have Bitcoin and It's in your possession, whether on a single hardware wallet or multiple, and you have it at home with you. You're, you're becoming a target. And we're starting to see, frankly, criminals to date haven't known about Bitcoin enough to understand that Bitcoiners are vulnerable because they might be holding it at home. And I think that that is starting to shift and Jesse Myers (12:50.172) It will inevitably become common knowledge that that people with crypto, if they're holding it on in self custody, they probably have the ability to give it over. You know, if you, if you hold a gun to their head, unfortunately. and so this climate is, is, problematic to say the least that there's an increasing activity of scammers trying to, get Bitcoin from people. And it's kind of been hard to know how big of a problem this is. But recently, the FBI put out numbers saying that in 2023, five point six billion dollars in crypto related loss was incurred by Americans, which is up 44 percent from the year before. So you've got the FBI sort of putting a big number to this. And, you know, obviously, people aren't sharing their losses so readily because it's It's kind of shameful to have fallen for a phishing scam. so people may not talk about it as much as it is actually happening to folks in the Bitcoin space. So that's the context of a growing problem that is going on in the Bitcoin and crypto space in general. And there's an easy solution to it. And that is to more seriously take a look at your custody solution. And so the second half of the piece is sort of an exploration of, well, first, why it's important to upgrade your custody. And that's very simple. mean, recently we had Michael Saylor put out numbers saying that he expects Bitcoin to go to $13 million, base case $13 million per coin in 20 years, which... is based on some of my analysis and methodology, which we're very proud of. But that number is crazy, right? That's a huge number. That amounts to a 200X over the next 20 years. people who hold crypto today, hold Bitcoin, they're not thinking about it as a potential 200X. They're thinking about Jesse Myers (15:12.554) it's okay if I leave $100 ,000 of Bitcoin on Coinbase. That's okay. That's a small portion of my portfolio. Maybe it's, you you can imagine that it's $100 ,000. I make $100 ,000 a year. It's not, you know, I don't need to move heaven and earth to do anything different. Coinbase is good enough. You can easily rationalize that. But if it 200Xs in the next 20 years, that's $20 million. That's that's retirement. That's that's potentially generational wealth. And if you had 20 million dollars on Coinbase today, you would you would get it off. You would set up a better custody solution and move your coins into that custody solution. And that's the right way to think about the stakes here, because if you screw up This is a once in a species opportunity that you're going to miss out on. And that's a tragedy. anybody who's gotten to a place where they understand what Bitcoin is, and they've put meaningful capital into Bitcoin, and then they're still running this risk of leaving it on an exchange and potentially getting scammed by social engineering hackers trying to get their log information and drain their funds from Coinbase or any other exchange. That becomes a tragedy. What could have been for that individual, for their family, that will never be realized because those funds were stolen early in the process. It's just terrible. when you think about it in those terms, if you think about the $100 ,000 of Bitcoin that I have sitting on an exchange, what should I do with it instead? you should set up a better custody solution and withdraw it from an exchange. There are obviously a number of different custody formats. I. Michael (17:20.366) Jessica, before jumping into the custody side, we maybe add a little meat, like contextualize a little point, then we'll go to custody, if that works. Just on the notion of, kind of like to go back to everything you said, was a perfect recap, amazing article we've been talking about, we've been feeling personally. I think my background's known, we've talked about it a lot, helping build out, unchain, and deal with the plastic devices. I feel like we're at a very good spot. to talk with thousands of onboardings, billions of dollars. And I had hesitated a little bit in talking about a lot of things Jesse referenced because it seemed like FUD. Like this this notion of what Jesse is explaining comes from like multiple different factors. One is just knowledge, right? So Jesse referenced Bitcoin's total addressable market or the TAM of growth. That's a component. If somebody thinks about it in that lens, then you're already thinking like this. Bradley Chambers is very notable for this. He came on the pod recently. Another potential of this is just knowledge. So when you're working in the sector, you see all day long that anecdote that Jesse shared was not made up. That's something we heard directly and he softened it in this initial. I think it's a little bit more in the piece, but these are like professional rings that come into cities and literally spend three months there just to do this exact task. That's increasing. So that's the knowledge there. And then the last part is just living in the future. So if you're overly exposed, IE or IE, what did Saylor say? irresponsibly long, you feel this way already and you naturally have to find the right solution. So you're already feeling there. But for the vast majority of the market, they haven't got there. And that's the point of a lot of these writings, this conversation, the education of a firm like ours. Now, A couple of things Jesse referenced was it's pretty crazy the past like three weeks to past five when it comes to the FBI rings DOJ pulling where there stings of these people that are naturally they're actually going into homes to torture people to get their capital this happened in the UK. There's the North Korean thing that recently came about I think it was like four billion. So this is increasing and to our friend Chris Kuyper about always invert it's like let's flip it it's like when do you answer the phone when is it not a scammer is the real question because it's like I Michael (19:36.108) answer my phone ever. It's like that's how bad it is. So like all of that to say you take all that and then let's operate under four absolute assumptions that may be controversial but I'm pretty confident will all be where everybody ends up is one is everybody is a scammer. Like in Bitcoin if you really think about it's prescient because they're either trying to take your Bitcoin by way of like hey or sell it so you can invest in my new cryptocurrency or any investment to outperform Bitcoin or it's less here, give me your Bitcoin, I can rehypothecate it, or here, let me social engineer. So that just exists. Jesse referenced the CRM stuff. You should always operate, like all your info is always gonna be out there because it's data and it's very hard to secure. So they're going to know how much Bitcoin you have. It's not talked about enough, but like AI tools, all the metadata from everything is effectively out there already where you can discern a directional amount of how much Bitcoin somebody owns. So if that's true, then operate like Bitcoin is six figures. And if you have those two to be true, well then now the scamming, the sophistication of digital bear asset is, there's unknown unknowns on how great it'll be and what it'll look like in a digital world, in phishing, but then in a physical world and what does that look like and how does it manifest itself in a real way where the last part is operate like your house is not a place to store this stuff because it shouldn't be. But that is for 90 % of individuals because the first two haven't been realized yet, which is operate like all your info's out there and be operate like it's six figures. Because when those two happen and the ledger or treasures in your house and your family's around, that is not a game you want to play. And that's just not the common knowledge. And it's kind of sad because all the people that are in Bitcoin, everybody's talking about self custody, they fail to lack the fact that, it's valuable, it's still needed, there's a place for it. But like when this thing happens, there's going to be a lot of pain. And I like to think about when we think about our clients is like, we want to put them in a Michael (21:36.622) for this not to be realistic. That's why we don't onboard them to devices and have to put them in these positions. So I think just to anchor back to a little bit of like the gravity and where we