Advisers' crypto hesitancy feeding into client allocations

As cryptocurrency has worked its way into mainstream investing, seven in 10 have said they would be interested in receiving advice on the asset class, however most advisers aren’t yet equipped to meet this demand.

According to the latest CoreData report, more than one in 10 (12 per cent) Australian adults now hold cryptocurrency in some capacity, making it the third most popular investment among Australians, beaten only by cash (19 per cent) and Australian stocks and shares (21 per cent).

The top benefits cited of investing in the asset include higher growth potential, no minimum investment amount, fast transactions and decentralised ownership.

This growing interest in the asset class could prove beneficial for advisers with a third (32 per cent) of crypto holders already working with an adviser on either an ongoing or occasional basis. The most common areas they seek help with are crypto tax strategy and regulatory compliance, portfolio allocation and diversification, and yield generation. 

Some 88 per cent of these clients said they had discussed crypto with their adviser, but the majority of these conversations are being driven by the client. 

“Three quarters (76 per cent) of conversations about cryptocurrency between advisers and clients are being initiated by clients. This reflects strong demand from clients, yet hesitancy on behalf of the advice industry.”

Despite the strong demand for the asset class, advisers seem somewhat mixed in their support on a personal level with six in 10 (58 per cent) saying they have never invested in crypto and don’t plan to, while just one in five (21 per cent) are currently invested in the digital asset.

This hesitancy among advisers is reflected in the portfolio construction of advised clients as those crypto holders who have an existing advice relationship typically hold a smaller allocation to cryptocurrency. Over three-quarters of advised clients (77 per cent) hold less than 30 per cent of their portfolios in crypto compared to half of non-advised investors. 

It is also reflected in their approved product lists (APLs) as just 11 per cent of advisers report having access to crypto funds or crypto ETFs on their APLs, while three-quarters of advisers do not include the assets and do not advise on them. Some 6 per cent said they are not currently on their APLs but they may advise on them in special circumstances.