A survey of FA's reveals that mass affluent and high-net-worth clients are still keen to buy digital assets despite risks
Headline-grabbing stories such as the collapse of the FTX Exchange are concerning for investors in digital assets, but they still want a piece of the action.
While warnings about unregulated securities may dissuade some investors from cryptos and NFTs, the underlying narrative of being the bright future of assets is maintaining interest.
A recent survey of financial advisors (FAs) in the US by Greenwich Coalition and Talos, found that 92% of mass affluent and high net worth (HNW) clients are asking for access to digital assets for inclusion in their portfolios.
Three in ten FAs said they already have or plan to recommend specific digital asset investment products within the next three months.
More recognizable products are particularly popular and almost two-thirds (64%) of advisors surveyed said they have or will recommend an exchange-traded fund (ETF) related to digital assets.
And the report shows that demand, despite the industry’s downsides, continues to rise with 35% of respondents saying interest has grown significantly in the past year.
"Financial Advisors believe that the growth trend for digital asset adoption as an emerging asset class will persist and continue to increase, even in the face of the current bear market and recent market events," said the report's author David Easthope, Senior Analyst of Market Structure and Technology at Coalition Greenwich. "FAs are working to be ready to meet this demand through their integration of investment products and platforms. While the market will continue to evolve, the results of our survey suggest that the long-term demand trend remains intact among this fairly conservative segment of the market."
Compliance concerns
Even if demand is high, investors are concerned about compliance of platforms used to trade digital assets.
In Canada, the CSA recently bolstered its requirements for crypto trading platforms that operate in Canada and other jurisdictions are taking a more robust approach too.
The survey found that 69% of FAs said compliance approval of digital asset investment products is the most important feature for any digital asset platform.
"For FAs, compliance is simply the biggest blocker out there for investment strategies offered to clients, more so than knowledge or even risk," continued Easthope. "In fact, 64% of advisors who said they had not yet created an investment strategy for clients primarily due to compliance restrictions making it difficult or even impossible."
When it comes to the execution and trading support FAs would most like to see in the platforms they offer to clients, 76% said they would most like to see electronic execution capabilities, while 56% said inclusion of data and analytics was critical.