sit, and this all becomes apparent, when it hits these price points, we're just living in the future by nature of working in the space, seeing and having these discussions, and everybody else has the luxury of like living in the regular world and dealing with all the normal stuff. They don't have to think about this all day long, and so this is why we bring it to light and talk through it. And then the custody is like the second part. of this and what are the frameworks to think about? How do you plan around it? Jackson Mikalic (22:10.467) Yeah, want to react, Jesse, to your piece that you just described and then to Michael's points as well, because... I still think that we're in the early innings of these scams and threats. Jesse, one of the things that you referenced is the individual who fortunately did not have their Bitcoin stolen from them because they had it taped on the top of their safe, the paper wallet. And that's only because the criminals did not find that because that's not yet common knowledge, or at least it's not widespread information that this is the prominent way that people secure their Bitcoin. Of course, on the flip there are some more sophisticated groups that do realize this and Michael alluded to that earlier that there are criminal rings that I think we're traveling a lot in the southeast. I think it was a group that was based out of West Palm if I remember correctly but then traveled in different states in the southeast and maybe made it even up north to New York. So there are more sophisticated people that know that there are millions of dollars if not more of Bitcoin secured in people's homes but we're still really early on. for this. Like if you go out onto the streets and you talk to people, you still realize that most people don't even know what Bitcoin is. They don't even inherently know that it has any sort of value and they don't have any idea about Jesse's work on full potential valuation or Michael Saylor's Bitcoin price target. Right. So we're still early for people even understanding what this is, why it's valuable. But as people come into this space and they start to realize this and they have malicious motives and we're still on a standard of people securing significant wealth in their house, it's really going to be an ugly world to live in. Jesse, I think you might have referenced it on a previous podcast we did, but it's kind of like almost reverting back to a barbaric state, right? Where like we now have to defend our money and property within our home and we constantly have to live under fear of threats of people doing that. Jackson Mikalic (24:11.031) I don't want to live in that world. don't think that Bitcoin will actually be adopted or proliferated in that type of world either, which is why we're here having this conversation. And then the second piece outside of the physical threats is the the swan emails. I have a firsthand account on that too. One of my buddies got that email that went out a little bit over a week ago now and he texted me a screenshot and he was like, what do I do with this? Because he thought it was legitimate and I had to and A, he shouldn't have his Bitcoin on an exchange to begin with. And I've told him this, but he also doesn't want to do self -custody because he doesn't he's not sophisticated enough to do it quite frankly and he doesn't want to do it so He texts me this. says, what do I do with it? Like I got this email. It's concerning. And I also told him a couple of weeks ago, Hey, you should really consider not having your Bitcoin on an exchange anymore. So he was already kind of like frightened about having it there. And then he got that email and he was like, well, like I really should do this now. And I was like, hang on a sec. Like, let me, let me take a look at this. And I was like, this is not a legitimate thing. You have like, ignore it. Don't do anything. Fortunately he didn't act on it yet, but it just goes to show that these people are getting very sophisticated. I even saw the emails, like I said, and And it looks very professionally done. Obviously, if you like take a look at the domain that it's being sent from and you understand actually, you know, what's going on there with how it's worded and what they're asking of you, you obviously know it's a scam. But for someone who might be newer to the space, not as sophisticated, doesn't understand what seed phrases are, yada yada, it looks very legitimate. So I just wanted to react to both of your points that this is, we're in the early innings of this, it's still a trillion dollar asset class. There's $900 trillion of wealth out there and this is only going to get worse as we kind of progress from here into the next cycle. Jesse Myers (25:56.104) Yeah, yeah, go ahead, Rich. Rich Kerr (25:56.364) it. I was just going to share a story. You know, just kind of draw a parallel, I guess. You know, when I first graduated from school, I went out and I became a financial advisor. I was running financial plans and and you know. working with individual investors and one day I had an inherited client, right? And what that means is essentially somebody who left the company, client doesn't have a relationship, go ahead and call on that individual, right? So I called on her and she was like, yeah, come out and see me. And I drove out to East Mesa clear out, you know, towards Red Mountain. was a heck of a drive, but it was a retirement community out there. And I walked in and it was a older lady and she was roughly 80 years old. Wonderful person. sat there and we talked and she made me tea and we had a nice conversation. We talked about her life, her children, what her children are doing, the whole nine yards. It was a fascinating conversation. Great person. And she said to me, before you leave, Rich, will I get a chance to see you again? And I said, absolutely. I'm assigned to your account and I'd be happy to meet with you and address any financial planning needs that you have, investment needs. anything that you have, you know, any kind of questions around. And so yes, you'll absolutely meet me again. And she goes, good. She said, before you leave, can you take a look at this? And she goes, come with me. And she walks down the hall and she had a auxiliary closet in the hallway. And she opened it up and she pulls out this box and pulls a file and inside that file. Rich Kerr (27:40.486) was a stack of stock certificates and bonds with coupons that she would clip and send out. And I share this story, right, because immediately I was like, my gosh, you know, she's 80 years old, she's a prime target, I don't have a clue how much all of this is worth, I haven't really studied what the certificates were and everything, but I said, I'm a little bit concerned about, you know, how you are. protecting these assets, right, because they're in bearer condition. And this makes her a threat or puts her in a threat situation. And so we sat back down and had a discussion around, you know, potentially considering a different custodial solution, right, bringing those in -house, being able to have those on a qualified custodians platform and not being exposed to the bearer nature, especially with the bonds. So came back, stock powers, everything, and we basically brought in multiple people because you can't just take all of this stuff without a proper level of security and controls and witnesses. And we brought it all back and we sent it into the home office and her account funds. And it was about $5 .7 million. This is 1991. Michael (28:59.758) Holy shit. Jesse Myers (29:05.886) Wow. Rich Kerr (29:07.983) Now, if you think about... You know, if you're a financial professional or you're an individual investor who was around during those times of bearer assets and thinking about the risk that you incurred, you'd say to yourself, well, that was lunacy at the time, right? Looking back at it, you go, my God, I can't believe I had five and a half million dollars sitting in a closet. And the risks that it presents, right? Risk of loss, fire, you know. And there were ways that they could recoup securities in the event of total, you know, disaster. that being said, it was a real, real risk, especially with the bearer bonds. And so I look back and I think about Bitcoin in the same lens, right? It's a bearer asset if you are holding it, you know, in self custody. And that's not a bad thing. Some people have the ability to hold that asset. in in bearer form. It might not align to your estate planning needs. It certainly presents risks and Jesse does a great job and I think his article about lining the strengths of that approach and also the weaknesses and you have to know yourself. You