US-based financial advisers are increasingly recommending investments in cryptocurrencies to their clients, and less exposure to legacy finance investment products such as exchange-traded funds (ETFs) and individual stocks, according to a recent survey.
This approach is in line with the rising interest demonstrated by their customer base, the report by the US-based Financial Planning Association (FPA) and the Journal of Financial Planning said.
The report comprises a survey that was fielded in March 2021 (or before the strong market correction in April and May), and prepared based on the 529 online responses collected from financial advisers who offer clients investment advice and/or implement investment recommendations.
The survey indicated that, while US financial advisers remain cautious on digital assets, “it seems they may be shifting to embracing them due to a rising client demand.”
Cryptocurrencies were first added to the survey in 2018, said the report, when 1.4% of the then surveyed 223 advisers said they were currently using or recommending crypto with clients,” according to the association.
While in 2019 and 2020 that percentage dropped to below 1%, it then increased to 14% of the 529 surveyed advisers indicating that they are using or recommending cryptocurrencies in 2021.
And the number may increase.
“More than a quarter (26%) of advisers indicated in the 2021 survey that they plan to increase their use/recommendation of cryptocurrencies over the next 12 months,” said the report. This is up from 0% indicated in 2020.
It further found that 49% of advisers indicated that, in the last six months, clients have asked them about investing in cryptocurrencies. This is up from 17% in 2020.
In contrast with cryptocurrencies, legacy finance investment products, such as ETFs, saw a lower rate of recommendations this year. Some 64% of financial advisors said they suggest investing in ETFs to their clients this year, down from 85% in 2020.
Cash and equivalents, as well as individual stocks, are also less popular in 2021, down from 75% to 57%, and 51% to 44%, respectively.
Among the vehicles currently used/recommended to clients, only three saw a rise in the percentages since last year: cryptocurrencies are leading by far, followed by precious metals (5% to 9%) and private equity funds (9% to 12%).
Further findings include that:
- 1.8% in the 2018 survey said cryptocurrencies were a viable investment option that has a place in a portfolio, compared to 28% of respondents in 2021;
- 18% in 2018 said it was a fad that is best avoided, compared to 6% this year 2021;
- 24% in 2018 said it was “a gamble,” while 28% said the same this year;
- 48% read the occasional news stories on cryptocurrencies and are somewhat comfortable conversing about it, 33% actively educate themselves on the topic and are comfortable conversing about it, and 4% said they don’t know anything about cryptos and don’t talk about them with their clients.
- 52% had not personally invested in cryptocurrencies, while 48% did.
Based in Denver, the FPA says it is the primary membership organization for financial planning practitioners in the US.