Learning the Crypto Lingo | National Association of Plan Advisors

In the spring of last year, I finally aped in. Cryptocurrency had been on my radar for a while, but I hadn’t taken the time to learn how it worked or why it had appeal. 

That changed after learning about the Bored Ape Yacht Club (BAYC). Like almost every startup entity, they had a business plan, but it basically consisted of a statement instead of a series of PowerPoint slides. In short, a bunch of “apes” (people who go all-in on something) are so bored with their extreme wealth that they take up residence in a swamp. The BAYC sold pictures of cartoon apes as a membership in this club. These cartoons are non-fungible tokens (NFTs)—unique digital items with proven ownership on a blockchain.

Sounds ridiculous, right? Not even a year after their launch, their company is valued at approximately $5 billion. The BAYC clearly struck a chord, and NFT was named the word of the year for 2021 by Collins Dictionary. Celebrities (Steph Curry, Jimmy Fallon, Paris Hilton, Justin Bieber and dozens of others) have purchased a Bored Ape NFT to show they’re hip with the culture. Joining the BAYC will now cost you a minimum of $200,000.

Okay, let’s back up a bit. Before someone purchases an NFT, they usually own some kind of cryptocurrency. Motivations for purchasing crypto varies, and in this column—distilled after spending thousands of hours in this space for the past year—I’ll show you how to understand why your clients may own crypto, and how to speak their language to learn their motivations. If cryptocurrency or other digital assets find their way into retirement plans, internalizing the language below will put you way ahead of the curve.

Here’s a fictional conversation that might benefit you, along with the underlying definitions of the verbiage used and the reasons.


For example, by simply asking a client, “What do you think of cryptocurrency?”, the following conversation could play out:

Client: I’m into it and have had a little Bitcoin for a while.

You: Interesting! Are you keeping your crypto on an exchange or are you choosing to self-custody?

This tells us how your client is storing their crypto. An exchange, like BlockFi, Coinbase, Crypto.com, Kraken or others, is how one can initially buy Bitcoin, Ethereum, or dozens of different cryptocurrencies. If your client is self-custodying their assets, this is analogous to going to the bank and withdrawing a bag of cash—if you lose the bag, you lose your money. A self-custody situation puts much more responsibility on the owner of the crypto vesus the assets being held on an exchange.


Read more commentary by Spencer X Smith here


If the client is self-custodying:

You: Do you feel like a hardware wallet is important for most crypto investors like you?

Client: I do. Once you have enough money invested in crypto, it’s important for security to do that.

A hardware wallet is an extra layer of security chosen by many crypto investors. Sometimes this is referred to as “cold storage.” This is a little like two-factor authentication, where a second method is required to approve transactions. A hardware wallet will allow a user to sign requests to withdraw money digitally, so if a computer is compromised (via a hack or malware), the hardware wallet will impede a hacker from stealing self-custodied assets. 

You: What is that number, would you say, for most people? How much do they need in crypto to really take security seriously?

Client: $5,000.

This gives you a gauge of how your client thinks about their crypto holdings relative to other people. Some crypto investors think everything should be stored with a hardware-wallet level of security, while others think there’s a minimum for the cost and hassle involved with the process.

You: Makes sense. In your case, is this something you include in your overall investment portfolio? Or is it just more play money, so to speak?

Client: I include it in my portfolio.

This gives a gauge of how your client thinks about their crypto holdings relative to their own net worth. An oft-repeated tenet in crypto is, “Don’t invest what you can’t afford to lose.” Put another way, this stuff could literally go to zero. Depending on when your client began investing in crypto, it could comprise a large portion of their wealth, and if they’re including it in their portfolio value, it shows they’ve probably grown accustomed to the volatility and are holding for the long-term. 

You: Which percentage do you feel is appropriate for most investors?

Client: 5%. 

This is an important insight. If your client says anything other than “zero,” they’re probably considering their crypto as an alternative-asset sleeve appropriate for both themselves and others. This is indicative of their belief in the overall crypto ecosystem and its viability. Going a step further, if their retirement plan eventually contains a crypto option, it might be something they would consider. If your client is a plan sponsor herself or himself, this could be a significant value proposition for your services if you can speak to this possibility.

Regardless of how you feel about cryptocurrency or NFTs, understanding why others may have an interest in these topics will help your business. As the world grows increasingly digital, and as we break down geographic boundaries with a medium of exchange not tied to a government entity, I predict these technologies will become more commonplace.

Have you talked to your clients about cryptocurrency yet? If not, it could make sense to introduce a conversation like the sample above to better understand them and their financial goals. 

Spencer X Smith is the founder of AmpliPhi Social Media Strategies. He’s a former 401(k) wholesaler, and now teaches financial services professionals how to use social media for business development. This column originally appeared in the Spring issue of NAPA Net the Magazine.