really have to know yourself. Do you have the time? Do you have the inclination? Do you have the competency? And if you have all three of them, great. You know, now make sure that your controls are in place and your backup plans are in place and those who can, you have trusted people in your life that know how to handle things should something happen to you. But that being said, time, inclination, and control. If one of those is missing, you've got a problem. Rich Kerr (30:51.94) You might have two, you've got to have all three. Otherwise, you've got a problem. So that's just a story to share. Michael (30:57.816) Yeah. One, to respond to that, Rich, I always anchor back to him when we met and you referenced your experience and your professional experience and personal at Schwab. And. Rich Kerr (31:05.893) Yeah. Michael (31:16.405) the altruism, the notable, the nature that Schwab was known for being innovative, but also democratizing the ability to, individuals to preserve their wealth. And that maybe it had slowed down, or you found Bitcoin, or like, well maybe they'll align, I'm not as aligned, and maybe this is, know, some other things, maybe it's time that kind of hang it up here. Rich Kerr (31:26.928) Yeah. Michael (31:37.726) And I think about Bitcoin as like this ultimate, think everyone would agree it democratizes the ability for people to preserve their wealth. The problem with it is that the asset does, but the custodial solutions have historically not done that, i .e. you can't really put material amounts of wealth on an exchange because people know where they get rugged. And so they start that process and then they don't get to extend into the future to put majority or like a larger percentage because they never get to see that unless they've picked one of the exchanges that are still around, there's only a few. The alternative to that is everyone claims self -custody is not hard. It isn't if you focus a lot of time or have the time and effort, majority of people, for better or worse, you can't expect them to go through and take that to your point, bearer, Rich Kerr (31:59.364) Yes. Michael (32:24.11) take custody of it and then start to position more and more wealth into the asset. you historically just have either somebody looks at it doesn't put any money in or it's very little because anything they put in is just looked at as well it's a flyer, it's not a preserver of wealth. Rich Kerr (32:41.306) Right. Michael (32:41.386) And so this notion of what we're talking about here with what we do is like to my mind the first time we've seen that where you can open it up, you're not have a centralized risk. At the same time as you learn, you don't have the risk of, well, I get rugged, i .e. block fire, i .e. Celsius. Every cycle has its own cohorts that are just mine fields in this space that keep people out from getting material exposure. And then over time, as you get educated, you have the room to breathe, to take self -custody and do anything you with the asset if you so choose to but it's not the first thing you have to do which I think ultimately keeps a lot of people out or I know it keeps a lot of people out because it's just daunting and it takes time to really get good of self -custody it's like throwing somebody a gun you can't just go to war with it like you've got to practice it nobody anybody saying any otherwise just is their line it's not true Rich Kerr (33:25.051) Yeah. Rich Kerr (33:32.934) Yeah, you know, it's interesting. I guess I'll share another story because I think I think we learn from experiences and you whether it's our own or others. But, you know, I became a huge Bitcoiner really around 2020 and it was born out of, know, I guess some false arrogance that I had and frankly some bad, not well thought out, not well researched advice that I had given a couple of people that I really care about and told them steer clear of it, right? Because I didn't know anything about it and I just said steer clear of it. A few months go by and I'm sitting in front of a number of people and I'm giving a speech to people about... the importance of being well researched and knowing, right, the difference between knowing and thinking, you know, and giving that to a client and that you need to really be well researched and, you know, before you ever, you know, just, you know, patently give advice relative to an individual security and how it might. that a client's portfolio. And that moment hit me and I was reminded immediately of how I basically did the same thing with two people that I care about. And I realized, gosh, I said something about Bitcoin without having any point of view and doing any level of personal research. Well, I did that, right? I went through it. I went back and I said, okay, I got to make amends. I got to learn. I got to double down. I'm going to do some, some work on Bitcoin. I eventually became a Bitcoiner and started. Rich Kerr (35:23.36) stacking right and I started at Coinbase and then I said okay well there's all these other exchanges maybe I need to diversify the exchange risk because I was aware of exchange failures so I went to River and I went to Swan and I went to Strike and I had all of my coins kind of scattered around Michael and then all of a sudden I realized okay Exchanges are probably not the place they have a they serve a purpose they allow you to enter into the Bitcoin, but they're not you know necessarily where I want to store my Bitcoin because they have a history of failure in a nascent industry. So I'm going to become is somebody that that steps into cold storage right and I went and did my research and I you know got a got a treasure. You know, started moving the assets from all the various exchanges onto it. And then sure enough, we had the big drawdown of 22 and I just started, you know, stacking, right? I just was like, okay, this is great. I'm all in. I'm just going to continue to, you know, cost average and put, you know, chunks of money into, into Bitcoin. Next thing I know, I'm feeling pretty proud of where I'm at and my wife who is a very seasoned executive in the financial services space and she said to me, she goes, look, how much do we have on this little device? And how does it fit into our estate plan? And. What happens if you get hit by a bus and how do I do this? And I just was like, okay, yeah, I get it. I've got a problem. I've walked us into a problem. And now I need to have a conversation about what she says. She says, look, I'm a believer in Bitcoin, but... Rich Kerr (37:24.69) Also have concerns right how did how in the world does this thing? Hit an adoption curve if everybody's running around with their wealth on a little little UBS drive right and what does that what does that mean? She's like it doesn't make sense of mass adoption. This isn't the way to mass adoption. So how she goes imagine a 70 year old client going okay yeah what am I going to do here? I'm going to end walking through it and she's like remember how hard it was to get people to move to online? capabilities just to check their accounts. They got there, but it took 15 years to get people comfortable looking and reviewing at their accounts. And she was like, these devices aren't going to do it. That's not going to be the way that Bitcoin scales. Advisors won't adopt that technology. It won't be the it won't be good for them because they're going to be tinkering and doing key checks and things that are low value activities when the relational aspects of their work is so much more meaningful and I was like okay I get it. So I went out and I started doing some more research and I found collaborative custody at Multi -Sig and I was like okay this improves our situation and I can integrate my my inheritance and our estate planning and I can title accounts correctly and we have a partner. Right. And that feels good. And my wife was like, OK, this feels good, but it's still not a scalable solution like this. She's thinking about how does this thing evolve? And, you know, that research kind of led me down the path to start integrating into the Bitcoin community a little bit more. And I found, you know, on ramp and and I was like, my God. Rich Kerr (39:21.558) Once the light bulb clicked, was like, OK, so multi -sig, which is native to Bitcoin, I liked that. And all of sudden, I started looking at the trust minimized approach by saying, OK, you've got three different institutions that have a very specific and defined role. And I thought, OK, they can't unilaterally do anything without my authorization. This is a control factor. This is really cool. So I said to my wife I go take a look at this. What do you think? about