Twenty-five percent of advisors said their clients had asked about investing in cryptocurrency in 2019. But less than one percent of advisors acted on the demand or even recommended bitcoin.
“Virtually no advisers surveyed (less than 1 percent) are currently using or recommending cyrptocurrencies in client portfolios.”
The timing of the survey (first-quarter 2019) means curious investors missed a huge 130 percent run-up in 2019 because of hyper-cautious advisors.
Are financial advisors breaking their fiduciary duty by not recommending it?
Only 1% financial advisors think crypto should be in your portfolio
The report, conducted by the Journal of Financial Planning, and the FPA Research and Practice Institute, polled 392 active financial advisors. The results suggest that financial advisors are reluctant to commit capital to bitcoin.
Only 1 percent called crypto “a viable investment option that has a place in your portfolio.”
Thirty-two percent dismissed it entirely, saying it is “not a viable investment option,” 15 percent called it a gamble, and 18 percent said crypto is a fad to be ignored.
On the bright side, a third of advisors are actively monitoring the space, calling bitcoin “an interesting concept to keep an eye on, but not an investment yet.”
Ignoring client crypto demand?
Despite overly-cautious advisors, client-side demand for bitcoin is clearly strong. One-fourth of advisors said their clients had asked them about crypto opportunities, even in the depths of the bear market.
Are financial advisors ignoring the demand for alternative investments? Almost certainly.
It’s worth pointing out that financial advisors have a fiduciary duty to protect their clients’ money. They are, therefore, perhaps the most conservative and cautious actors in traditional finance.
But they are stubborn in their recommendations. Less than 1 percent plan to hold or recommend cryptocurrencies in the next year.
A Bitcoin ETF could change everything
The report revealed that financial advisors are still enamored by exchange-traded funds (ETFs). 88 percent of advisors use and recommend ETFs, and 45 percent expect to increase their exposure in the next 12 months.
If approved, a bitcoin ETF could give financial advisors a route to crypto exposure that they are comfortable with.
The approval process for a Bitcoin ETF is ongoing, although few expect any progress before 2020.
Are institutional players coming?
A slew of institutional players have flipped the narrative on bitcoin investment. Even traditional investors admitted recently on CNBC that BTC should make up between 1-10 percent of your portfolio.
“Usually in a portfolio, gold is about 5-10% of the portfolio so there’s nothing wrong with saying bitcoin couldn’t be 5-10% of a portfolio right now.”
Meanwhile, $7 trillion asset management firm Fidelity has built a crypto trading and custody platform to serve its clients. Wall Street is slowly opening up to bitcoin and digital assets. But small-fry financial advisors, driven by conservative strategies, may be slow to follow.
As bitcoin remains the best-performing asset of 2019 (not to mention the last ten years), perhaps it’s time for advisors to wake up and realize they are breaking their fiduciary duty by not allocating assets to bitcoin.