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Gun-shy advisors struggle to provide clients with crypto guidance

March 6, 2022

shortage of crypto advisors - Gun-shy advisors struggle to provide clients with crypto guidanceCryptocurrency's breakthrough from the financial fringes to the mainstream has been characterized by major investors like Paul Tudor Jones — and some companies like Microstrategy and Tesla — dipping their toes into Bitcoin (BTC-USD). Even Apple CEO Tim Cook is getting in on the action.

Yet some financial advisors and wealth managers appear to be struggling over how to adapt to the new era, in a sector defined by head-spinning price action, still-evolving regulation, and rising fraud.

A recent survey from fintech company eMoney Advisor found about 38% of U.S. respondents say their investments are managed by a financial advisor, and that 43% said they invest in cryptocurrencies. The data underscore how less than half are handling out digital token advice, even as the sector becomes an increasingly hot topic in retail and institutional investing.

Separately, a January survey by crypto investment manager Bitwise found a staggering 94% of advisors surveyed have gotten crypto-related questions from clients. Yet a slim 15% actually allocated money to digital tokens.

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Nevertheless, Bitwise CIO Matt Hougan said the sector was:

“approaching the tipping point for the widespread adoption of crypto by financial advisors. Two years ago, just 6% of advisors were allocating to crypto in client accounts; today it’s 15% and our survey suggests it will be nearly 30% by year-end."

Crypto's notorious volatility, in addition to the lack of a Bitcoin exchange traded fund (ETF) specifically tied to its spot price, may have something to do with it.

A spot ETF has yet to be approved by the Securities and Exchange Commission, even though a few new futures-linked funds have found a receptive audience. Several financial advisors Yahoo Finance spoke with recently all suggested a spot ETF would be the ideal vehicle for clients.

Yet Ric Edelman, founder of The Digital Asset Council of Financial Professionals (DACFP) thinks some advisors are making a mistake waiting for a spot Bitcoin fund. Having first discovered Bitcoin in 2012, Edelman argues that advisors can easily allocate 1-3% of their client portfolios to cryptocurrency-linked assets.

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“Obviously, crypto is huge but we’re just not at all trained in this space," Maize told Yahoo Finance. "Even if you don’t want to recommend it as an investment, we should at least know enough to be able to discuss it," she added.

“There’s so much hype around cryptocurrency. I have no problem if people want to trade their funny money but before that many of them need to cover basic financial planning bases like allocating their 401Ks, and other retirement accounts,” Valega told Yahoo Finance.

“For our clients who want cryptocurrency and whose risk profiles suggest that it could be appropriate for their portfolios, I want to see a spot Bitcoin ETF approved by the SEC before we make anything happen,” Von dem Bussche insisted.

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