'Crypto could become a standard sleeve in diversified portfolios'

Financial advisors are increasingly hopping on the crypto bandwagon, according to a new report sponsored by Franklin Templeton.

A Digital Assets Council of Financial Professionals (DACFP) study fielded back in June showed approximately 40 percent of the 584 financial advisors surveyed recommended digital assets to at least half their clients. That figure came in at 32 percent in March, the survey said.

Furthermore, among advisors who have not recommended digital assets, 56 percent plan to do so at some point in the future, according to the DACFP, with 40 percent of that group saying they will be pulling the trigger in the next six months.

Recommended crypto allocations vary, according to the DACFP report, with 24 percent of the advisors who have recommended digital assets suggesting a 2 percent allocation, while 22 percent recommend a 5 percent allocation.

Chris King, CEO at crypto SMA platform Eaglebrook, believes crypto is still in its early innings. Furthermore, unlike prior emerging asset classes, he says crypto has been a tale of “bottom-up adoption” as retail investors have driven most of the demand up until now.

That said, King says the dynamic could shift with RIAs and other institutional investors driving demand for crypto now that well-known and trusted institutions have placed their stamp of approval on the asset class and politicians are becoming more supportive.

“As the risks of investing in crypto become less of a headwind and the long-term secular tailwinds fall into place, the trend of advisors recommending crypto should gain even more momentum. Over the long term, crypto could become a standard sleeve in a diversified investment portfolio,” said King.

Added King: “Like prior new asset classes, such as emerging markets and REITs, it takes time for the broader investment community to embrace an unknown asset class fully. For Bitcoin, secular trends support further global adoption and inclusion in investment portfolios.”

Bitcoin is a long-term, generational investment well positioned to benefit as a hedge against persistent monetary debasement and ever-growing sovereign debt levels, according to King. He advises that advisors work with clients to make them aware of the significant volatility in the asset class.

“This subset of investors should then consider allocating 3 to 5 percent of their portfolio to crypto, allowing them to participate in the potential significant upside but limiting the impact of the heightened volatility,” said King.

Despite the rising crypto tide, Seth Hickle, managing partner at Mindset Wealth Management, is still not currently allocating to crypto in client accounts. However, he is not recommending they stay away either.

“We frequently take into consideration clients outside assets and discuss the crypto space, the role it could play in a portfolio, and how the regulatory environment around it is shaping up,” said Hickle.

Bigger cities, AI-boom powering infrastructure bull market, says abrdn portfolio manager