Financial advisors seem poised to embrace cryptocurrencies for their clients’ investments, in part because more clients are asking about them, according to the Financial Planning Association.
Although only a minority of advisors currently use or recommend cryptocurrencies, nearly half of advisors surveyed recently said their clients had asked about digital investments, and one-quarter said they will increase their use and/or recommendation of cryptocurrencies over the next year, FPA said.
The FPA and the Journal of Financial Planning surveyed 529 financial planners to gauge their acceptance level for digital assets and their opinions on other investment options. The results of the “2021 Trends in Investing Survey" were released today.
Two years ago, when advisors were first asked about cryptocurrency use, only 1.4% of advisors said they were using or recommending digital assets, compared to 14% today, the survey indicated.
“It is clear from these results that we have reached an inflection point in the wealth management space. Advisors are now faced with a client base that demands knowledge, access and advice from their advisors on crypto assets,” Tyrone Ross, CEO of Onramp Invest, which collaborated on the survey, said in a statement.
“With most of the public poorly informed about what digital assets are, I find it comforting that more financial advisors are involved in conversations about the topic and the role such assets should or should not have in clients’ portfolios,” Dan Moisand, practitioner editor of the Journal of Financial Planning, said in a statement.
The survey also revealed some seemingly conflicting feelings among advisors about exchange-traded funds. Nearly two-thirds of advisors (64%) said they use or recommend ETFs for clients. That percentage has dropped 21% from last year’s survey, but at the same time 36% said they will increase their use of ETFs over the next 12 months.
Elsewhere, 21% of advisors said they are planning to decrease their use of individual bonds. That's possibly due to the low yields offered by fixed-income investments. In addition, 20% of advisors said they will decrease their use of non-wrap mutual funds, 9% will decrease their use of mutual fund wrap programs, and an equal percentage will decrease their use of fixed annuities.
Fifty-eight percent of advisors said they use a blend of active and passive funds. But it looks like the use of purely passive investment approaches is on the wane as 29% of advisors favored passive strategies in 2019, 24% did so last year and only 18% did so this year, the survey said.