Commentary April 11, 2022 at 07:44 AM Share & Print
What You Need to Know
- In a survey, 72% of advisors who embrace digital assets said a spot crypto ETF would make them more likely to invest client assets in crypto.
- Bitcoin futures ETFs are popular among these advisors.
- Most said they would like to use a broad-based crypto index fund.
More than 70% of advisors would be more likely to invest their clients’ assets in cryptocurrency if a spot crypto ETF was offered in the U.S., according to the findings of a new Nasdaq survey of 500 advisors who are currently allocating or considering allocating to crypto.
Eric Balchunas, senior ETF analyst at Bloomberg, estimated in a tweet Monday morning that advisors collectively control $26 trillion in client assets in the U.S.
Michael Krause, co-founder and CIO of Counterpoint Mutual Funds, replied that only a minority of advisors embrace crypto and that this group likely skews younger — in other words, these advisors control fewer assets.
It “wouldn’t surprise me if this is 5% of your 26T number at most,” Krause told Balchunas.
How Advisors Invest in Crypto
Meanwhile, 86% of advisors already investing in crypto plan to increase their allocations within 12 months, according to the survey, conducted in March by marketing research consultancy 8 Acre Perspective, Nasdaq said Monday in announcing the findings.
None of those advisors said they planned to decrease their crypto allocations.
Within that same group, 50% said they were already using Bitcoin futures ETFs and 28% said they planned to start using them in the next 12 months, according to Nasdaq.
On average, advisors currently or considering investing in crypto said their ideal crypto allocation was 6% of a client’s total portfolio.
About 69% of those advisors would consider using an index fund for broad exposure, followed by sector-specific index funds (57%), actively managed funds (52%), individual digital assets (40%) and high-yield funds (31%), Nasdaq said.
Although there is strong interest in a passive approach to crypto and a spot crypto ETF, the advisors surveyed said they were not confident such a product would be approved in 2022. Only 38% found that likely, while 31% found it unlikely, 24% found it neither likely nor unlikely and 7% said they were not sure.
“Over the last decade, financial advisors have been focused on shifting assets into index funds,” according to Jake Rapaport, head of Digital Asset Index Research at Nasdaq.
“As they incorporate digital assets into their investment strategies, they are expressing strong interest in a similar vehicle that can offer broad asset class exposure for their clients,” he said in a statement.
“The vast majority of advisors we surveyed either plan to begin allocating to crypto or increase their existing allocation to crypto,” he added. “As demand continues to surge, advisors will be looking for an institutional solution to the crypto question that now dominates client conversations.”
RIAs Are Widest Crypto Adopters
The survey also found that crypto adoption was highest among RIAs, with 34% of RIAs using crypto compared with just 19% of independent broker-dealers and 17% of wirehouse advisors.
Nearly half of RIAs (49%) reported that compliance rules and restrictions were a barrier to crypto investing, compared with 78% of advisors in all other channels, Nasdaq said.
Some 10% of advisors reported being very knowledgeable about crypto, while 9% said they felt very confident in their ability to advise clients on crypto.
Almost all advisors surveyed (98%) expressed interest in learning more about crypto and digital assets, according to Nasdaq.
Seven percent of respondents said that environmental, social and governance considerations were very important when deciding on a client’s digital asset strategy.
“Crypto inflows through advisor channels show no signs of stopping, even as advisors grapple with compliance considerations and look for guidance from educational materials from other industry participants, including asset managers and index providers,” according to Rapaport. “We expect ESG and crypto considerations to converge as investors continue to direct assets into both.”
In March, Nasdaq and Hashdex, a global crypto-focused asset manager, announced their launch of the Nasdaq Advisor Academy: Digital Assets curriculum for financial professionals.