Advisors Are Still on the Fence About Crypto. Should They Be?

Digital assets have become a significant class for next-generation wealth builders and inheritors, but some advisors are still on the fence about offering crypto to clients. Should they be? In a recent Bank of America survey, investors under the age of 43 were asked to rank the asset classes with the greatest opportunities for growth. The top three answers might surprise you:

• Real estate topped the list at 31%, followed closely by digital assets and crypto at 28%, and private equity at 26%. 
• In fact, more than 7 of 10 investors said it’s impossible to achieve above average returns with stocks and bonds alone. 

The same holds true if you ask ETF investors across demographics which asset class they plan to invest in next year. A Charles Schwab study found the top three choices were U.S. equities at 55%, digital assets and crypto at 45%, and bonds and fixed income at 44%.

If your firm does not currently serve this demographic — or doesn’t plan to in the future — you could be missing out on a significant percentage of investible assets. And that could have a meaningful impact on your business performance over a client’s full life cycle. It’s important to keep an open mind and take simple steps to determine whether crypto is right for your practice.

Cryptic Messages

When talking about crypto, advisors often make assumptions: “It’s not relevant to my practice” or “these aren’t my clients” are two of the most general ones. If we are having an honest conversation about digital assets, it would be irresponsible not to acknowledge that digital assets are not a fit for every firm. There are still gray areas surrounding the asset class. 

But there are strategies to determine if it’s right for your business. Consider client surveys, one of the most valuable tools in an RIA’s tool set. You may already conduct semi-annual or annual surveys measuring client satisfaction, client behaviors, and what investment options they are seeking. Adding the question, “Is access to digital assets important for achieving your financial goals?” can gauge client interest. If you prefer a more conservative approach, try, “Is access to alternative investment classes important to you?” including digital assets as one option, similar to how Bank of America and Schwab structured their surveys. 

Going Digital. Next, discuss digital assets during client meetings over the next 30 to 90 days. Incorporate a question such as, “Is access to digital assets important for achieving your financial goals?” Document both verbal responses and any emotional reactions, and review these insights at a subsequent leadership team meeting. 

These steps will provide valuable insights, deepening your understanding of your clients and where the puck is going. You’ll discover how you and your firm can organically grow and retain wealthy investors, deliver a best-in-class client experience, and fulfill your fiduciary standard. If we are being honest, digital assets should at least be a part of the conversation.

Marc Nichols is the Director of Business Development for Prometheum Inc. where he leads strategic initiatives for the Registered Investment Advisor (RIA) channel, focusing on the integration of institutional-grade digital asset solutions into RIA and wealth management platforms.