Why Won't Financial Advisors Dive Into Crypto ETFs?

With spot bitcoin ETF assets ballooning to more than $50 billion since debuting in January and becoming the biggest story in the ETF space this year, it would be difficult for financial advisors to ignore the cryptocurrency category.

But some still are.

“Still not getting on board with crypto,” said Chuck Failla, principal at Sovereign Financial Group in New York.

“There’s really been just one client that wanted some and we purchased it for him on an unsolicited basis,” Failla added. “I just don’t see it as an investment right now; too volatile for my liking.”

Tim Holsworth, president of AHP Financial in Midland, Mich., leans on geography when explaining his aversion to cryptocurrency investing. “My clients are midwestern conservative investors that invest for the long term in tried-and-true investment vehicles,” he said.

Yet with easy access via spot bitcoin ETFs and a second wave of spot Ethereum ETFs appearing on the horizon, the crypto drum will only get louder, which could deepen the divide.

"There may be some advisors who were reluctant to add crypto to client accounts strictly because of the operational difficulty, but I don't think that's the majority,” said Tom Graff, chief investment officer at Facet in Phoenix, Md.

“I think if an advisor doesn't like crypto, either for philosophical reasons or risk reasons, the ETF doesn't really change anything," he added.

Advisors Divided on Crypto

“While the development of spot bitcoin and Ethereum ETFs are a sign of maturity in the crypto market, it’s unlikely to sway many advisors in either direction,” said J.J. Feldman, co-head of Wealth Management at Helium Advisors in Everett, Wash.

“Advisors have had several years to learn about this space and determine whether exposure to crypto is appropriate for their clients,” he added. “These newest events may increase client demand on the margins, but we doubt they will open the floodgates for advisors who have yet to utilize crypto strategies.”

Paul Schatz, president and founder of Heritage Capital in Woodbridge, Conn., has been bullish on bitcoin since the end of 2022, but he continues to struggle with where it fits in client portfolios.

“While I advocated that clients on their own should have no more than 5% in the crypto space, I was waiting until the ETFs were launched and regulated,” he said. “I haven’t successfully modeled the ETFs yet and I hope to spend more time over the summer creating a strategy, and it’s unlikely I will just buy and hold these instruments.”

Svetlin Krastev, founder of Black Sea Gold Advisors in Kingston, N.Y., also saw the spot bitcoin ETFs as an easy onramp for his clients.

But even as a cryptocurrency enthusiast, Krastev is advising clients to limit their exposure to 2% of their overall investment portfolio.

“I tell my clients to think of bitcoin as digital gold,” he said. “It’s a non-yielding asset with no income, but it is non-correlated, and the price will probably be around a half million dollars five years from now.”