If you asked your financial advisor about the best ways to bolster your investment portfolio a year ago, you would most likely not have heard them recommend cryptocurrency. However, this relatively new investment vehicle has garnered unprecedented interest in the first half of 2021. In the recently published 2021 Trends in Investing Survey from the Financial Planning Association and Journal of Financial Planning, nearly half of financial advisors say that their clients have inquired about cryptocurrency this year. In 2020, only 17 percent fielded crypto-related questions from clients.
This shift has prompted more advisors than ever to begin treating crypto as a practical investment vehicle. A mere four years ago, less than 2 percent of advisors thought that their clients should add cryptocurrencies to their portfolios. In the eyes of most financial professionals, crypto was little more than an investment fad—and one their clients should avoid, at that. As public perception has changed, however, 28 percent of advisors say cryptocurrencies are a viable investment option, even though they remain a “gamble” to many.
Cryptocurrencies like Bitcoin (BTCUSD), Ethereum (ETHUSD), and Dogecoin (DOGEUSD) have indeed had a tumultuous few months, but this hasn’t deterred would-be investors from thinking about making them part of their portfolios. In 2021, they have been less concerned about market volatility and more interested in gaining an edge against rising inflation.
In response, financial advisors have begun to embrace crypto in earnest. According to the 2021 Trends in Investing Survey, 14 percent of these professionals now make cryptocurrencies part of their clients’ portfolios or, at least, recommend that they do so. Even more (26 percent) say that they intend to expand their use of crypto over the next 12 months.
This is a tremendous jump from just a year prior, when less than one percent of advisors endorsed crypto investments. Moreover, not a single respondent to last year’s survey thought that crypto would be among their portfolio recommendations in 2021.
As public interest in crypto has surged, advisors seem to have come to the realization that they must respond in kind. It’s become clear that crypto won’t be going away any time soon, so these professionals must adapt in order to keep up with the times. Already, some advisors are noticing that their clients have more knowledge of crypto than they do. Nearly half the respondents to the survey say that they are only “somewhat comfortable” discussing crypto with their clients. Four percent don’t possess any knowledge on the topic at all.
Advisors are quickly realizing that they must remain abreast of the latest developments in crypto if they want to meet increasing client demand. Wide embracement of crypto as a viable investment strategy, however, is still a stretch.