what on ramp is done here and and she's like This is how Bitcoin scales. This is how adoption curves move. This is exactly what is familiar to the 90 percent who are not early adopters of Bitcoin, right? Those people that have the time, the inclination and the competency, right? All the others that may be missing one, maybe they're missing two, maybe they're missing all three. Maybe they don't have the time inclination or the competency and they just want the Bitcoin exposure because they recognize the value proposition of sound money in very very dangerous times where debts are exploding and Deficits are running wild and and you know, nothing seems to make sense People are getting attracted to Bitcoin. All right. So how did they come to it? How did they secure it? And how does it feel familiar to them in a way that they don't have a bunch of hidden key fobs in a treasure map and she was like, is potentially the way that this makes sense and can scale. And I just thought, wow, I gotta be a part of it. And I was fortunate, I was very fortunate to find you guys because it aligned with my calling, so it was good. Jesse Myers (41:10.612) You Michael (41:18.436) We were fortunate to find you two, your wife has given us the best compliment, at least I've heard, that we may ever hear. It's a big feat, especially coming from you guys being involved. And it's, so involved in the financial industry. It's kind of a funny thing because I think we forget the tropes, right, like of... Rich Kerr (41:23.79) You Michael (41:36.898) You first principle thinking gets thrown around a lot, but it's like you hear things and you just do them and self custody has ultimately been baked into bitcoins ethos for so long that I think we kind of forget. Well, like if this is how it all goes, well, what does the world look like is the first question. And then the second one is, well, we understood why we couldn't trust a custodian, but it's not just like a small improvement to put two custodians. It's more than even a step function because you could trust some custodians, but you don't know which one. That's why you don't do it. But then when you need to trust two of three it changes the dynamic and it scales proportionate with the amount of capital So it's just a fundamentally different it goes back to that analogy of like the wheel being used the wrong way Like in my opinion multi -seg has just been used the wrong way and once you flip it you kind of like that was a thing It's the first time you've had governance built into a protocol because gold didn't have this and this is effectively the difference between gold and then you're like now I understand how to build financial products around it and So we get to talk about every day and everybody's like I don't really get what's going on Jesse Myers (42:33.535) Yeah. Michael (42:36.742) here and it's just like okay well we'll show you because at 100k everybody's gonna be like I get it like I don't really like these plastic things in my house and I really don't like Coinbase holding all of it and maybe later in the call we'll pull up that chart that everybody's been talking about with you know Coinbase that looks like a spiderweb with all of that you know capital sitting there which is just kind of if people are talking about at 58 ,000 imagine at 108 ,000 like it's just gonna be a existential like crisis for for the asset class in general. Jesse Myers (43:05.662) Yeah. Michael, to your point, think, yeah, what makes it more than a step function improvement is, with, with, with, to date, you've got third party custody and self custody. And obviously you don't have control of your coins in third party custody. You do have control of your coins in self custody. But then you have all the risks of this sort of barbarism that Jackson mentioned of you're keeping it buried out back or you're hiding it under a floorboard in your house or in a safe. And then you're living in a world where everyone's wealth is stored with them. And that invites a regression of civilization where you're kind of, you know, You go back to a world where everyone's a target at all times because they've got their wealth on them or near them. And that's, think, part of the story of Bitcoin's evolution and understanding the psychology of adoption to date and looking forward where people are not... The mainstream is not going to adopt this as the centerpiece of their financial lives if it involves, keeping their wealth on or near them at all times and being responsible for the technical and security burden of that. And the thing about multi -institution custody is this form of custody where you get the benefit of third party custodians' expertise, but you retain control. And so, know, this mantra over the 15 years of Bitcoin's life, of not your keys, not your coins has been really helpful historically because it has pointed people away from trusting their coins with Mount Gox and towards taking self custody. And that's been the better, the better of the two options because the failures of centralized exchanges have been way greater than the failures of individuals screwing up their self custody. So not your keys, not your coins has been good, but what it really at the core of that, what Jesse Myers (45:29.032) what the sage advice there is, not your control, not your coins. Because ultimately it's about control. You want to make sure that you're not giving over control of your coins to a third party custodian that could then become susceptible to a hack or could rehypothecate your coins or could somehow, know, abscond with your coins like maybe the Quadriga founder did. And so, you know, You don't want to give up control of your coins. so self custody has been the only game in town, but with multi -institution custody, you get to this combination of the expertise of third party custodians participating while you are not giving up control of your coins because each participant only has one third of the quorum of the key material. And so in that sense, you, you retain control because you're the only legal, legally authorized, person to, to, to direct the key holders to sign on your behalf. And that's the ultimate, you know, wisdom of not your keys, not your coins. So, you know, I think looking forward, what's possible with multi -institution custody is, is that we move out of this. 15 year period of either trust someone with your coins or bury it out back. And you move from that into a future state where individuals no longer have to take on the technical burden and the security burden of setting up and maintaining their own custody solution, but they get to have control of their coins. And so that's the best of both worlds. And I think it's how this asset matures. We're building a new financial system here from scratch, and that involves going through the barbaric era, and then civilization develops further from there. And that, in Bitcoin land, looks like pulling in the benefits of institutional trust, but also making sure that the end user retains control. Jesse Myers (47:51.494) and stripping away the requirement of understanding how to set up and maintain a cryptographic key. Because the mainstream is not going to be capable of that and shouldn't have to do that. And so I think, you know, that's the significance of what multi -institution custody creates looking forward. And it's also why it's the best solution for the mainstream that has yet to come to Bitcoin. And these people, you know, in the mainstream, People should not be expected to have to put in hundred hours to learn how cryptographic signatures work and then understand multi -sig and then understand hardware wallets and the vulnerabilities and think about all the threat vectors that they have and do it all yourself. It's just not tenable. It's not what the mainstream is gonna be capable of, frankly. But they're gonna be capable of having an account. with an institution that is coordinating among several institutions and provides all the benefits and risk mitigates as much as possible, all in one package. Michael (48:59.906) Yeah, and the point you made working backwards on that, it's like, I'm intimately familiar with the process of collaborative custody, whether it's Swan, Nunchuck, or anything, and the reality is if somebody really sits by themselves and is honest with themselves. they are probably very, very uncomfortable if you realize the different functions you have to be prepared to do. If you're going to use something like that, you ultimately need to be prepared for your hardware device to malfunction and then you to be able to restore it backwards and forwards. And then if the partner goes down, which you have to