Here's Why Financial Advisors Won't Recommend Cryptocurrencies — Even if They'd Like to
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Financial advisor Douglas Boneparth considers himself to be fairly pro-crypto. But, despite the fact that he has clients who directly hold cryptocurrencies, he can't actually recommend that they buy or sell their digital coins.
That's because cryptocurrency isn't regulated by agencies like the Securities and Exchange Commission and Financial Industry Regulatory Authority, which Boneparth and other advisors take their guidance from before bringing recommendations to clients. The most he can do is educate them on where and how they can buy it if they choose to themselves, the risks associated with incorporating crypto assets into their portfolios and how it can impact their overall financial goals.
“There is a regulatory and compliance landscape that is handcuffing the vast majority of registered investment advisors from making recommendations about the purchase or sale of crypto assets,” says Boneparth, an advisor at Bone Fide Wealth based in New York City which specializes in millennials.
But interest in cryptocurrency has boomed in the last year, with Bitcoin’s price reaching an all-time high of more than $63,000 in April of 2021 after sitting around $8,000 just a year earlier. Apps like Robinhood and Webull allow users to trade cryptocurrency at lightning speeds with no fees, and even robo-advisors, which have long touted the goal of helping young people with long-term investing, are dipping their toes into crypto.
So it makes sense that financial advisors are getting inundated with questions from clients about whether or not cryptocurrency should be a part of their investment portfolio. And some advisors are warming up to the idea of digital currency. The Financial Planning Association’s (FPA) 2021 Trends in Investing Survey found that 14% of advisors surveyed say they are currently using or recommending cryptocurrencies, up from below one percent in 2019 and 2020. And 26% said that they plan to increase their use or recommendation of cryptocurrencies over the next year.
Why financial advisors aren't recommending Bitcoin
