Why Advisors Might Be Missing the Crypto Boat

What will it take to get the financial planning industry, in general, to climb aboard the cryptocurrency train? Apparently, more than just a raft of new exchange-traded funds and a 125% gain by bitcoin over the past 12 months.

Jason Ware, chief investment officer and chief economist at Albion Financial Group in Salt Lake City, Utah, might not be the perfect proxy for all advisors when it comes to crypto investing, but he is representative of the majority of advisors we speak with.

“I hear a lot of bullish arguments for crypto, but it’s really just more people coming to a space where there is a limited supply of coins,” he said, citing the supply and demand fundamentals driving up the price.

For Ware, who owns some crypto in his personal portfolio, the primary issue with digital currencies is that they don’t fit easily inside any box of traditional portfolio management financial planning.

“We’re trying to fundamentally value assets, and you just can’t do that with crypto,” he said.

For most of the past decade, that was the kind of statement that might wrap up most crypto conversations with clients. But the new twist in 2024 was the debut of spot crypto ETFs presenting easy exposure to bitcoin and Ethereum, with more surely to come.

Couple that with the soaring recent performance, particularly in the wake of a crypto-friendly Trump administration, and you’ve got a financial planning community that could be described as swimming against the tide.

Why Advisors Can’t Embrace Crypto

Chris Diodato, founder of WELLthe Financial Planning in Palm Beach Gardens, Fla., said his clients have expressed increased interest in crypto since last month’s presidential election.

“Surprisingly, it seems the level of interest is somewhat divided along political lines, with my more Republican-leaning clients showing a lot more interest than Democrat-leaning clients,” he said.

Diodato views crypto as an alternative investment and recommends an allocation of no more than 2% through an ETF.

Politics is also driving client interest for Said Israilov, a financial advisor at Israilov Financial in San Francisco.

“Since bitcoin's meteoric rally following the result of the presidential election, I started getting emails from clients to discuss how crypto can play a role in their investment portfolio,” he said.

But, for many advisors, beyond the initial hoopla in the wake of Donald Trump’s reelection, it keeps coming back to fundamentals.

“We don’t think the launch of ETFs changes the fundamentals,” said Noah Damsky, principal at Marina Wealth Advisors in Los Angeles.

“We believe in the fundamental value of the blockchain, but that doesn’t mean the coins such as bitcoin are going to be of value,” he added.

Chris King, chief executive of the crypto separate account platform Eaglebrook in Bethesda, Md., described bitcoin adoption as coming in waves, “with significant price increases grabbing the attention of the next cohort of investors.”

The past year, he added, saw the evolving regulatory and political uncertainty around cryptocurrencies switch from being headwinds to tailwinds, “allowing advisors to feel more comfortable allocating to bitcoin.”

It’s certainly an optimistic take that comes during a bullish time for crypto. But, when it comes to crypto ETFs as the hottest tickets of 2024, most of the inflows are still coming from retail investors, while financial advisors, as the largest users of ETFs, mostly watch from the sidelines.