be prepared for, because that's why you're using it, then how do you reconstitute the wallet? And then where do you put the wallet? Is it online, offline? You need it both, but then that's a piece of information. And then you have your seeds, well they need to be away from your hardware devices. And then you actually need to make sure they're tamper -proof because somebody takes a picture, they can start to pull together all the different pieces. And maybe it doesn't matter at 20k or 40k, but maybe it matters at 60k or 100k. And when you really look at all that, nobody's incentivized to tell anybody that. When you look at it, it's like, wait, this actually doesn't. But going back really quick, Jesse, you hit on something about like, it's probably an anomaly, the amount of self, like the majority of assets sit in self -custody today, right? I think it's whatever, like 70%. percent, 60 to 70 percent. And you mentioned like the barbaric or the phase of adoption. You joked back in thinking about like gold and gold didn't come out as a coin, right? It like came out as this ore and you know if you like go back to it it's not gonna be direct but it's like you people were trading different forms of metallic units and then some people were scamming people for others until they realized like this is the one that's scarce, this is the one that's portable and all the things that makes gold gold. And that's what's happening right today with cryptocurrencies and all this stuff. It's just like one's monetizing and everything else is kind of demonetizing against it. But then they probably put it underneath their cave or wherever they sat. And then people came and robbed them. And they were like, well, maybe there's a better version of this. And then you have financial and market structure. And you evolve as a society. Michael (51:03.876) And so if the parallel, sure, I don't have to explicitly say, like that's the parallel of what's happening today and it's what kept the assets off, kept the assets offline, but it's been a sweet spot. It's gonna be the anomaly. I'm just working through this as Jesse was saying, like, well, was nice to have them offline because the price was $1 ,000 or 10 bucks. Nobody's running around looking for your 1 ,000 BTC in 10 bucks, but it changes. And something that Bradley had shared privately that it's always stuck in my head is we don't test our food every time we go eat, but we expect to live in a world where we're not gonna trust anybody? What does that look like? And so you extrapolate that further into custody of an asset that's worth a lot of money. I know a lot of, not a lot, but I know people have over 10 ,000 BTC and they custody it themselves, because how else do you do it? Or at least have this form of collaborative custody. And they don't really spend their Bitcoin, right? Like what do do with it? But at a certain point in the future you do and your exit liquidity is something in the financial world, whether it's real estate, whether it's some kind of financial asset, well there's a trail there. That metadata, that thing opens you up to a bunch of risk that wouldn't have been there at this current moment because nobody's really watching you, nobody knows you have 10 ,000 BTC, well that looks different. And so to expect somebody that has, call it 100 million today, to have three billion on their person or four billion or five, like it's just. There hasn't been a full picture of how do we get to where we want to go. And so I think like parallels like we're talking about in this notion of this is where it was, this is why it's important, this is why it's a good check. I guess the last part is if people were around in 17, Multisig was just coming around from a consumer perspective. It's been used since 2013 or 14, but from an institutional perspective, but in 17 was really when like 16, 17, the cost of the chains of the world came about. And then it really took till 21 to really pick up and that's really be a function of price. Because as the price goes up, then the need goes. Similar with like what we're doing here. Michael (53:04.62) And if you take that to its extension, it's like multi -sig was good error cover for single -sig because now from a security perspective, you're able to say, look, I don't have a full control. You know, it's kind of like a pass phrase. Like I have multiple keys or geographically separated all this. So in a world where people still want to use multi -sig and collab custody of their own, roll their own, multi -institution still provides the error cover because you're like, look, I can't move the assets. I got to go like to institutions in a future state. I got to go to an on -ramp branch and I got to go talk to them. Like it's just an evolution of where we go as an asset. that we'd all, can't, the only option is that we just hold it on our person or I can like hold somebody against the phone to Coinbase until they move the Bitcoin. Jackson Mikalic (53:44.694) Yeah, I mean everyone's made such great points. So many different topics here. One thing I was thinking of while you both were speaking is the idea that... People will acknowledge that we're early for Bitcoin, but at the same time, they believe that we've effectively figured everything out as it relates to custody and Bitcoin infrastructure. And I tweeted something earlier today just about Trezor devices. The Model 1 was introduced in July of 2014, and the price of Bitcoin was about $600. Now, a decade later in 2024, Bitcoin is about $56 ,000, right? So the price is 100x what it was a decade ago, yet people are using the same technology to secure the asset. I think that there's kind of a cognitive dissonance in the sense that if you believe that Bitcoin is early, you can't also believe that we figured everything out. It's just those two do not mesh. So... Part of our mission here is to help people understand that their needs are evolving as Bitcoin evolves in its adoption and growth trajectory. again, it doesn't mean that self -custody is a bad way to secure the asset. I think everyone on this call uses self -custody to some degree. But the difference is... we don't necessarily believe that we're going to live in a world where you can't trust anyone, where you have to go into your cave and dig up your stamps, your seed phrase, stamp and seal and sign a transaction, right? It's just like, it's worked. It's kept people safe, but the market is evolving. And to Michael's point, like actually I'm on the phone a lot of the day with people who have done self custody and they're telling me, Jackson Mikalic (55:41.634) that they have these concerns and that they have these issues. And I'm not prompting it out of them. They reach out to us or I have a conversation with them through social media some way somehow. They tell me, you know, this is how I've done it historically, but I've been doing it this way since Bitcoin was $5 ,000 or since it was $10 ,000. you know what? Now I have children or I got married, whatever it is, right? Or I moved and I realized when I to travel that this was, this was challenging and for me to think about it and it was causing, you know, it was hurting my peace of mind. So I'm hearing firsthand that people are recognizing this and they're coming around to the idea that if we are early, then we also can't and have everything figured out. And I think more people just need to think about that in the industry. Michael (56:28.964) There's a funny aspect of Jesse where you came from, from, you know, Bain or Stanford and Rich on the Schwab side. was, 10 years ago I was at Google and I went and visited, I was in Nashville last week and there was an office we built out there and I went and stopped by to just catch up, share what I was doing and I was told about my previous firm and what we did and I pulled out, I had one of these and like it clinks because it has this nice little, just like, like it moves that the, I'm holding up a Trezor and I told them like what we did and they just, they just like, they, It just laughed. It's just a funny thing if you really think about it. Imagine going in a Schwab meeting and you're like, look, we're gonna get you this alternative asset, but we're gonna ship these to you and you're gonna put it in the office. They would just be like, Rich, you please leave? I'm glad you left. We'll see you when you're in the nursing home or whatever. It's just ridiculous. Rich Kerr (57:18.127) Yeah, no, I can't even imagine. I can't even imagine. But you know, it's so funny, right? You know, Jesse was just kind of walking us through the whole, you know, trust dialogue. And, and I think that's a really, really important conversation. You