Evidence is becoming increasingly apparent that financial advisors are often ill-equipped to advise their clients who own crypto assets, given that the percentage of clients who invest in and maintain knowledge of them greatly outpaces that of their advisors, as DJ Windle writes today.
Also in today’s newsletter, Kelly Chambers introduces what he calls “the Weekly Digital Asset Power Hour,” a challenge for financial advisors to block off time to “research” one digital asset per week of the 500 within CoinDesk’s Digital Asset Classification Standard.
Despite bitcoin’s surge in popularity, many financial advisors remain hesitant or even dismissive towards cryptocurrencies. This has created a growing disconnect between advisors and their clients who have invested in these digital assets.
The reasons for this disconnect are numerous. Some advisors are skeptical of cryptocurrencies, viewing them as a speculative bubble or simply failing to understand their underlying technology. Others may be deterred by the lack of clear regulations or guidance from regulatory bodies.
This disconnect can be especially problematic for clients who have invested heavily in cryptocurrencies without the guidance of a financial advisor. While some may have had tremendous success, others may be exposing themselves to unnecessary risks or missed opportunities.
The disconnect between financial advisors and their clients regarding cryptocurrencies has become increasingly apparent in recent years. The Bitwise/VettaFi 2023 Benchmark Survey of Financial Advisor Attitudes Toward Crypto Assets underscores this trend, revealing that only 37% of advisors admit to having personally invested in crypto, down 10% from 2022. In contrast, the same survey revealed that financial advisors say that upwards of 83% of clients either have crypto or the advisor isn’t aware if they do.
Furthermore, a recent survey by Coinbase of over 2,000 Americans in February 2023 found that 76% of Americans believe that cryptocurrency and blockchain are the future, while 20% of all Americans currently own crypto. Additionally, 67% of Americans think that the current financial system needs major changes or a complete overhaul. These statistics demonstrate the growing popularity and acceptance of cryptocurrencies among the general public.
Despite these trends, the Bitwise/VettaFi survey also showed that 76% of financial advisors in 2023 stated that they would definitely not or probably not invest their clients in crypto. This highlights the need for financial advisors to become more informed and engaged with these assets to better serve their clients and help them make informed investment decisions.
As cryptocurrencies continue to gain mainstream acceptance and become more integrated into the financial landscape, advisors who remain disconnected from these assets may find themselves at a disadvantage. It is crucial for financial advisors to take these surveys seriously and adapt to the changing landscape of the financial industry.
Understandably, crypto regulation is getting a lot of attention. But for investors looking to allocate capital over a longer horizon, focusing too much on tracking legislation and industry legal woes may be a distraction to long-term success.
Most advisers are getting their crypto education from traditional media, which focuses on BTC, ETH, regulation and the latest news on the Sam Bankman-Fried saga.
Why does this matter? It suggests some of the most sophisticated investors – financial advisers – lack broad knowledge of digital assets.
So what’s an investor to do when news headlines are luring us in with who Securities and Exchange Commission Chair Gary Gensler is after or what Kevin O’Leary thinks of the SEC? Start a weekly challenge, of course!
I know a lot of financial professionals who block off time for “research” (aka reading news). The challenge is to dedicate at least one of those hours per week to learning about a digital asset. CoinDesk’s Digital Asset Classification Standard has 500 assets waiting for you. (If this at all sounds boring, remind yourself that Warren Buffett has long done this with 10-Ks – oof.)
The more you understand the use cases of individual assets, the better you can diversify beyond bitcoin (BTC) and Ethereum’s ETH, whether that be selecting individual assets or taking an index approach. The data suggests that it may also give you a competitive edge.
Over the past few months, CoinDesk has been developing a reward system for Consensus 2023 attendees to bring long-term value. We’ve partnered with Art Blocks Engine, TokenProof and Passage Protocol to launch the Consensus Multi-Year, Multi-Tiered NFT Ticket, coming on March 2. Learn more.
The pilot is currently only available for Android users in the U.S., U.K., Germany, Australia and New Zealand.
Disclaimer: The information contained in this newsletter, and any information linked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. You should seek additional information regarding the merits and risks of investing in any cryptocurrency or digital assets.
