Almost half of UK investment advisers have said their clients are willing to sidestep their relationship to allocate to cryptocurrencies.
A WisdomTree survey found that 72% of UK advisors have spoken to their clients about investing in digital assets, with 45% admitting their clients were willing to invest outside their association.
Crypto exchange-traded products (ETP) have been available for some time in countries including Germany and Switzerland, a notable divergence from UK regulators that have yet to recognise cryptocurrencies as financial instruments.
Last October, the Financial Conduct Authority set out its hardline stance by banning UK retail investment in crypto ETNs and warning those that put money into digital assets should prepare to “lose all their money”.
Despite this, regulation was not cited as the most common barrier to entry for UK advisers in the survey, with 35% noting its lack of intrinsic value as the biggest barrier, followed by lack of regulation (34%) and lack of trust (34%).
Jason Guthrie, head of digital assets in Europe, said: “If clients are willing to step outside of their adviser relationship, the best thing an adviser can do is get up to speed on the asset class and guide them on their journey into cryptocurrencies, as this will minimise capital risk.
“Risk management and education should be a priority, especially with such a nascent and fast-moving asset.”
When it came to how digital assets can be allocated, 48% noted their diversification benefits to uncorrelated assets in a portfolio, with just 17% believing they can be used as a store of value, similar to gold.
The survey, which questioned over 600 professional investors across Europe with combined assets under management (AUM) of €400bn, found that 47% of advisers across Europe said their clients had upped their risk appetite since the pandemic, driven by inflation and low-interest rates.
Guthrie added: “Categorising all assets in the same way ignores the nuances and different use cases of coins, mega-cap coins like bitcoin and ether are very different to the wide range of altcoins available on the market.
“Despite the volatility we have seen this year, demand for digital assets has not dampened and advisers need to be ahead of the curve to ensure clients’ portfolios are managed effectively and the risks around investing in this new asset class are minimised.”