Financial Advisors’ Cautious Approach to Crypto

Cautious by nature, financial advisors tend to urge clients to tread carefully around the new and unproven. Risky portfolios require a lot of hand-holding, and bad bets mean lost clients. 

So why are they not all folding on crypto after last year’s 65% drop in bitcoin, the most popular digital currency? After high-profile crypto exchange bankruptcies, billions in losses and arrests of executives, why would any advisor suggest investors stay in? 

Ryan Firth, certified financial planner and founder of Mercer Street Co. in Houston, started buying bitcoin in 2015. He sold some and bought more as the market rose and fell, and each time the price hit a bottom, it was higher than the previous low. 

“There’s value in the asset, and it’s only going to increase over time,” he said in an interview. “I don’t think there’s anyone who shouldn’t be in crypto.” 

Firth said 33%-40% of his clients have crypto investments, mostly in actual coins bought from an exchange. 

He isn’t alone. A recent survey found 60% of financial advisors are long-term bullish on crypto and the portion of them buying crypto for client accounts last year was about unchanged, at 15%, according to a survey from San Francisco-based Bitwise Asset Management Inc., issuer of the Bitwise Crypto Industry Innovators ETF (BITQ). 

And they plan to buy more. Even after bitcoin’s crash last year, just over three-quarters of advisors currently holding crypto said they will boost their investments or stay at current levels, according to the survey.

Advisors are recommending a conservative allocation of 1%-5% in crypto, the Bitwise survey found, with exchange-traded funds being the preferred way clients get crypto exposure.

Firth said some of his clients with long-term horizons have as much as 90% of their portfolios in crypto.

“They are used to market volatility,” he said, adding that he expects bitcoin will set a new high of $70,000 by 2025 at the latest, triple today’s price. 

Yet not all financial advisors recommend investing in crypto. Some adamantly oppose this type of investment, such as Tobias Financial Advisors in Plantation, Florida. 

“It might be the conservative nature of our firm, but we currently believe that crypto does NOT have a place in a long-term retirement portfolio,” CCEO Marianela Collado wrote in an email. “If a client still wants to invest, the advice we give is to only invest what they are prepared to lose.” 

She said that one client lost half of their $500,000 in crypto.

“It’s hard to plan with that level of volatility when the goal is to make sure that at some point, the family will have the resources to meet their needs,” Collado noted.

Contact Ron Day at [email protected]