Despite the recent surge in cryptocurrency values and mainstream adoption, most financial advisors remain hesitant about recommending crypto investments to their clients. A recent CoinShares survey of 250 financial advisors found that 62% believe recommending Bitcoin does not align with their fiduciary responsibility to act in a client’s best interest.
Concerns Over Risk and Volatility
One of the primary reasons advisors hesitate to recommend crypto is its extreme volatility. More than half (53%) of the survey respondents cited volatility as a major challenge, leading many to discourage clients from investing in digital assets.
“Clients trust us to secure their financial future. We can’t be rolling the dice. If that’s all we’re going to do, then they don’t need us. They can go to a casino,” said Kashif A. Ahmed, president of American Private Wealth.
Many advisors argue that crypto lacks a defined role in a diversified portfolio. Unlike traditional investments that can provide stability, risk mitigation, or inflation protection, crypto remains largely speculative, said Noah Damsky, founder of Marina Wealth Advisors.
Reputational Risks for Advisors
Beyond market risks, financial advisors also worry about reputational damage. The survey found that 55% of respondents fear recommending digital assets could harm their professional credibility. Given that trust is a cornerstone of financial advising, any misstep in crypto recommendations could significantly impact careers.
“In our case, we have to be a little bit more sober about it because we are truly responsible,” Ahmed added. “If we screw up your financial future, then there may be no recovery time for you.”
Regulatory and Educational Barriers
Advisors also face challenges in keeping up with the evolving regulatory landscape and the complexities of the crypto industry. Christina Lynn, a wealth strategist at Mariner, pointed out that understanding crypto requires studying blockchain fundamentals, token differences, compliance rules, and portfolio implementation strategies.
“It’s not something that you can take a one-hour CE webinar and get caught up to speed on. It takes hours of focused study to really understand this technology and the different products and services out there,” Lynn said.
Additionally, uncertainties around regulation, tax treatment, and custody remain major concerns that deter advisors from embracing crypto.
A Shift in Attitudes?
Despite these challenges, there are signs that financial advisors are warming up to crypto. The introduction of spot Bitcoin ETFs in January 2024 has provided a more familiar investment vehicle, making digital assets more palatable for traditional finance professionals.
A separate Bitwise/VettaFi survey released in January revealed that the percentage of advisors reporting crypto allocations in client accounts reached an all-time high of 22% last year—double the rate in 2023. This suggests that while skepticism remains, interest in digital assets is growing.
“I think we’re past the point where advisors can just generally dismiss it as not being suitable or a passing trend,” Lynn noted.
Looking Ahead
As the crypto market matures, financial advisors may find value in integrating crypto into their services. Learning to navigate the complexities of digital assets could help them build trust with clients, improve retention, and offer valuable guidance on tax and estate planning for crypto holdings.
While the road to widespread adoption remains uncertain, the financial industry is slowly evolving, and crypto’s role in investment portfolios is becoming harder to ignore.
