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Engagement of Financial Advisors in Crypto Discussions
A mere 1% of financial advisors frequently engage in discussions about crypto with their clients due to concerns about potential legal liabilities and associated expenses if the investment goes awry. According to CoreData’s “Australia’s Crypto Investors” report, a staggering 89% of financial advisers stated that they have never provided advice on cryptocurrency.
Reasons for Hesitance
One of the most prominent reasons why advisers are not talking about cryptocurrency is due to concerns around not being covered by professional indemnity insurance (PI). Without PI cover, advisers risk heavy legal expenses if clients claim their advice led to financial loss or harm.
Factors Contributing to Advisers’ Reluctance
- Prevalence of scams within the cryptocurrency space
- Limited information compared to traditional assets
- Absence of historical performance data
- Lack of clear regulations
Opportunities for Advisory Firms
CoreData believes that the majority of advisers’ reluctance to explore the cryptocurrency market presents an opportunity for advisory firms to specialize in or enhance their understanding of this emerging asset class. Financial advisers are beginning to allocate to $BTC, around 3.5% of a client’s portfolio, which could lead to significant inflows into crypto if widely adopted.
Interest in Professional Advice
The survey revealed that 67% of crypto holders expressed interest in receiving professional advice on the subject, with the highest demand coming from individuals who hold cryptocurrency due to their belief in its potential for value appreciation or concerns about inflation.
Future Outlook
As younger generations become a larger part of the market, the demand for digital assets, including cryptocurrencies and tokenized real-world assets, is expected to rise. Building expertise in blockchain-based assets becomes a crucial consideration for future-proofing advisory practices in Australia.
Morgan Stanley’s Move Towards Bitcoin ETFs
Morgan Stanley is exploring the possibility of expanding its sales of Bitcoin ETFs by allowing its brokers to actively recommend these products to customers. By enabling advisors to recommend these products, the firm could potentially broaden its customer base, although it would also expose itself to additional liability.
Some financial institutions have chosen not to offer cryptocurrency products, citing concerns about their suitability for long-term portfolios. However, the trend towards evaluating and offering Bitcoin funds to customers is evident in the industry.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
