December 15, 2022 | Stamford, CT — Amid the front-page turmoil at a few crypto firms including FTX, which has rocked confidence in digital asset exchanges, financial advisors are continuing their steady work adopting products and infrastructure that will eventually bring a broader and more diversified universe of digital assets to their clients.
A recent Coalition Greenwich study on financial advisor adoption of crypto, conducted on behalf of Talos, the premier provider of institutional digital asset trading technology, found that 92% of the 537 U.S. financial advisors participating had received a client inquiry on digital assets in the last 12 months. Despite the market volatility in August of 2022, more than half the financial advisors say interest in digital assets has held either steady or increased since last year.
“While it remains to be seen how some recent events will affect near-term investor demand for digital assets, financial advisors believe that the growth trend for digital asset adoption as a whole will persist,” says David Easthope, Senior Analyst for Coalition Greenwich Market Structure & Technology and author of Digital Asset Investing – Financial Advisors Strive to Meet Client Needs. “And they are working to be ready to meet this demand through the adoption of investment products and platforms.”
The Journey to Digital Assets
Coalition Greenwich believes that end clients see digital assets as having potential to meet real portfolio needs, whether for diversification, outsized investment returns, or even just experimentations with next-generation technologies. For this reason, many in the industry expect investor interest in these assets to remain robust.
In response, financial advisors have been mastering investment approaches and identifying products to meet this demand. Thirty percent of financial advisors in the study have recommended or will recommend a specific investment product to clients for exposure to digital assets in the next three months. While most financial advisors looking to provide clients with access to digital assets turn to ETFs and other products, the industry is also pushing for more SEC-registered and compliant products, which are often a good fit for end clients.
However, an underlying goal for many financial advisors is also to provide access to crypto assets directly, and to manage these assets alongside other, more traditional assets in the same systems. Achieving those goals will require an organization-wide effort. In addition, compliance issues associated with offering these assets or products (or even simply providing advice) is a major hurdle to overcome.
Finally, the tools to do research, select investments, manage digital asset investments in client portfolios, and handle reporting are not yet widely available to most financial advisors.
“Integrating these tools into existing systems will require careful planning, as well as participation from third-party vendors and the financial advisors’ own technology and operations departments,” concludes David Easthope.
Digital Asset Investing – Financial Advisors Strive to Meet Client Needs analyzes investor demand for digital assets and examines the strategies financial advisors are using to build the capabilities needed to make digital asset investments available to their clients.