ETFs
Why Advisors Remain Reluctant to Talk Cryptocurrency Despite the Success of Bitcoin ETFs
Key points to remember
- The approval of Bitcoin spot ETFs in the United States has been a clear catalyst for the cryptocurrency’s price rise this year.
- Market watchers say financial advisors are still hesitant to talk about cryptocurrency with their clients.
- Regulatory uncertainty remains a clear concern for financial advisors, although passage of the Financial Innovation and Technology for the 21st Century (FIT21) Act could improve this situation.
- Analysts say many financial institutions have yet to allow Bitcoin ETFs to be offered to their clients, which could change in the coming months.
Bitcoin Spot exchange-traded funds (ETFs) have racked up over $14.6 billion in inflows, propelling nearly a bitcoin (Bitcoin) have seen a price increase since their launch in January. But an overwhelming majority of financial advisors still refuse to discuss cryptocurrencies with their clients.
A study by Cerulli Associates found that while their numbers are increasing, only 2.6% advisors have recommended cryptocurrency opportunities to their clients. In fact, only 12.1% of advisors are willing to discuss cryptocurrency if their clients bring it up.
Since advisors will not help them, investors must determine their cryptocurrency investments themselves.
About 80% of inflows into these products come from do-it-yourself investors using online brokers, according to Samara Cohen, BlackRock’s director of ETF and index investments.
What needs to change for financial advisors to embrace crypto?
Regulatory uncertainty remains a major concern for advisors’ engagement with crypto.
“Despite recent change of heart by the SEC which was not expected until shortly before ETH [spot ether ETF] approval deadline, an important regulatory framework around digital assets “is still missing,” the Cerulli report says.
Some regulatory ambiguity could be resolved by passage of the Financial Innovation and Technology for the 21st Century (FIT21) Act, which has already passed the House of Representatives but still needs approval by the Senate and President Biden.
This may not be enough on its own, however.
“Most of the largest wealth management platforms, wiring houses“The advisor networks have yet to fully endorse Bitcoin ETFs,” Bloomberg Intelligence analyst James Seyffart said in an interview. “In most cases, the only way these advisors or brokers will buy a Bitcoin ETF for their client(s) is after the client specifically requests it.”
Seyffart said he expects the rules governing which advisers can offer Bitcoin Spot ETF their customers to switch by the end of the year, although this process could still take several months.
That said, it’s not that advisors aren’t crypto-friendly at all. Cerulli also found that 58.9% of financial advisors never expect to discuss crypto with their customers; however, this proportion has slightly decreased compared to the 62.2% who responded in the same way last year.