Beware of financial advisors pumping Bitcoin to clients

The recent launch of US Bitcoin ETFs is opening a floodgate of demand from one group of investors — financial advisors.

• Before, advisors buying Bitcoin for clients required going through several regulatory hurdles — a tedious process.
• After the launch of the recent Bitcoin ETFs, advisors can offer crypto to clients more easily.

Last week, Interactive Brokers Group opened crypto trading up for Registered Investment Advisors — letting them trade crypto for clients — giving access to 5,700 advisors managing $60B in client assets.

And demand from clients is looking strong…

• 81% of clients asked advisors about crypto in 2021 and 17% of those who haven’t bought any said they would this year — according to a recent Bitwise survey.
• 14% of advisors are using or recommending cryptos to clients — up from less than 1% in 2020 — according to the Journal of Financial Planning.

Beware the advisor: Tyrone Ross, CEO of Onramp Invest (via WSJ) cautions investors against advisors promoting Bitcoin:

• Beware: Someone who recommends the new Bitcoin ETF is “just a salesperson, not someone focused on your long-term goals.”
• Always ask: “How do you get paid on the sale and what will it cost me?”

Holding these Bitcoin ETFs isn’t like holding Bitcoin directly and comes with extra costs. But for younger investors who already stay away from advisors and at increasing rates, the trend could impact them in different ways…

What does this mean for Bitcoin? More demand. In 2020, North American wealth managers had $58T in assets while the Bitcoin market cap stood at just $1.2T — with stocks and bonds still a popular holding among wealth managers.

Even a small allocation of 1-2% from this industry into crypto could bring massive demand.