Financial advisers are reporting increasing client interest in investing in cryptocurrencies, despite being largely speculative and an unregulated asset.
Three quarters of 300 financial advisers polled by AJ Bell said their clients had asked them about investing in cryptocurrency, and 36% said their clients already held such assets.
Just 4% of respondents said they would recommend clients invest directly in crypto, though 26% confirmed they would consider endorsing investment in a multi-asset fund with a degree of crypto exposure.
“The reported valuations of cryptocurrency create the familiar investor condition of fear of missing out (Fomo). Like all easy money stories, caution is the obvious watchword that few will heed,” said Dominic Thomas, financial planner at Solomon’s IFA.
Easier to stomach in multi-asset funds
While very few advisers would recommend pure crypto investments to their clients, some would consider advocating multi-asset funds with a degree of exposure to the asset class.
“I wouldn’t advise a client to exclude a fund just because it contains exposure to crypto. Baillie Gifford, for example, invests in Tesla, which obviously holds crypto assets, but its funds perform well,” said Minesh Patel, financial planner and director at EA Financial Solutions.
Ruffer turned a tidy profit of $1bn (£721m, €850m) from its bitcoin holding, which it initiated in late 2020 as a portfolio hedge.
“That seems the most likely path for crypto to make it into the portfolios of advised investors in future,” added AJ Bell financial analyst Laith Khalaf, “though that would require more asset allocators to build exposure to cryptocurrencies, something we haven’t seen as yet, because the prevailing mood towards crypto in the investment community is still one of deep scepticism.”
‘I would never recommend a client gamble on it’
It is typically considered by the industry that investing purely in crypto is more for wealthy clients who can afford to lose should the market turn on them.
“I wouldn’t recommend it directly for a client’s portfolio, however, I do have a couple of clients that have set up investments in crypto on their own. For those, I said to look at it as a speculative asset, not risking more than 5% of their liquid assets,” said James Wyman, financial adviser at Lyndhurst Financial Management.
Darren Cooke, financial planner at Red Circle Financial Planning, added: “As far as I am aware, only a couple [of clients] hold it and both in very small amounts as a bit of fun. I would never recommend a client gamble on it.”
Interest has yet to peak
The consensus among the advice sector is that, as stewards of wealth, responsible for investing to secure returns, recommending investment in crypto will continue to be unusual given the current environment in which it operates.
Some advisers do acknowledge, however, that interest has yet to peak, though renewed curiosity could generate issues.
“I believe it will become more mainstream as an asset class, although there needs to be better routes of entry for day-to-day investors for it to truly be acceptable,” Lyndhurst’s Wyman said.
“There are plenty of exchanges around to trade with but there does seem to be news surrounding the hacking of them and millions being stolen.”
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