Counseling crypto-curious clients in 2025

If there's one thing we should have learned by now, it's that the constant state of change in our industry is driven by advances in technology. 

A few years ago the big shift was related to robo-advice and many of us now offer automated investment management options for portions of our client base. Then the pandemic forced us to learn how to connect with our clients virtually, not to mention ramp up our social media presence to accommodate the growing number of clients and prospects who expect to find important information through online searches.

Then came bitcoin.

Client curiosity about crypto will only grow

Especially for those of us who have been in the business awhile, the notion of cryptocurrency sounded not only opaque but suspect. In those early days, the cryptocurrency marketplace had virtually no regulation, lots of exaggerated claims and a fair amount of fraud and assorted shady goings-on. 

What many of us — including yours truly — told our clients at that point was basically, "Avoid at all costs."

Yet between the SEC's approval of cryptocurrency-based ETFs, along with the rising number of publicly traded companies with substantial interests in cryptocurrency and other digital assets, it's getting harder to ignore or dismiss this sector. 

Clients are still coming to us with questions, and the number of those doing so seems unlikely to decrease with the passage of time — especially given that the price of bitcoin recently topped a record $100,000.

READ MORE: Crypto in client portfolios? Advisors on bitcoin, 1 year after ETF approval

Address advisor bias at the outset

The first place to start is with our own biases. According to a July 2024 survey by Cerulli Associates, more than half of us either don't expect to engage with cryptocurrency or even discuss it with our clients. 

We should keep in mind advisors are subject to the same types of behavioral and emotional prejudices that we warn our clients about. 

This likely indicates that before talking with clients about cryptocurrencies we need to check in with ourselves on matters like loss aversion, over (or under) confidence, status quo bias and the other behavioral finance red flags we're well versed in. One of those may be an advisor-focused version of herd mentality ("If none of my colleagues are doing it, I probably shouldn't, either"). We need to weigh evidence in the evolving cryptocurrency marketplace and make judgments based on data, not on fear of the unknown or some other emotional/behavioral driver.

READ MORE: Does crypto belong in retirement portfolios in 2025?

Not that there aren't legitimate concerns that still attach to these assets. 

The cryptocurrency space is still "rife with abuses and fraud," as outgoing SEC chairman Gary Gensler said in March. In fiscal year 2024, a good chunk of the SEC's $8.2 billion came from enforcement actions against cryptocurrency firms. With the buzz surrounding bitcoin's new highs, there will likely be more investors attracted to the idea of crypto, which typically leads to more opportunities for scammers and other hustlers.

On the other hand, as cryptocurrency approaches mainstream status more resources are becoming available; take for example the CFP Board's 2022 guidelines to assist advisors. Sources like Morningstar, Forbes and Investopedia publish research, educational articles, guidelines for fiduciary considerations and other information advisors need to speak knowledgeably and professionally with clients.

Back to basics on bitcoin and more

As we discuss cryptocurrencies and other digital assets with clients, we need to keep the basics in mind: objectives and available resources, risk tolerance, stage in the investment life cycle and the other factors that go into developing a long-term strategy. 

We should remind clients that notwithstanding the word "currency" in cryptocurrency, these assets are far from being cash in a checking or savings account. As with any single asset or asset type, we should counsel against committing an overly large percentage of the portfolio. We also need to outline the tax complications that come along with buying and selling cryptocurrency and other digital assets.

READ MORE: Ask an advisor: Trump is coming. Should I buy crypto?

Clients also need to know that they can participate in the cryptocurrency and digital asset markets without directly owning the currencies — a move fraught with a host of liabilities that many of us would like to avoid.

Instead, we may want to inform clients that owning shares in an ETF, or even shares of companies like NVIDIA, PayPal, Coinbase and other listed, exchange-traded stocks can help gain them exposure to the space without buying a digital wallet. In fact, some of these holdings may already be in client accounts in the form of mutual fund shares. Clients may be surprised to realize this, but we should make sure they hear it from us.

As we move forward on this latest front of technologically driven investing and advising, the key, as always, is to have the most thorough knowledge not only of potential investments but of each client. Our clients depend on us for trustworthy guidance. To supply it, the first person we may need to educate is ourselves.