Financial advisors reluctant to discuss crypto with clients due to legal concerns, survey finds

Last updated: May 13, 2024 9:11 am EDT | 2 minutes of reading

Only 1% of financial advisors frequently engage in crypto discussions with clients due to concerns about potential legal liabilities and associated expenses if the investment goes wrong.

According to CoreData’s “Australian Crypto Investors” reporta staggering 89% of financial advisors said they have never provided advice on cryptocurrencies.

“One of the main reasons advisors don’t talk about cryptocurrency is the fear of not being covered by professional liability (PI) insurance,” the report said.

“Without IP coverage, advisers risk hefty legal expenses if clients claim their advice resulted in financial loss or harm. »

Why don’t financial advisors discuss crypto?

Several other factors contribute to advisor hesitancy, including the prevalence of cryptocurrency scams, limited information compared to traditional assets, lack of historical performance data, and lack of clear regulations. .

“Unlike traditional assets, cryptocurrency currently lacks clear study notes and guidance from governing bodies. Although historical data exists on blockchain, the history of cryptocurrency is relatively short and its future uncertain.

However, CoreData believes that the reluctance of the majority of advisors to explore the cryptocurrency market presents an opportunity for advisory firms to specialize or improve their understanding of this emerging asset class.

Interestingly, the survey found that 67% of crypto holders expressed interest in receiving professional advice on the subject.

The greatest demand for advice has come from people holding cryptocurrencies due to their belief in its potential for value appreciation or concerns about inflation.

“For advisors looking to develop their skills in the field, crypto-assets represent an opportunity to build a unique offering for their business,” the survey said.

“Practices that strive to develop skills in the field will have the chance to increase their assets under management among cohorts of crypto-curious investors, as well as seasoned crypto holders who have built their wealth via blockchain” , he adds.

As younger, digitally savvy generations become a larger part of the market, demand for digital assets, including cryptocurrencies and real-world tokenized assets, is expected to increase.

Therefore, developing expertise in blockchain-based assets becomes a crucial consideration for sustainable advisory practices in Australia.

Morgan Stanley will allow brokers to recommend Spot Bitcoin ETFs

As noted, Morgan Stanley, one of the leading financial institutions, is explore the possibility of expanding its Bitcoin ETF sales by allowing its approximately 15,000 brokers to actively recommend these products to their clients.

Currently, Morgan Stanley offers Bitcoin ETFs on an unsolicited basis, meaning clients must contact their advisors independently to express interest in investing.

By allowing advisors to actively recommend these products, the company could potentially expand its customer base, although it would also expose itself to additional liability.

Some financial institutions, such as Raymond James Financial and Avant-gardehave chosen not to offer cryptocurrency products, citing concerns about their suitability for long-term portfolios.

LPL Financial, the largest independent brokerage firm with more than 22,000 brokers, announced plans in February to evaluate Bitcoin funds it could offer its clients.

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