6%: The ideal crypto allocation among financial advisors, Nasdaq survey

The study found that, among advisors, the ideal crypto allocation is 6% of a client’s total portfolio.

72% of financial advisors who are currently or considering allocating to crypto are more likely to invest client assets in crypto if a spot ETF product were offered in the United States, according to a survey conducted by Nasdaq.

Despite their interest in a passive approach to crypto and a spot crypto ETF, they do not seem confident that such a product will be approved in 2022, with only some 38% finding it likely.

The study found that among advisors already investing in crypto, 86% expect to increase their allocations over the next 12 months, while 0% report plans to decrease. Of the same group, 50% are already using Bitcoin futures ETFs and 28% plan to start using them in the next 12 months.

Nasdaq surveyed 500 financial advisors in search of answers as to the state of crypto in the institutional sphere. The study found that, among advisors, the ideal crypto allocation is 6% of a client’s total portfolio.

Over two thirds of these advisors would consider using an index fund for broad exposure, followed by sector-specific index funds (57%), actively managed funds (52%), individual digital assets (40%) and high-yield funds (31%).

Jake Rapaport, Head of Digital Asset Index Research, Nasdaq, said: “Over the last decade, financial advisors have been focused on shifting assets into index funds. As they incorporate digital assets into their investment strategies, they are expressing strong interest in a similar vehicle that can offer broad asset class exposure for their clients. The vast majority of advisors we surveyed either plan to begin allocating to crypto or increase their existing allocation to crypto. As demand continues to surge, advisors will be looking for an institutional solution to the crypto question that now dominates client conversations.”

“Crypto inflows through advisor channels show no signs of stopping, even as advisors grapple with compliance considerations and look for guidance from educational materials from other industry participants, including asset managers and index providers. We expect ESG and crypto considerations to converge as investors continue to direct assets into both.”

The survey also found that 34% of registered investment advisors (RIAs) are going crypto, which is more than 19% of independent broker-dealers (IBDs) and 17% of wirehouse advisors.

About half of RIAs (49%) report that compliance rules and restrictions are a barrier to crypto investing, compared to 78% of advisors in all other channels.