Survey Reveals Financial Advisors’ Reluctance to Discuss Crypto with Clients over Legal Concerns
According to a recent survey conducted by CoreData’s “Australia’s Crypto Investors” report, only 1% of financial advisors frequently engage in discussions about cryptocurrency with their clients. The survey found that a staggering 89% of financial advisors have never provided advice on cryptocurrency due to concerns about potential legal liabilities and associated expenses if the investment goes awry.
The report highlights that one of the main reasons advisors are hesitant to discuss cryptocurrency is the lack of coverage by professional indemnity insurance (PI). This, coupled with other factors such as the prevalence of scams in the cryptocurrency space, limited information compared to traditional assets, the absence of historical performance data, and the lack of clear regulations, contribute to advisors’ reluctance.
Unlike traditional assets, cryptocurrency currently lacks research house ratings and clear advice from governing bodies. While there is historical data on the blockchain, cryptocurrency’s history is relatively short, and its future remains uncertain.
However, CoreData believes that this reluctance presents an opportunity for advisory firms to specialize in or enhance their understanding of this emerging asset class. Interestingly, the survey also revealed that 67% of crypto holders expressed interest in receiving professional advice on the subject.
The highest demand for advice came from individuals who hold cryptocurrency due to their belief in its potential for value appreciation or concerns about inflation. Therefore, the survey suggests that advisors who develop their skills in the area of crypto assets can build a unique offering for their business.
As younger generations, who are digitally savvy, become a larger part of the market, the demand for digital assets, including cryptocurrencies and tokenized real-world assets, is expected to rise. Therefore, building expertise in blockchain-based assets becomes crucial for future-proofing advisory practices in Australia.
In related news, Morgan Stanley, one of the leading financial institutions, is considering expanding its sales of Bitcoin ETFs. The firm is exploring the possibility of allowing its brokers to actively recommend these products to customers. Currently, Morgan Stanley offers Bitcoin ETFs on an unsolicited basis, meaning that customers must approach their advisors independently to express interest in investing.
By enabling advisors to actively recommend these products, the firm could potentially broaden its customer base, although it would also expose itself to additional liability. However, some financial institutions, like Raymond James Financial and Vanguard, have chosen not to offer cryptocurrency products due to concerns about their suitability for long-term portfolios.
LPL Financial, the largest independent brokerage, announced plans earlier this year to evaluate which Bitcoin funds it could offer to customers.
