Few clients hold cryptocurrency, advisors say

Roughly half of financial advisors hold personal investments in cryptocurrency, though in general they continue to steer their clients away from the assets. 

Half of advisors say 5% or fewer of their clients hold any cryptocurrency. Of advisors with clients who hold crypto, about half say at least some have experienced notable losses. But 70%  say at least some have experienced notable gains.

Of the advisors who personally own crypto, their holdings are likely to be between $1,000 and $50,000.

Those were among the findings in Financial Planning’s September Financial Advisor Confidence Outlook (FACO), a survey of financial advisors and planners that measures confidence in the economy and other factors.

How invested are clients in crypto?

Most advisors report that crypto remains a relatively small slice of client portfolios. However, a minority of advisors note larger allocations among select clients.

Chris Diodato, founder of WELLth Financial Planning in Palm Beach Gardens, Florida, said in an interview outside the survey that up to 40% of his clients own some amount of crypto.

“If that percentage seems high, it’s probably because my client base is primarily the Financial Independence, Retire Early community and tilts younger,” he said.

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Similarly, Ramiro Marmolejo, founder of Financial Rubrics in San Antonio, Texas, said in an interview that around 30% of his clients hold some positions in crypto. He said his approach to crypto is to present it as its own asset class.

“I emphasize to my clients that they should not consider it as a real currency,” he said. “I suggest they hold it as an aggressive growth asset.”

Marmolejo said he also suggests clients treat crypto as any other investment type and not be overweighted in it.

“If they consider how it best fits into their financial plan and continue to monitor, then they should be OK, regardless of what happens in that asset class,” he said.

Kevin Newbert, a financial advisor with Ausperity Private Wealth in Moorestown, New Jersey, estimated in an interview that fewer than 10% of his clients hold crypto.

“Our largest client segment is high-income millennials that are largely in tech, consumer packaged goods and health care who have a larger interest in the asset class,” he said.

At the opposite end of the spectrum from Diodato and Marmolejo is Vincent D’Eletto, an advisor and operating manager at Investment Insight Wealth Management in South Farmingdale, New York, who said in an interview that of the over 160 households at his firm, he is the only one holding crypto in his portfolio.

“The average age of our client roster is 66 years old, so crypto isn’t exactly suitable for most of them,” he said. “For our retiree-heavy client base, we prioritize planning, liquidity and risk management over speculative growth assets. For younger investors or founders with longer horizons, crypto may be an educational topic we discuss, but it’s not a default allocation in our portfolios.”

Mixed returns highlight crypto volatility

Crypto is a particularly volatile asset, as investors have learned. Advisors in the FACO survey reported a mix of outcomes, with some experiencing notable gains, while others suffered losses.

For many, results have been relatively modest or stable.

For his clients invested in crypto, Marmolejo said it’s a “mixed bag” for returns. He said at least three of his clients lost a substantial amount due to panicking-selling in 2022.

“However, the majority of my clients who hold positions are up,” he said. “My firm did not offer any crypto options until very recently. My clients whom I recommended and who bought these offerings are up.”

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The losses have been particularly acute for Diodato’s client base, especially with early adopters who were buying NFTs and so-called memecoins back in 2020 and 2021.

“In many cases, these losses drove folks to focus their investments on the most ‘blue chip’ currencies, such as bitcoin and ethereum, which have both done well since,” he said.

Similarly, Newbert said his firm has seen situations where clients invested in alternative coins in an attempt to get rich quickly.

“This has led to some significant losses,” he said. “We have worked these into the overall plan to take profits from other concentrated positions to be proactive with the losses that were taken and actively communicate with the client’s accountant.”

Financial advisors who invest in crypto

Slightly more than half of the advisors in the FACO survey said they have personal investments in cryptocurrency. Those who do have crypto holdings range from modest stakes of less than $1,000 (14%) to more than $100,000 (4%).

Most began investing in crypto recently, but 4% reported they’ve been involved for 10 years or longer.

Diodato said he personally has around $10,000 invested in bitcoin ETFs. He said he started investing in crypto last summer.

“It’s enough to participate in potential upside but not enough to steer the performance of an entire portfolio,” he said. “Yep, I was late, but the story behind bitcoin is compelling to me, especially in a world where governments don’t seem to care about budget deficits.”

D’Eletto said he made his first crypto purchase in late 2017, and today his personal allocation is approximately $60,000.

“I’ve experienced significant volatility over the last four years, which tracks with crypto’s risk profile,” he said.