know, because I think in many respects, you look at, you look at the whole the whole world today, right? know, institutions have somewhat betrayed the trust of those that they were meant to, or established to serve. And that's, it's not a good feeling for anybody. I think we all on this call can feel it in some degree, and certainly everybody that I speak with, you know, has felt a degree of, whoa, I need to really rethink what does trust mean? And... And that's a healthy thing. But when you're talking about financial services, it's an industry that's built on trust. It's an industry that really, really relies on trust. I think about the beauty of MIC in many respects is that It's familiar because it says yes, I'm going to extend trust but with boundaries It it's it's trust minimized right it has the ability for Each institution to play a singular role within their competency and their skill set and their controls But it minimizes that the total control of any single institution right because it's dispersed key risk and inside the quorum and so it says hey look I can still have a trusting relationship with you but the level of that trust has boundaries and I'm asking you to play you know qualified custodian a specific and singular role inside of a quorum and I'm dispersing that risk across others and I like that right because I'm a trust extension Rich Kerr (59:30.674) guy, right? Like my whole life, I always said, you know, I'm going to lead with trust and extend trust to people. Others kind of come from a, you got to prove to me who you are. neither is right, neither is wrong. We just have different ways that we are wired. But the beautiful thing about it is when you feel like, well, geez, I think the government has betrayed the trust of the people in some way, or form. And I think universally, regardless of where you are on the party spectrum, I that doesn't make a difference. You probably are saying, ugh, what the heck, what went wrong here? They betrayed their trust. They didn't manage the responsibility effectively for the citizens that stand up that government. One can point at the food industry or the healthcare industry or whatever industry. It doesn't make a difference. They're all showing some degradation of the trust that has been extended to them. So maybe we as people just need to sit back and say, OK, look, regardless, trust does matter. It does need to be earned, but we also need to be able to extend it with limitations and boundaries. And so there's a really interesting inner dialogue that I think we're all probably going through and evaluating how we think about trust. The same can be said on the advisor side. If you don't mind me kind of just pivoting a little bit. You know, I worked inside Schwab for 31 years and it was such a wonderful ride and I had the opportunity to help build out our wealth management capabilities at Schwab starting in, you know, you know, in the 2000s and, you know, and that's really grown into something. pretty cool, but at the same point in time, I also had the chance to cross over and work on the institutional side and work directly with advisors and helping them, you know, establish their business and run successful businesses and continue to grow and succeed with their clients. it's never lost on me. I think about, you know, a number of firms that I have very close relationships with and how Rich Kerr (01:01:47.878) they made this decision from going from a wire house into the independent channel and the deep, deep level of due diligence that they did on their custodial channels that they could have explored, whether that be Schwab or Fidelity or Raymond James or LPL, right? There were a lot of choices that were available to them and they spent an enormous amount of time. registered investment advisors doing very deep due diligence on the capabilities of that firm before they ever made the choice of who was going to be their custodial partner, right? Of the litany of things that they had to think about of starting a business, that one took a lot of mind share and a lot of, you know, looking under the rug and trying to find where there were problems. And there's a reason for that, right? Because the number one obligation that they have to their clients is to protect their assets. protect their assets not just to acquire and consolidate and asset allocate and run a great financial plan but it is to say that these assets are important to you this is the store of your life's work and I will make certain that the custodial choice is one that is sound and you will you will do that you will have a great custodian not just not just me as a small business owner and a partner in your financial affairs. That being said, I look at all of the advisors who are either very seasoned in the space today. Rich Kerr (01:03:33.653) or maybe even just trying to raise their own level of awareness to the asset class now that we have a 15 year track record, right? It's catching their eye and they're like, okay, wait a second, I need to take a look at this. And the ETFs play a role into making them take a look at it a little bit more seriously. But, you know, regularly, I mean, actually every conversation, pretty much every conversation in some way, or form, The thing I hear from advisors is, why not just ETF, right? Why not just ETF, Rich? It seems easy. And I try to remind them of... You know, those early days of when they launched their own firm and how important that custodial partner was in that selection process and that due diligence. And by the way, that due diligence is ongoing on every strategic partner of those firms. They are rigorous about it, right? And it's part of their compliance approach is to do that due diligence on a regular basis and assess the quality of their custodian and the marketplace. And so why just lean in too easy? When you're entering into an asset class that is so profound like Bitcoin, right? To Jesse's point, it's a once in a species asset. It has unique properties and it needs to be considered a very unique asset and you need to do the due diligence on what... you're really getting invested in. And so it doesn't matter on where people are on the spectrum, right? Very seasoned or or just coming to the place. There is a degree of nonchalance that sometimes happens in the due diligence. They kick the tires a little bit, but they're not really seeking and learning and understanding the implications. And so, you know, my my whole goal in going back to the wake of call is to try to raise that level of Rich Kerr (01:05:38.542) understanding that this is a unique asset. It does have unique properties and you do need to think about the way that it is custodied and whether or not your client ultimately has control. And so there's some really fascinating conversations that we're having and I love the fact that they're you know ever growing conversations. You know just my calendar continues to fill up with more and more firms that are finding you on ramp and trying to explore why we're a little bit different and and Whether they choose us or not doesn't matter to me at this point in time. What matters to me is that they're actually thinking properly about the asset and they're thinking properly about the custody and the care of that asset over the long term for their clients and the implications of not entering it incorrectly simply because it's easy. And that's what the ETFs do. Right. You just hit a rebalance button and boom you know it's allocated across your clients and rebalanced and you know it's cheap and it's price exposure but what happens when your client two years down the line says wait a second what is this because it's behaving very differently in my inside of my portfolio and they do some work and they say well geez I want to Do you know I want actual Bitcoin. I don't want a price proxy. Well now you're gonna have a potential taxable gain and you've entered the asset incorrectly. You've done well for your client, but you you've entered the asset incorrectly and you have downstream complications. But I am seeing more and more of the seasoned firms, right? The ones who really came to it early and felt a degree of conviction and they did their due diligence and they secured the Bitcoin. They're rethinking their business. Rich Kerr (01:07:30.952) business models too. You know, do I want it sitting on single exchange? Is that something that I'm comfortable with at this stage of the game? Or am I comfortable holding keys or setting up and being exposed to people's seed phrases and doing key checks with clients? You know, am I comfortable doing that? Is that a risk that makes sense and is it a good approach long