Industry behemoth Fidelity
But there’s another headline to come out of this watershed moment in the ecosystem’s development as it continues to permeate the traditional investment landscape. The value of retirement plans like 401(k)s make up a majority of the average American’s overall net worth. Total U.S. assets in individual retirement accounts totaled $13.9 trillion at the end of the fourth quarter of 2021, up 4.3% from the quarter before that. Defined contribution plan assets totaled $11.0 trillion at the end of Q4 2021, up 5.3% from the previous quarter.
The responsibility for proper planning around those assets is, as we know, where the guidance of financial advisors comes into play. Fidelity’s announcement has revived an increasingly important conversation about what financial professionals can and should be learning about this emerging asset class. But the fast-paced crypto universe has left many legacy players wondering if it’s too late to start — and if it isn’t, where to start.
With that background, it should come as no surprise that most advisors are shying away from making allocations to crypto within broader portfolios. According to the
So, why aren’t advisors allocating? Per the survey, advisors cite regulatory concerns and say that the asset class is “too volatile.” Regardless of whether advisors’ employers, be they RIAs, IBDs or broker-dealers, have put restrictions on or outright banned investments in cryptoassets on behalf of clients over the short term for the reasons listed above, there are likely no limitations when it comes to crypto education.
It comes down to an issue of preparedness. According to the survey cited above, 94% of financial advisors were asked one or more questions about crypto by their clients in 2021 — a staggering increase from 81% in 2020 and 76% in 2019.
The due diligence required when it comes to cryptoassets should be taken no less seriously than any other product wrapper, sector, etc. It’s another investable asset class within a broader market. So ask yourself: If clients don’t ask you, then who? By refusing to engage with clients on cryptoassets, or by not having the background knowledge to do so intelligently, you are inadvertently pushing them to social media platforms, mainstream news and other sources in search of answers to their questions. These channels are often riddled with clickbait and misleading headlines, causing additional confusion rather than providing clarity.
Fidelity’s recent, widely circulated news is likely to cause a resurgence of interest in cryptoassets by everyday clients looking to get exposure within tax-advantaged accounts where a majority of their wealth is likely to be invested. It should also reinvigorate advisor education efforts around cryptoassets and spark a new sense of urgency among advisors to become more crypto-fluent in order to effectively advise clients on this emerging space.
If you haven’t already, now is the time to start the conversation with clients about bitcoin and other cryptoassets.
