Crypto Winter Has Not Frozen Demand From High Net Worth Investors - According to 537 US Financial Advisors
Report from Coalition Greenwich Details How Financial Advisors are Navigating Recent Adverse Industry Events to Meet Growing Client Demand
NEW YORK, Dec. 15, 2022 /PRNewswire/ -- Talos, the premier provider of institutional digital asset trading technology, today released survey findings from Coalition Greenwich revealing that US Financial Advisors (FAs) are fielding significantly increased demand from investors for digital assets despite the current crypto winter. Conducted in partnership with Talos, the survey reported that 92% of mass affluent and high net worth (HNW) clients are asking for access to digital assets for inclusion in their portfolios. Among the 537 FAs surveyed, 30% responded that they already have or plan to recommend specific digital asset investment products within the next three months.
The results are particularly interesting as they were taken during the third quarter of 2022, following the collapse of TerraUSD, Luna and Three Arrows Capital that shook the digital assets world, and preceded the fall of FTX. With digital assets pushing deeper into the 2022 bear market, the Coalition Greenwich report set out to identify how these recent market events impacted investor demand. Additionally, the survey looked at how advisors are responding, making recommendations, creating investment strategies and handling compliance and regulations related to digital assets. Overall, demand continues to grow with over half the advisors surveyed suggesting that client interest is increasing or staying the same as a year ago, with 35% saying interest has increased significantly over last year.
"Financial Advisors believe that the growth trend for digital asset adoption as an emerging asset class will persist and continue to increase, even in the face of the current bear market and recent market events," said the report's author David Easthope, Senior Analyst of Market Structure and Technology at Coalition Greenwich. "FAs are working to be ready to meet this demand through their integration of investment products and platforms. While the market will continue to evolve, the results of our survey suggest that the long-term demand trend remains intact among this fairly conservative segment of the market."
You can view the report in its entirety here.
Compliance is key
The survey revealed that compliance approval matters greatly to advisors, more so than either security or risk when it comes to offering a digital asset platform to clients. In fact, 69% of FAs said compliance approval of digital asset investment products is the most important feature for any digital asset platform, with compliance of the platform itself also near the top of the priority list. Compliance came out far ahead of research, execution quality and data/analytics in terms of critical platform features.
"For FAs, compliance is simply the biggest blocker out there for investment strategies offered to clients, more so than knowledge or even risk," continued Easthope. "In fact, 64% of advisors who said they had not yet created an investment strategy for clients primarily due to compliance restrictions making it difficult or even impossible."
When it comes to the execution and trading support FAs would most like to see in the platforms they offer to clients, 76% said they would most like to see electronic execution capabilities, while 56% said inclusion of data and analytics was critical. The report also revealed that advisors prioritize ease of use and integration as a priority with 68% citing the importance of a single system for managing digital assets alongside other client assets.
ETFs dominate product demand
With more and more advisors recommending digital asset products to their clients, the most recognizable, well understood and mainstream products get the majority of attention. To that end, almost two-thirds (64%) of advisors surveyed said they have or will recommend an exchange-traded fund (ETF) related to digital assets. According to the report, "the available options for ETFs are expanding and there appears to be pent up demand for these products. Also getting attention are other fund structures like OTC trusts and other investment funds. Simply put, ETFs are a must have, likely due to their simplicity and regulated status."
Platform solutions for FAs
When it comes to the execution and trading support FAs would most like to see in the platforms they offer to clients, 76% said they would most like to see electronic execution capabilities, while 56% said inclusion of data and analytics was critical. The survey also revealed that advisors prioritize ease of use and integration as a priority, with 68% citing the importance of a single system for managing digital assets alongside other client assets
"As digital assets go increasingly mainstream, financial advisors and other service providers need access to reliable, compliant, end-to-end trading systems," said Talos CEO and co-founder Anton Katz. "At Talos, we've seen these requirements underscored by the increasing institutional adoption of our white-label offering, now used by millions of retail end-users globally. The Talos white-label offering - one of many solutions Talos provides to institutional investors - enables third parties, including FAs, to leverage our secure, market-proven, end-to-end trading platform to their clients. While institutional investors have assumed a heightened sense of caution following the collapse of FTX, we believe demand for solutions that enable FAs and others to develop and evolve their digital asset offerings will continue to increase in the long-term based on this report."
Survey methodology
During the third quarter of 2022, Coalition Greenwich partnered with Talos to survey 537 Financial Advisors across the US. The FAs surveyed all primarily served mass affluent, high net worth, or a hybrid combination of these client segments. The FAs surveyed work for a diversified and representative set of firms across the following segments: bank/wirehouse, insurance, independent and institutional firms.
About Talos
Talos powers digital asset trading strategies globally. Engineered by a team with unmatched experience in building institutional trading systems, the Talos platform is trusted by the largest and most sophisticated market participants and their end clients for its performance, reliability, and security. Its growing network of services – trading platform, marketplace, data and analytics, and portfolio and settlement tools, all offered directly or through service providers on a white-label basis – enable clients of all types to transact end-to-end without concern for unnecessary intermediary risk or potential conflicts of interest. Talos has offices in New York, Europe, Cyprus and Singapore. For additional information visit www.talos.com.
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