When a client owns crypto outside our firm, the first step is to define the scope of service in writing: education, reporting, planning, advice, billing, or discretionary management. Held-away digital assets can affect risk, taxes, liquidity, and estate planning even when the firm never takes custody, so the engagement terms should state exactly what the advisor will and will not do.
What "Held-Away Crypto" Means
Held-away crypto is any digital asset a client controls outside the firm's custody and trading platform, coins on an exchange account, tokens in a self-custodied wallet, or positions inside a separate trust or LLC. The advisor may see, plan around, or even advise on these assets, but does not hold the private keys or settle trades. That distinction drives the custody, billing, and reporting questions below, and it is the dividing line the SEC custody rule turns on. For the firm-wide version of this question, see what to do when a client owns crypto held away from the advisor, and for the broader practice context, the Crypto Services for RIAs hub.
Advisor Workflow
- Ask about crypto ownership during discovery, ideally through a standard crypto client questionnaire.
- Document where each asset is held and who controls the keys.
- Identify whether the asset is self-custodied or sits with a third-party exchange or Cryptocurrency qualified custodians have emerged to serve institutional requirements. Qualified custody may be required for register">qualified custodian.
- Clarify in the agreement whether the firm will advise on the asset or only acknowledge it.
- Review custody and billing implications before charging on the position.
- Coordinate tax-record and estate-planning issues, given the IRS treats digital assets as property.
- Document recommendations, limitations, and anything the client declined.
Key Compliance Questions
Work each of these before the asset enters a plan, report, or fee calculation:
- Custody. Does the way the firm interacts with the asset create custody under the SEC rule (for example, holding keys or login credentials)?
- Billing. Can the firm bill on the asset, and is the basis disclosed? See whether RIAs can bill on held-away crypto.
- Reporting. Is the position included in performance reporting, and is its valuation source noted?
- Disclosure. What Form ADV and engagement-letter disclosures are needed for the scope chosen?
- Records. Who is responsible for tax records and cost basis, and is that written down? See how RIAs should document crypto recommendations.
When to Refer Out
Referral or a crypto specialist may fit when the client has self-custodied keys, large unrealized gains, trust or LLC ownership, missing records, or a token liquidity event. The trade-off is real either way: bringing the asset into scope adds custody, valuation, and tax-record duties, while leaving it out of scope means the plan may not reflect a material holding. For the timing call, see when an advisor should refer crypto clients to a specialist.
Related Questions
Can we advise on crypto a client self-custodies?
Generally yes, advice itself is permitted, but holding the client's private keys or login credentials can trigger the custody rule. Whether you can advise without custody depends on the facts and your compliance review.
Does reviewing held-away crypto let us bill on it?
Not automatically. Billing on a held-away asset depends on the disclosed fee basis, your ability to value the position, and state and SEC interpretations. Confirm with compliance counsel before adding it to a fee calculation.
Who handles tax records for crypto we don't custody?
Usually the client, but the engagement letter should say so explicitly. Because the IRS treats digital assets as property, each disposal can be a taxable event; coordinate with the client's tax professional rather than assuming records exist.
Sources
Compliance Note
This article is educational and does not provide legal, compliance, tax, investment, fiduciary, or custody advice. RIAs should consult compliance counsel before advising on held-away crypto. SEC registration alone does not guarantee a particular level of skill or outcome, and no workflow removes the market, custody, or tax risks inherent in digital assets. Registration does not imply a certain level of skill or training.