Multiple surveys out of the US show financial advisers’ appetite for crypto exposure is on the rise, with ETFs and the protections they offer seen as an effective way of exploring digital assets.
One recent industry poll by TMX VettaFi which tested adviser intentions, shows 57% plan on increasing their allocations into crypto ETFs, while 42% think they will maintain their position. Only 1% are considering reducing their position.
Locally, advisers’ interest in exposure to crypto through ETFs is being driven less by a shift in sentiment about the reputation of digital assets and is more about the evolution of the products available for investors, says Hamilton Hindon Greene investment advisor Jeremy Sullivan.
“Your professional indemnity insurance doesn't allow you to to invest in things that wouldn't be somewhat mainstream.
“So as that adoption moves to mainstream, it means that people could theoretically invest in it and still have that professional indemnity insurance as it is for a regulated exchange and a regulated product that's audited, and there's all those checks and balances that are in place.”
In portfolio construction, Hamilton Hindin Greene offers clients the range of locally packaged Smart ETFs, which Sullivan says are particularly useful for smaller portfolios.
“For people starting up, and for even medium sized portfolios looking to get low cost diversification and a mix of active and passive strategies, they're a great place to invest.”
The likes of gold and crypto ETFs are the realm of sophisticated investors, he says, and there are plenty on offer with more exchange traded funds in the world than listed stocks. Investors can still get the exposure to an asset or theme they want without having to hold the assets directly and risk getting caught up in a crash like the failure of the crypto-exchange FTX.
“For people starting up, and for even medium sized portfolios looking to get low cost diversification and a mix of active and passive strategies, they're a great place to invest.”
“The last thing you want is for an issuer to disappear because the proper regulations weren't being followed, and to know that they are going through an iShares or a Vanguard, or whomever of the larger players in town that does provide that level of comfort and security, that the product itself is critically regulated and run.”
When it comes to retail investors, overtrading of ETFs remains a risk and that is where a financial advisor adds value, says Sullian.
“They can also be a little bit too close to the news and make poor decisions and switches based on the way a normal market moves.”
“The recent correction was a good example, and I'm sure KiwiSaver switches increased on the back of that one.
“So not having a long term plan, a strategic asset allocation, and basing your decisions on that plan, and being too emotive.”
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