Key Takeaways
- The approval of spot bitcoin ETFs in the U.S. has been a clear catalyst for the cryptocurrency’s price rise this year.
- Market watchers say that financial advisors are still wary about talking crypto with clients.
- Regulatory uncertainty remains a clear area of concern for financial advisors, although the passage of the Financial Innovation and Technology for the 21st Century Act (FIT21) could improve that situation.
- Analysts say many financial institutions also have not yet cleared bitcoin ETFs to be offered to their clients, which could change in coming months.
Spot bitcoin exchange-traded funds (ETFs) have amassed more than $14.6 billion in inflows, pretty much propelling a bitcoin (BTC) price rally since they first launched in January. But an overwhelming majority of financial advisors still won’t discuss cryptocurrencies with their clients.
A study by Cerulli Associates found that, although growing in number, only 2.6% of advisors have recommended crypto opportunities to their clients. In fact, only 12.1% of advisors are willing to discuss crypto if their clients’ bring it up.
Because advisors won’t help, investors have to figure out their crypto investments themselves.
Roughly 80% of the inflows into these products has come from self-directed investors using online brokerages, according to BlackRock Chief Investment Officer of ETF and Index Investments Samara Cohen.
What Needs To Change for Financial Advisors To Embrace Crypto?
Regulatory uncertainty remains a key concern for advisor engagement with crypto.
“Despite the recent change of heart by the SEC that was not foreseen until shortly before the ETH [spot ether ETF] approval deadline, a significant regulatory framework around digital assets still is missing,” the Cerulli report said.
Some regulatory ambiguity could be to a solved by the passage of the Financial Innovation and Technology for the 21st Century Act (FIT21), which already has passed the House of Representatives but still needs approval by the Senate and President Biden.
That alone may not be enough, however.
“Many of the largest wealth platforms, wirehouses, and advisor networks haven’t fully approved the Bitcoin ETFs,” Bloomberg Intelligence analyst James Seyffart said in an interview. “In most cases, the only way those advisors or brokers are currently allowed to buy a Bitcoin ETF for their client(s) is after a client specifically requests it.”
Seyffart said he expects the rules surrounding advisors being able to offer spot bitcoin ETFs to their clients to change by the end of the year, although that process could still take many months to unfold.
That said, it’s not that advisors are not warming to crypto at all. Cerulli also found that 58.9% of financial advisors do not ever expect to discuss crypto with their clients; however, that proportion has declined slightly from the 62.2% responding the same way last year.