It’s time for financial advisers and wealth managers to embrace crypto, says Dr Nils Bulling, head of Digital Assets Product Domain, at wealth management software provider Avaloq.
Avaloq’s recent investor survey revealed that an overwhelming 92% of participants would be open to investing in crypto through conventional financial institutions if the option was available to them. It is therefore clear that wealth managers have a substantial, yet unexplored, opportunity to expand their offerings and cater to the changing needs of their clients.
Crypto continues to hold its ground in terms of popularity, with Avaloq’s research indicating that 37% of investors currently own crypto assets. The study, which was conducted among 3,000 affluent to ultra-high net worth individuals from Europe and Asia, also revealed that crypto ownership in the UK increased from 22% in 2022 to 29% in 2023, mirroring trends in Germany where ownership rose from 34% to 40%. Switzerland (57%) and Hong Kong (50%) also registered minor increases.
By contrast, Singapore witnessed a significant decline in crypto ownership, from 48% in 2022 to 29% in 2023, following negative news flow surrounding crypto and the introduction of tighter regulations. Meanwhile, in Japan, the rate of crypto ownership has remained steady at 15% in both 2022 and 2023, although 41% of those not investing in crypto expressed disinterest, a figure considerably higher than the global average of 24%.
Analysing crypto ownership by demographics
Crypto ownership is highest among those with investable assets of GBP 8 million to GBP 40 million (57%). This is followed by those in the GBP 800,000 to GBP 8 million wealth bracket (43%) and those with GBP 40 million or more (38%). Meanwhile, the affluent segment lags behind at 28%.
The research also reveals a generational divide when it comes to the adoption of crypto, with the asset class being more popular among young investors. For example, while only 16% of Baby Boomers currently invest in crypto, 47% of Millennials and 36% of Generation Z investors hold crypto investments, followed by Generation X at 34%.
When looking at the 63% of investors who do not already own crypto assets, the most prominent reason for not doing so is market volatility (43%), followed by a lack of trust in crypto exchanges (30%) and not knowing where to start (27%).
The role of advisers
Financial advisers and wealth managers have a significant opportunity to confront these issues. They are in a prime position to deliver trusted advice and reassurance to those eager to explore the crypto space but are deterred by their limited knowledge of the sector and lack of trust in the crypto exchanges which dominate the market. At the moment, only 38% of investors hold crypto assets via a financial adviser or wealth manager, with 77% relying on crypto exchanges. Given the lack of trust in these exchanges, there is clearly space for advisers to further tap into this market in the years to come.
The crypto investing landscape is rapidly evolving, with recent regulations such as the UK’s decision to allow crypto-related securities, the SEC’s landmark approval of Bitcoin-focused exchange-traded funds in the US and the European Union’s comprehensive “Markets in Cryptoassets” (MiCA) signalling a transition of crypto investing towards the mainstream arena.
If wealth managers and financial advisers want to remain competitive with exchanges and challengers, it is vital that they adapt to clients’ demand for crypto assets. Technology will be key in allowing them to keep up with such a changing environment, and seamlessly integrate crypto assets into traditional portfolios.
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