How should RIAs choose a crypto sub-advisor? Through a documented due diligence process that examines the provider's registration status, investment process, custody arrangements, discretion, conflicts, fees, reporting, compliance support, and fit with the firm's clients. Findings should be recorded and reviewed periodically with compliance counsel before and after any engagement. This page sits within the Crypto Services for RIAs Hub.
What a Crypto Sub-Advisor Is
A crypto sub-advisor is a third-party investment adviser an RIA engages to manage or model the digital-asset portion of client portfolios, while the RIA keeps the primary client relationship and fiduciary duty. The arrangement does not remove that duty: the RIA remains responsible for supervising the relationship, even though day-to-day strategy is delegated. For a broader view of the model, see what crypto sub-advisory is and how it differs from a crypto SMA for advisors.
Due Diligence Checklist
Work through each item and keep the supporting documents in your file. Selection sits within the firm's wider crypto due diligence checklist for RIAs.
- Registration. Is the provider registered as an investment adviser? Pull the Form ADV (Parts 1, 2A, and 2B) and confirm the disciplinary history on the SEC's adviser-search system. Registration alone does not guarantee skill or results.
- Services and discretion. What exactly is delivered (models, full discretion, reporting), and who holds trading discretion over client accounts?
- Custody. How are assets held? Confirm a Cryptocurrency qualified custodians have emerged to serve institutional requirements. Qualified custody may be required for register">qualified custodian under the SEC custody rule, and ask whether cold storage, multi-signature controls, and a current SOC 1 or SOC 2 report are in place. See qualified custody for RIAs managing digital assets.
- Investment process. What strategies, models, or indexes are used, and how is rebalancing handled?
- Conflicts. What conflicts of interest exist (affiliated custodians, token holdings, revenue sharing), and how are they disclosed?
- Fees. How is the sub-advisory fee structured and disclosed, and how does it layer with your own fee?
- Reporting. What position, performance, and tax reporting is available, and does it fit your stack?
- Tax records. How does the provider handle cost basis and records? Digital assets are generally treated as property by the IRS, and Form 1099-DA reporting is being phased in.
- Compliance support. What disclosures, marketing, and audit materials does the provider supply?
Operational Fit
The sub-advisor should match your client base, portfolio process, reporting tools, custody relationships, and compliance program. A strategy that cannot reconcile with your performance reporting, or that relies on a custodian you cannot onboard, creates friction regardless of its merits. Choosing well overlaps with how RIAs should document crypto recommendations.
Ongoing Review
Selection is not a one-time event. Review each sub-advisor periodically against performance, process changes, personnel turnover, custody and control reports, compliance posture, fees, and service quality. Document what you reviewed and when. No sub-advisor or strategy removes market, custody, or tax risk from digital-asset exposure, so the review should test how those risks are being managed, not assume they are gone.
Related Questions
Does using a crypto sub-advisor remove the RIA's fiduciary duty?
Generally no. Delegating strategy does not delegate the duty of care. The RIA typically remains responsible for selecting and supervising the sub-advisor and for acting in the client's best interest, which is why the selection and review process should be documented.
Is a crypto sub-advisor required to use a qualified custodian?
It depends on the facts, but client digital assets generally still fall under the SEC custody rule, which contemplates a qualified custodian. Confirm custody arrangements and supporting control reports during diligence and consult compliance counsel on your specific structure.
How often should an RIA review a crypto sub-advisor?
There is no single mandated cadence, but many firms review at least annually and after any material change in personnel, process, custody, or fees. The right frequency depends on the firm's policies and the strategy involved.
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 selecting sub-advisors. Registration does not imply a certain level of skill or training.