Crypto Winter Has Not Affected Demand from High Net Worth Investors, Report Reveals

Talos, the premier provider of institutional digital asset trading technology, 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.”

The report’s author David Easthope, Senior Analyst of Market Structure and Technology at Coalition Greenwich, said:

“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. 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.”

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.”

Easthope added:

“For FAs, compliance is simply the biggest blocker out there for investment strategies offered to clients, more so than knowledge or even risk. 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.”

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.”

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