New Bitcoin Exchange-Traded Funds (ETFs) are attracting significant investment, yet financial advisors are largely steering clear, due in part to restrictive policies at major wealth management firms.
Matt Apkarian, an associate director at Cerulli & Associates, points out that most advisors are barred from discussing spot Bitcoin funds, now numbering 11, unless prompted by clients. This status quo persists despite the advent of these new ETFs, which doesn't alter advisors' capacity to recommend them.
The nation's top brokerage firms, including Merrill Lynch, Morgan Stanley, UBS, and Wells Fargo, adhere to policies that permit advisors to respond to client inquiries about Bitcoin ETFs and execute investments on their behalf, but not to initiate discussions about them. Clients utilizing self-directed online platforms from these firms can also invest in these funds.
A survey across ten wealth management firms reveals a cautious approach towards Bitcoin ETFs, with policies varying in scope and detail. UBS, for instance, makes some Bitcoin funds available to brokerage clients but not to advisory accounts. Wealth Enhancement Group and Mariner Wealth Advisors have policies regarding Bitcoin ETF investments but are reticent about specifics.
Fidelity, offering its Bitcoin ETF, reports significant inflows across different investor segments, allowing its retail advisors to facilitate investments in Bitcoin funds under specific conditions, including the signing of a Designated Investments Agreement for certain complex or risky products.
However, the interest spike following the SEC’s approval of Bitcoin ETFs in January hasn't led to a dramatic shift in advisor-client dynamics concerning digital assets. Will McGough, Director of Investments at Prime Capital Investment Advisors, notes minimal demand for digital assets on their platform, attributing Bitcoin's allure more to speculative interest than its inherent value as an asset.
The crypto market, despite its growth and increasing mainstream attention, is viewed by many advisors as speculative and fraught with risk. This perception is unlikely to change without significant regulatory clarity and oversight, which could help mitigate risks and legitimize digital assets within traditional investment portfolios. Until then, crypto remains an ancillary consideration for most financial advisors, highlighting a cautious approach to a rapidly evolving asset class.
