Advisors considering how to allocate to crypto in next 12 months are most likely to think about using an index fund, survey shows
The continued lack of a crypto ETF solution other than bitcoin futures ETFs in the U.S. is causing considerable frustration among advisors looking for exposure to the new asset class, according to new research.
In a new Nasdaq study of 500 financial advisors who are presently allocating to crypto or are considering doing so, 72% said they would be more willing to invest client assets in crypto if a spot ETF product was available in the US.
Eighty-six per cent of advisers who have already invested in crypto intend to grow their allocations in the next 12 months, while none expect to reduce their exposure. Fifty per cent of the same group is already utilizing Bitcoin futures ETFs, with another 28% planning to do so in the next 12 months.
Specifically, 69% of these advisors would use an index fund for broad exposure, followed by sector-specific index funds (57%), actively managed funds (52%), individual digital assets (40%), and high-yield funds (31%).
In spite of the high demand for a passive approach to crypto and a spot crypto ETF, advisers polled are skeptical that such a product would be approved before 2022. Only 38% believe it is likely, 31% believe it is unlikely, 24% believe it is neither likely nor unlikely, and 7% are unsure.
“Over the last decade, financial advisors have been focused on shifting assets into index funds. As they incorporate digital assets into their investment strategies, they are expressing strong interest in a similar vehicle that can offer broad asset class exposure for their clients,” said Jake Rapaport, Head of Digital Asset Index Research, Nasdaq.
“The vast majority of advisors we surveyed either plan to begin allocating to crypto or increase their existing allocation to crypto. As demand continues to surge, advisors will be looking for an institutional solution to the crypto question that now dominates client conversations,” he added.
According to the poll, registered investment advisors (RIAs) are the most likely to employ cryptocurrency, with 34% doing so compared to 19% for independent broker-dealers (IBDs) and 17% for wirehouse advisers.
Compliance requirements and limits constitute a barrier to crypto investment for over half of RIAs (49%), in contrast to 78% of advisers in all other channels. Approximately 10% of advisers claim to be very educated about cryptocurrency, and 9% have high confidence in their abilities to advise customers on the subject.
Almost every adviser polled (98%) expressed a desire in learning more about cryptocurrency and digital assets. ESG is a very important consideration for 7% of respondents when deciding on a client's digital asset strategy.
“Crypto inflows through advisor channels show no signs of stopping, even as advisors grapple with compliance considerations and look for guidance from educational materials from other industry participants, including asset managers and index providers,” Rapaport said, “We expect ESG and crypto considerations to converge as investors continue to direct assets into both.”