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Digital asset investing: Financial advisors strive to meet client needs

Produced in collaboration with Coalition Greenwich

One can only describe the recent market volatility and business failures in digital assets as troubling. Despite the volatility happening in the midst of our research fielding process, however, Coalition Greenwich sees sustained or increasing interest in this asset class among investors served by financial advisors (FAs) in the United States.

55% of FAs see either increasing or sustained client interest in investing in digital assets.

In an effort to identify the perspectives and preferences for digital assets among FAs, we conducted an independent study in collaboration with Coalition Greenwich, gathering responses from 537 FAs in the U.S. serving high-net-worth (HNW) and mass affluent (MA) clients. Our study reflects the insights from an array of FAs, comprising independent, bank/wirehouse, retail, institutional, and insurance firms.

Even with the market corrections in August, interest in digital assets remained robust and sustained. Ninety-two percent of FAs have received a client inquiry on digital assets in the last 12 months, with 55% of FAs also seeing either increasing or sustained client interest in investing in digital assets versus last year. Interestingly, end clients appear to see this asset class meeting a need in their portfolios, whether for diversification, outsized returns, or even just experimentation offering exposure to next-generation technologies.

In response, FAs have been mastering investment approaches and identifying products to meet this demand. Thirty percent have recommended or will recommend a specific investment product to clients for exposure to digital assets in the next three months.

At the same time, some FAs simply don’t believe they have their own firm’s backing to develop investment strategies for digital assets. Compliance, even beyond risk, is the biggest blocker of digital asset investment strategies to date. However, other knowledge and technology platform gaps persist, which will need to be overcome even if compliance gives the green light to FAs in the future.

While exchange-traded funds (ETFs) and trust products are popular approaches (and FAs will clearly want more registered and compliant products), FAs also want to be able to access the original form of digital assets—cryptocurrencies— in client portfolios as well. Moreover, they would prefer to manage these assets alongside other assets in the same systems. Because the crypto market is unique in terms of data and portfolio systems to date, this will be a difficult challenge. However, it logical for advisors to seek the same systems to support clients without introducing additional complexity, so that digital assets can be truly ingrained into the FA-client experience.

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