Crypto investment: 'We haven't even scratched the surface'

While they’re still a relatively niche asset class, cryptocurrencies have turned into one of the hottest segments of the investment landscape, and financial advisors are increasingly warming up to it.

“I think they're very excited broadly about crypto and the blockchain space given the developments that we have seen,” says Vlad Tasevski, Chief Operating Officer and Head of Product at Purpose Investments. “This entire ecosystem is on path to be the most disruptive technology in our lifetimes. And with that obviously provides amazing opportunities for our clients’ portfolios and for their investments.”

Partly due to that strength of the investment thesis around crypto itself, Tasevski says advisors are also facing more demand from clients to actually get allocation into crypto within their portfolios. But because the wealth firms advisors work with operate within a traditional regulatory environment, he says they will need time to adjust their internal policies and frameworks to let advisors allocate crypto into their portfolios.

While he has seen openness among firms to adapt and accommodate cryptocurrencies, the pace of progress across the industry is uneven to say the least. In the meantime, advisors are left looking for any opportunity they can seize to provide crypto exposure to their clients. Spot crypto ETFs, which put crypto in a regulated structure that’s eligible for Canadians registered accounts, have been a lifesaver in that respect.

“Our regulators in Canada have shown that they're by far the most advanced globally to actually protect clients’ interest by effectively opening the door for clients to get access to a spot crypto in safe and convenient way,” Tasevski says.

Even if advisors already have a means to provide crypto exposure at their disposal, that still leaves the challenge of deciding how to actually allocate crypto in clients’ portfolios. At the moment, Purpose offers spot ETFs for bitcoin and ether, the two largest cryptocurrencies by market cap. But as Tasevski notes, those are two very different types of assets.

“Education is going to be very important. The space is evolving at a breakneck pace,” Tasevski says. “Firms who offer crypto ETFs will have to meaningfully step up their educational efforts.”

According to Tasevski, Purpose offers a lot of education broadly around crypto to help advisors understand the space and recent developments. In line with that, the firm recently launched Purpose Crypto Corner on its website to provide dedicated educational content resources. But beyond that, he says advisors’ own research departments also have to provide informational support, similar to what’s already available for traditional asset classes like fixed income and equities, as wealth firms become more comfortable around crypto assets.

“I think we haven’t even scratched the surface on the type of exciting innovations we’ll see over the coming years,” Tasevski says. “Crypto is in its early innings, so the volatility will persist. But I think some of the core technologies and new innovations that will emerge over time will provide great opportunities for investment returns for advisors and their clients. So we’ll be offering additional couple of strategies this year to actually provide high-quality points of access for different parts of the crypto space.”