term for my value proposition and what I bring to the client relationship. I doing low value activities in order to help a client and they couldn't do it on their own without me? Did I set them up in the right arrangement? And so there's really interesting conversations that are emerging at all levels of the advisor space. Michael (01:08:22.776) Yeah. Michael (01:08:29.358) Yeah, I'm kind of jealous of Rich. I got lucky to get on a couple of those calls. I don't know how it happened. was via LinkedIn, and I was able to get a taste of some of these conversations that are happening on the RIA front. one of the angles on the barbell, thinking about it a barbell, there's the natural independent advisor that wants to differentiate, which you want to look different than an ETF, right? Because they all look the same. But then there's the other side of it, which is ultra sophisticated, ultra high net worth individuals want specialists, which is pretty standard in asset management, but the funny thing is that you you kind of know empirically, you get what you pay for. then you know, like okay, well if an ETF is low cost, maybe I should look more, maybe a specialist can help me think about counterparty risk. But then I think that there's this notion of if you want a specialist for an asset, where the stakes aren't so high, you still, that's standard, right? You go somewhere, but imagine the stakes being this high where we've seen in the past 15 years, if you pick the wrong custodian in the wrong place, the assets don't end up at the best spot, or a loss of zero. So what does that look like for the next couple of years or in the future? Are the big incumbents actually, there a way for them to adopt, integrate? or are they not able to catch up? Because by the time they catch up to custody, then there's all these other financial products that end up looking like, there's just an interesting dynamic on how does that play out that is gonna be TBD because the most innovative thing we think about right now is an ETF, which is a fund wrapper that sits at Coinbase. And that's the most innovative because there's still people that haven't stepped in. And by the time they step in and do anything, let's just call it MI, -I -C, Multi -Institution Custody, that's years from now, if at best. But then there's a whole slew of financial products that already existed while a lot of bad things have probably happened at centralized custodians because of the asset, its volatility, its risk profile of custody. So it's just an interesting dynamic of these independent advisors in their best interest to find alternatives because it lets them be specialized, but then the market starts to catch up. Rich Kerr (01:10:35.328) you Michael (01:10:40.418) to it because it's technology and the flight, the capital moves very quickly. And is BlackRock and these other firms able to catch up and do that if this asset takes as much capital flow from what we believe in the different buckets. It's just an interesting landscape where I think most people, including us, would believe, okay, BlackRock's gonna be BlackRock, Fidelity's gonna be Fidelity, Schwab. It's gonna step in and they'll probably adopt it and pool it. It's like, I'm starting to believe that less and less because of how radically different this asset is that I don't know at the end state they will be big players. Rich Kerr (01:11:11.364) Well said. It's going to be interesting. Yeah, good. Jackson Mikalic (01:11:13.772) Rich, I have a question. I have a question for you just in terms of the conversations that you've been having recently. I've been a part of some of them. And to Michael's point, it's been really exciting and informative for me to be a part of those conversations and just get to hear firsthand how your experience from Schwab for over 30 years really ties into your approach with working with advisors. But I know I'm not on every call that you have and even those meetings that you have in person, which seem to be, as you said, filling up your calendar more and more. So there's a lot of interest. I'm curious if there's like any themes that you notice in terms of the advisors that you're speaking with, whether it's firm size, is there any theme geographically, is there any theme around where they're at in terms of having Bitcoin product within the firm? Just curious to hear from your perspective where you're seeing the most interest these days and maybe how you'd expect that to change. next 6 to 12 months. Rich Kerr (01:12:17.917) Yeah, that's an interesting question. I think I'm seeing a little bit of everything in terms of firm size. You know, where we Jackson, I mean, you and I have been on calls with our eyes that are well north of $100 billion AUM. So they're there, they're paying attention. Now, they don't have as much to lose. You know, in other words, it's easy for them to lean into the ETFs. It's scalable. These firms have been have hit a certain scale advantage and and you know, the ETFs play really, really well there for firms that are thinking about their scale. And but they are also recognizing that they that that's not a sufficient enough solution all by itself. And they do need to have one off scenarios to meet the more complex client needs or more sophisticated client. And when I say that, I mean the client who actually has an awareness of what Bitcoin is and actually places value on it. They're not going to be inclined to see an ETF in their portfolio. They want, you know, they want those ownership assurances. And so they're starting to look at what is the array of ways to access this product that meet unique client circumstances. Where I find the most interest is actually in a very unique space. It's usually that advisor that's sitting at hundred million to seven hundred and fifty million. And there's a lot of advisors that are sitting in that hundred to seven hundred and fifty million. The reason why those are the really interesting conversations, mean really interesting, they've got teeth, is because the principal probably hasn't had a succession event, they are still in it, they are entrepreneurial, they are very close to their client and their client needs, they build specialized capabilities, it's very boutique in many respects, and they want to constantly Rich Kerr (01:14:38.364) differentiate and add value to their clients. One, to retain those clients because those clients are highly sought after and they know that the competitive landscape is difficult. And two, because they recognize that they can continue to grow and they can differentiate with the right level of expertise. And so the trend I would tell you here is really about education. advisors are looking for. partners in this space that allow them to upgrade their knowledge in how to access or, you know, not just to access, but how to secure and how to collaborate in the Bitcoin space and integrate it into their wealth management offer. So there's a lot more, they're more nimble, they're hungrier, they wish to differentiate, and they recognize that there are threat vectors on them. right for their clients that they want to close off and and you know it doesn't matter what size firm you're with at the end of the day advisors are smart people smart people are drawn to financial services right and because it tests them intellectually it tests them relationally and and there's good money here and to be made if you if you are very good and you can differentiate and so question is how do you continue to grow as an advisor and how do you grow your knowledge and be able to answer and address the big questions that clients are asking today. And whenever I'm on a call with an advisor I always ask them what's top of mind for clients when they come through your door? What universally are you hearing? Rich Kerr (01:16:25.292) almost universally, the question is around inflation and the impacts of inflation on their discretionary income, right? And it doesn't matter how wealthy you are or how little of assets you've accumulated, you are feeling the pain of compounding. impacts of inflation and you know it does affect people and so the question becomes for these advisors is how are we really addressing it and does our 60 -40 model really address it on real terms based off of what you know we're experiencing when people go to the pump or when they go to the grocery store. Or if they're paying their rent and their mortgage or whatever it might be right people are feeling compressed and Limited in what they can do and so advisors recognize that and they understand the return Characteristics of what Bitcoin has presented over a 15 year track record and they sit back and go probably