New trends are too easy for financial advisors to ignore, Cerulli Reports said in a recent white paper, but 13 years after bitcoin’s launch, the cryptocurrency is no longer new, and it’s no longer a trend.
So, are advisors ready now?
Because they don’t just need to know crypto, they need to be able to discuss it with clients, Cerulli said in his February post, “Cryptocurrency: Navigating a Frontier Asset Class for Advisors and Asset Managers.”
Client demand for information and access to crypto is already evident, Cerulli said, citing research from the Financial Planning Association showing that 80% of advisers say they have been asked about the use of crypto. This same research revealed that only 14% actually use or recommend cryptocurrencies.
Cerulli’s own numbers painted a grimmer picture: 82% of advisors in his recent survey hear from clients expressing at least some sort of interest in crypto exposure. (Most of these responses show low to medium interest.)
Although 68% of advisors in Cerulli Research believe demand for cryptocurrency exposures will increase in the future, only 7% of advisors surveyed said they currently invest in them, and only 16% plan to invest in them in the future. over the next two years. Only 31% of advisors said they plan to recommend the use of cryptocurrency in client wallets at any time in the future.
in no hurry
Cerulli discovered that advisers had reasons not to rush. Many do not understand or believe in crypto as an investment. Others worry that he won’t grow or that he can’t be properly assessed. Still others view crypto investing as a game due to the lack of traditional fundamentals on which valuations and growth expectations can be based.
Advisors may also be reluctant to trust crypto market participants, Cerulli said.
But there are also structural reasons, Cerulli said. Many companies do not offer crypto investment options on their platforms. There is a misunderstanding of the asset class from a tax and regulatory perspective, and learning about a new multi-faceted asset class takes time.
Advisors allocate a small portion of their client portfolios to alternatives, which averaged about 10.5% of client portfolios in 2021. That number is expected to average 11.8% in 2023, according to Cerulli research. Any crypto allocation would be only a small part of this alternative envelope, projected as an average of 2.5% of alternative investments in client portfolios in 2023.