Advisors, BDs Continue to Avoid Crypto: CFA Institute Study
The SEC also recently warned investors to exercise caution when investing in crypto-asset securities.
A recently released CFA Institute survey found that the majority of advisors avoid crypto assets and that broker-dealers prohibit representatives from selling crypto-related vehicles.
More than 90% of survey respondents reported that their firms do not allow representatives to solicit the sale of cryptoassets, and that 67% said they would not sell such investments to clients even if they were available to them.
Only 14% of respondents said they would, while 19% said they were unsure, the study said.
The survey data was collected from a survey of 340 broker-dealers conducted last November. The representatives are members of the Financial Services Institute.
“The survey results show that despite all the attention crypto has received, it still has a long way to go before it enters the mainstream of retail investing,” Stephen Deane, senior director of capital markets policy at the CFA Institute, said in a statement.
That said, “the findings also show greater receptivity among broker representatives who have entered the field in the last five years and are likely to have younger clients,” Deane added.
According to the study, advisors with five years of experience or less “were most likely to be open to recommending cryptoassets if they could, with 38% saying they would. Within the same group, 69% said they are comfortable discussing the topic with clients.”
However, advisors with more than 20 years of experience were “far less open, with only 12% saying they would sell cryptoassets if they were available. This group was also less comfortable talking about cryptoassets (40%) than their less experienced peers .”
While more than half of advisors “feel informed,” the study notes, a significant portion do not; 58% said they were either extremely, very, or moderately knowledgeable about cryptoassets, compared to 42% who said they were somewhat knowledgeable or had no knowledge at all.
Only 10% of respondents reported experiencing a significant increase in investor interest in cryptoassets over the past 12 months, while 44% reported no increase in interest over the same time period, the CFA Institute said.
“The survey results suggest that financial advisors generally do not feel strong pressure from clients to discuss or buy cryptoassets,” Deane said. “Respondents’ comments to open-ended questions also show that a number of advisers see their role as one of educating their clients about the risks of crypto-assets and steering them away from investments.”
SEC Risk Alert
The Securities and Exchange Commission’s Office of Investor Education and Advocacy recently warned investors to exercise caution when investing in crypto-asset securities.
“Investments in crypto-asset securities can be exceptionally volatile and speculative, and the platforms through which investors buy, sell, borrow or lend these securities may lack important protections for investors,” the SEC said in a recent notice.
The notice warns that those offering investments or services in cryptoassets “may not comply with applicable laws, including federal securities laws.”
However, brokers, investment advisers, alternative trading systems and exchanges must register with the SEC, a state regulator or a self-regulatory organization such as the Financial Industry Regulatory Authority – which offers “important protections” for investors, the notice said.
Benefits of using an adviser or broker-dealer include rules around custody of assets, fees, conflicts of interest, standards of conduct and minimum capital requirements for broker-dealers, the notice said.
Securities-related investments in cryptoassets “continue to be rife with fraud, including fake coin offerings, Ponzi and pyramid schemes, and outright theft where the project promoter simply disappears with investors’ money,” the alert said.
Recovering money from “wrongdoers may be nearly impossible,” the SEC notice warns. “In part, it may be because of the anonymity or pseudonymity associated with cryptoassets.”
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