need to Probably need to have a solution and what's the right solution. so universally I'm hearing education matters to them. And so, you know, I think, you know, all four of us well know on this call, we spend a ton of time trying to be educators, to be teachers, to be good partners, you know, to our clients and prospective clients and pushing out content that has meaning and that helps people on their Bitcoin journey. And we're customizing and building pieces that Rich Kerr (01:18:05.242) that speak to the advisory firm, right? How do you speak to a financial professional who's looking to integrate this and become an expert and retain their trusted advisor status with their clients and put them in a position of trust and retain in that position? We're trying to solve that and we're working really hard to collaborate with those advisors to give them what they need to be able to be successful with their clients. Jackson Mikalic (01:18:32.983) Yeah. Yeah, well said. mean, I've certainly noticed that too, Rich, on some of the calls I've been on with you, where typically our story and the Bitcoin story is resonating with folks who want to grow their business and have clients that are more concerned about their purchasing power and the inability of traditional financial assets to grow their purchasing power at this point. We live in a world now where if you invest in equities or real estate, you're merely keeping pace with the rate of inflation. which wasn't the case a decade ago. If you were invested in, any investable asset, you were getting still a pretty nice real return, but then the inflation made its way into the real economy in the past almost half a decade at this point. And now people are really challenged to even preserve their wealth, let alone grow it. And I think there's an interesting story, Rich, I know that you've been thinking and writing about this as well, but there's an interesting story to the extent that Bitcoin does align incentives with advisors and their clients because RIAs will win when their clients win. They're not making money pushing product on them. They're winning when their clients grow, in a lot of cases grow their assets under management if they're a fee based advisor. Right. So any advisor who looks at the performance of Bitcoin over the past five, 10 or 15 years and becomes compelled by that and wants to incorporate that into a portfolio will end up benefiting themselves kind of in a roundabout way because their clients will have a higher expected return assuming the things that have played out over the past 15 years continue to do so and we continue to see adoption of all sorts of institutions, individuals, which we are seeing. So it does really align incentives in a unique way that I haven't really seen before in the finance industry. Rich Kerr (01:20:26.51) Yeah, I mean, there's so many ways that advisors can grow by integrating Bitcoin. know, one, it opens up new channels to go after assets of existing clients that have Bitcoin on exchanges and improving their setup, right? Two, new you know, Bitcoiners that exist out there, you know, that let's look at what Michael just said. 70 % hold it in self custody. And they are and there's what one and a quarter trillion dollar asset class as of today, roughly. I mean, that's a huge pool of assets that are nobody is going after. And then the other piece about that is, you know, the advisors who are captured in wirehouses, they're going to go independent and they are calling us all the regular and we're like, okay, we can't really do much for you in your current situation. But you know, if your circumstances ever change, we were happy to be a thought partner and help you. And those folks are going to come out. And the question is, where are they going to land? Are they going to launch their own firm or are they going to join a firm that actually has an infrastructure set up that supports Bitcoin adoption? and that's a really interesting opportunity. And then I would say the final piece, which you're touching on, which is the kegger story, right? I just saw this morning, right? The 10 -year kegger for Bitcoin is 63%. And I think Brian Kubellas, who's our head of strategy and marketing, he said in any four year period, and correct me if I'm wrong here, Jesse, you probably know this better than I, but in any four year period and even taking a look at the very worst four year period, the kegger for Bitcoin was 25%. And so when you think about the compounding effects within the incentive alignment for an advisor, if I'm an advisor, Rich Kerr (01:22:24.085) I want Bitcoin in my client's portfolios because not only is my client going to win, which makes them a stickier client because they're saying, okay, you did great for me. Thank you. Right. You really protected our, our, our wealth, but you also did great as a firm. because your assets expand, right? So if I'm a billion dollar firm and I put, just for simple math, I put what? A 5 % allocation into Bitcoin, you know, what? That's 50 million, okay? And then, you know, start dropping a, you know, 63 % kegger on that. and then extrapolate that growth over a 10 year track record and knowing that you pull a 1 % management fee out of that, then look at what your revenue has done as a business owner. And I would encourage everybody to do that, you know, and just be able to sit back and go, wait a second, not only did I serve my clients well. and they grew, I grew along with them, we all benefited by bringing this solution forward just with a simple allocation and that's the beautiful thing about it. Michael (01:23:36.211) It's scary how the incentives map to every little place it touches, but also the asymmetry. Because asymmetry to what you described in the upside, but also the downside if they don't adopt this, because the capital flight and loss of clients, because it's a one -way door. If they don't find it there, they're gonna go somewhere else. So they can get the growth of 63%, or they can get the growth of whatever the percentage that's gonna be, or the negative growth of whatever's leaving on an annualized basis. Which is a very scary thing. I think that's how you reference kind of the, when you talk about like, the thing I always remember is, talking to an advisor, what price does your client deserve Bitcoin, Mr. Advisor, and it kind of just like stops people dead in their tracks thinking about this. Rich Kerr (01:24:03.503) Yeah, no. Rich Kerr (01:24:14.746) Yeah. Rich Kerr (01:24:20.004) Yeah, I it's I say that all the time is like, you know, in Bitcoin, we always say what everybody gets Bitcoin at the price that they deserve. What price do your clients deserve? I mean, answer that. I mean, it's it's not rhetorical. I want you to tell me, I want you to tell me that you got, you know, get off zero, get off zero. And, you know, That's the beautiful thing. But then, to the point of why we're all here, once you do, make sure that your diligence doesn't stop there. You've gotta secure it because the biggest risk to Bitcoin, once you're in it, is the loss of it. Jackson Mikalic (01:25:05.027) Yeah. Well said. Well, I know we're up on time, but Rich, really appreciate you coming on. I feel like the last 10 minutes or so of this conversation is just a preview of what you and Mark are covering on the wake up call. for folks that are interested in this angle as it relates to Bitcoin adoption in the wealth management industry, be sure to check that one out. And then of course, you can reach out to any four of us on this call directly on email or through our website or over LinkedIn or social. Happy to get in touch. Have a conversation. Rich Kerr (01:25:18.875) Yeah. Jackson Mikalic (01:25:36.409) and then I want to give one final plug as well. We have a webinar on Tuesday, September 17th, so less than a week away. The details for that will be in the show notes today. We'll be discussing the report that we recently published, The Evolution of Bitcoin Custody. Touched on some of the themes here today, but I'd imagine we'll go even deeper. And then one of the benefits of joining that as well is we'll have a lot of time allotted to a Q &A at the end of the session. So for those of you who are Rich Kerr (01:25:40.41) Yeah. Jackson Mikalic (01:26:05.648) listening to the podcast or following us along and have questions or concerns and want to air those out and get the team's feedback, be sure to join that one. It'll be a good session. So Rich, Jesse, Michael, good to see you all. Thanks for the time today and thanks everyone for joining and listening along today. Michael (01:26:24.824) Thanks, Rich. Rich Kerr (01:26:25.904) Thanks guys, great to be with you.