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Financial Planners Scope Out Crypto Recommendations for Clients

Clients are asking about cryptocurrencies, but many advisers remain cautious.

One in four financial planners plan to increase their use/recommendation of cryptocurrencies over the next 12 months, according to the 2021 Trends in Investing Survey, conducted by the Journal of Financial Planning and the Financial Planning Association (FPA), and supported by Onramp Invest.

In 2018, just 1.4% of advisers indicated they were currently using or recommending cryptocurrencies with clients. That percentage dropped to below 1% in both 2019 and 2020, but increased to 14% of advisers currently using or recommending cryptocurrencies in 2021.

What’s more, 49% of advisers indicated that, in the last six months, clients have asked them about investing in cryptocurrencies, up from 17% in 2020, according to the survey.

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Of note, about one in three planners surveyed actively educate themselves on cryptocurrencies and are comfortable conversing about the topic; roughly one in two planners read occasional news stories on cryptocurrencies, and are somewhat comfortable conversing about the topic; and 4% say they just don’t know anything about cryptocurrencies and don’t discuss the topic.

To be fair, many advisers remain cautious on digital assets, or cryptocurrencies.

“Short answer is no,” said Jeff Farrar, a certified financial planner with Procyon Partners. “I won’t recommend it. It’s not a currency when it rises or falls 20%-plus in a day. Can you speculate on it because ‘it’s going up?’ Sure, but that’s not a great reason to buy something.”

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To accommodate clients, however, Farrar said his firm has worked to secure a way for them to do that with a secure custodian if they insist for their “Vegas” money. But, he said, there has been much take-up on this accommodation.

Of note, Schwab  (SCHW) - Get Report may be gearing up to soon make cryptocurrency investing available on its platform, according to Kitces.com. Read: Charles Schwab Dials In On SEC's Signals On Bitcoin.

What’s more, the dominance of cryptocurrency in the consumer media means advisers have to talk to clients about it, even if the adviser’s view is that it's not (yet?) worth investing in, according to Kitces.com. Read: You Have To Talk With Clients About Cryptocurrency.

Other key findings:

Survey results suggest that clients are concerned about the effect of tax reform on their portfolio, with 40% of advisers indicating clients have asked about this topic, up from 27% in the 2020 survey.

This year’s survey found a continued downward trend of a pure passive approach and also verified that a majority of advisers reevaluate the asset allocation they typically recommend or implement.

It also found a continued interest in ESG funds and that advisers were somewhat bullish on their economic outlook for the next six to 12 months, but neutral on their economic outlook for the next two to five years.

Of note, survey results suggest that few financial planners expect to increase their use/recommendation of options, variable permanent life insurance, hedge funds, structured products, and non-traded REITs in the next 12 months.