As cryptocurrencies increasingly top the headlines these days, more and more investors are turning to their advisors with questions about crypto assets.
Fourteen percent (14%) of advisors are either recommending or using cryptocurrencies this year, up from 1% in the two previous years, according to CNBC.
However, many advisors are still uneducated on the digital asset class, potentially to their detriment—and that of their clients.
Increased Interest by Investors
The Financial Planning Association and the Journal of Financial Planning reported that around 49% of financial advisors had been asked by their clients about cryptocurrencies in the past six months, almost triple the amount asking in 2020.
Larger numbers of advisors, 26% to be exact, reported that they planned to increase how often they recommend and use crypto for their clients in the next 12 months.
Tyrone Ross, CEO of Onramp Invest, a provider of management technology for crypto-oriented financial advisors, said “folks are realizing now that it’s not going away.”
This newfound interest is creating urgency and even fear amongst advisors looking to quickly acclimate themselves so as not to be left behind.
How Investors Utilize Crypto for Clients
Financial investors who are incorporating cryptocurrencies into client portfolios typically do so at an allocation of 1-2%, according to Ross. More crypto-savvy advisors may go as high as 3-5%.
It is still up to the advisor to ensure they are also balancing the client’s interest in crypto with conversations about a more traditional financial plan, however. Ross said that includes weighing crypto allocations against existing portfolio exposures, as well as considering a client’s risk tolerances.
Getting Educated as an Advisor
Ross, who also runs an advisory practice entirely dedicated to cryptocurrencies, said that, “clients are coming to advisors now knowing more than the advisors.”
“The advisors are absolutely terrified, because you never want to look dumb in front of your client,” he added.
Education is the most important first step when initially getting into the crypto space as an advisor, Ross believes. For example, Onramp offers the Onramp Academy, an education program for advisors looking to learn more about digital assets.
But sometimes it’s best to go back to primary sources. The original Bitcoin whitepaper, written by Bitcoin’s creator, known only by the psuedonym Satoshi Nakamoto, is still available to read online, for example.