Financial Advisors Have to Take Notice of Cryprocurrency Investments
Perhaps the most interest among everyday investors in several years are cryptocurrencies like Bitcoin or Ethereum.
But, the majority of financial planners are less excited.
Wirehouses including: UBS (NYSE:UBS), Merrill Lynch Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) have forbidden their advisors from buying and selling Bitcoin for their clients.
They are not alone.
Most smaller wealth management firms have banned the buying and selling of digital currencies, too.
The attitude of the financial services industries towards digital currencies is in part a reaction to volatility in cryptocurrencies.
And because there is no intrinsic value to these currencies and relatively few places to spend them, there’s no guarantee the price will not fall to Zero as some analysts have predicted.
The US Securities and Exchange Commission (SEC) does not classify 2 of the biggest digital currencies, Bitcoin and Ethereum, as securities, meaning they do not fall under the SEC’s regulatory control and relevant securities laws. This creates a significant impediment for advisors to get involved. And, given their fiduciary responsibility, it is hard to justify that such a speculative investment is in the best interest of a client.
A growing number financial professionals now realize that turning a cold shoulder when it comes to cryptocurrencies is not the the correct answer to the issue, recognize the fiduciary responsibility to stay up-to-date on what is happening in the sector. They need to know and understand cryptocurrencies. Aa the larger cryptocurrencies are here to stay.
We here at HeffCap believe that digital currency and blockchain technology is not a financial fad, it is not going away.
While betting on the future of individual coin offerings is risky, some advisors are more open to investing in digital money indirectly.
One way to do this: purchase securities that are tied to blockchain, the distributed ledger technology that empowers digital currencies.
YTD, 6 ETFs )exchange-traded funds) focusing on blockchain have been launched.
While many financial advisory firms shy away from cryptocurrencies, in part due to their fiduciary responsibility and the inherent volatility of these investments, they are ignoring this new investment sector to their own detriment.
By understanding the market for digital currencies, firms will be better able to serve clients who are going to invest in it coins anyway.
Have a terrific weekend