Advisers who do not talk crypto currencies with their clients risk clients going elsewhere without advice or even losing their business in the future, commentators have claimed.
While acknowledging that crypto currencies are not a regulated asset class, panellists on the latest FTAdviser In Focus podcast suggested it was only a matter of time before the financial services regulator started allowing retail investors to access crypto through regulated products such as investment trusts or exchange-traded funds.
As a result, if advisers are not helping guide clients now, despite the lack of solid rules and regulations for the intermediated space around crypto currencies, the panel suggested advice firms could lose out in the long-term.
Jason Guthrie, head of digital assets for WisdomTree, said: “If I were an adviser I would be concerned about the number of people who are taking crypto exposure away from me, and the way this dilutes my relationship with my end client.
“If I were worried about being in business in 10 years, I would be more concerned with not moving to crypto and allowing people to take a moderate, risk-adjusted amount of exposure to it now, rather than lose relevance with everyone who is going to be looking at this as an asset class that is here to stay.”
Fellow panellist Rufus Round, chief executive of digital asset trader GlobalBlock, agreed crypto was ‘here to stay’ and suggested that allowing more regulated products such as ETFs that can track a basket of synthetic crypto assets might be a way of providing a level of security for advisers and clients.
He said: “It is easier to criticise a new technology than to embrace it.”
Round also said that advisers may feel crypto as a threat. “The underlying premise of crypto is to cut out the middle man and prevent the erosion of your wealth though fees.”
But he added in the long-run there was a strong role for advisers, given the complications of crypto. “It is a shame that someone like a hedge fund magnate can allocate money to it in their portfolio and my grandmother cannot.
“But the access is not there for her – yet…. and people will get burned especially if they go away from a trusted adviser to an unknown third party.”
Guthrie also said: “The Financial Conduct Authority has signalled it believes in this. It is regulating custodians and brokers, and helping exchanges come to market with sandboxes. It is supportive of this technology.
“The FCA has previously estimated there to be 2.3m UK adults with exposure to crypto, taking their investment directly through avenues that are “non-standard financial products.”
This is not an insignificant number of people, and the regulators will take note, he added.
Yet very few of those will have had regulated, signed-off financial advice to get into the emerging asset class, and this will have to change, Guthrie said, adding: “It’s an asset class that is here to stay. This is why regulators are looking at ways to bring it under the regulatory umbrella.