Warning of cryptocurrency advice gap

Warning of cryptocurrency advice gap

There is a "significant" gap between investor appetite for advice on cryptoassets and the financial advice profession's ability to provide it, research has found.

The research by investment platform Etoro found 38 per cent of investors who currently seek financial advice about pensions and investments would also go to an IFA for advice on cryptocurrencies but more than six in 10 (62 per cent) advisers admitted a total lack of confidence on this subject.  

A majority (63 per cent) of financial advisers said they had been asked about cryptocurrencies by clients but only 9 per cent felt highly confident providing advice on this.

Iqbal V Gandham, UK managing director at Etoro, said: "Investors clearly want help when it comes to cryptoassets and are looking to their adviser for the answers. However, whether due to concerns around long-term viability or a genuine lack of knowledge, IFAs are shying away from these conversations.

"The question is how long can advisers avoid this topic given the growing awareness of and interest in crypto. With regulation for crypto on the horizon in the UK, we believe that advisers are only going to see an increase in client inquiries about the best routes to invest."

The research revealed advisers were largely sceptical about cryptocurrencies, with the biggest concerns price volatility (74 per cent), lack of regulation (72 per cent), and the potential for fraud (68 per cent).

Rather than giving advice themselves, 14 per cent of financial advisers surveyed say they would consider directing clients to a regulated platform to access cryptoassets.

Mr Gandham said: "While we understand the concerns expressed by many IFAs about cryptoassets we also believe that there remains a lot of misunderstanding. We want to educate everyone - from consumers to advisers - of the potential benefits of cryptoassets as part of a diversified investment portfolio."

Last year, during the surge in cryptoasset values, the FCA warned these digital currencies had no discernible value and investors should be prepared to lose all their money.

In September the Treasury select committee called for greater regulation of the "Wild West" of the cryptocurrency market and said the government's position was too ambiguous and unsustainable.

Dan Farrow, director of SBN Wealth Management, said: "Cryptocurrencies are unregulated and financial advisers are regulated so if we started advising whether formally or not on something highly speculative and unregulated then we are stepping out of the system which is there for the consumer's protection and our protection.

"I would not shy away from generic advice but I would not give any formal specific advice because it would jeopardise my business and I would struggle to get PI cover for anything remotely unregulated. Cryptocurrencies have got fraud potential all over them and advisers should not be touching them with a barge pole."

Etoro's research was conducted online by Opinium among 206 advisers and 2,003 UK adults in September 2018.