Financial advisers readiness to offer crypto products

Jaltech recently ran a survey focused on financial advisers in order to obtain their views and approach to cryptocurrency investing.

FAnews spoke to Jonty Sacks, Partner at Jaltech about the findings, what the survey revealed about financial advisers’ readiness to offer crypto products and what intermediaries who are looking to offer their clients a diversified basket of cryptocurrencies should be looking for and what do they need to be aware of.

Some interesting findings

The most surprising result, according to Sacks, was the disconnect between financial advisers assisting clients with investing in cryptocurrencies (90% are not assisting clients with investing in cryptocurrencies) versus the 92% of clients who are seeking guidance from their financial adviser on cryptocurrency investing. 

Unsurprisingly, 84% of financial advisers indicated that the unregulated nature of cryptocurrencies is the reason for them not advising clients on cryptocurrency investing.

“This is about to change as the Reserve Bank announced they are aiming to introduce cryptocurrency regulations within the next 12 to 18 months. As a result, financial advisers with the relevant license will be permitted to provide clients with advice on cryptocurrency investments,” said Sacks.

The statistics also indicate that 87% of financial advisers have at the very least basic cryptocurrency knowledge. Forty two percent of the financial advisers say they have invested in cryptocurrencies and 73% of financial advisers say their clients are investing in cryptocurrencies.

What advisers should be looking for

Financial advisers, according to Sacks, will need to upskill themselves in order to provide the relevant advice. “The Financial Sector Conduct Authority (FSCA) will soon be announcing what category license is needed, for advisers to be able to provide the relevant advice.” 

“Financial advisers should also look to partner with a fund manager, who selects and manages a basket of cryptocurrencies on their client's behalf. They should be looking for a fund manager who manages a basket of cryptocurrencies which have been bundled together, based on key fundamentals and not simply based on market cap. For instance, investing in a top 10 bundle would include cryptocurrencies such as Dodge Coin, which in many experts’ view, is a poor cryptocurrency investment,” emphasised Sacks. 

“Financial advisers would also need to understand whether the fund manager is complying with local regulations when buying, selling and marketing the investment, as well as to understand how the cryptocurrencies are being stored/custodied. Storage is one of the most overlooked aspects of cryptocurrency investing and, as a consequence, investors have lost billions of Dollars through cryptocurrency exchanges being hacked. The ideal storage solution is where the cryptocurrencies are completely removed from an exchange,” added Sacks. 

This point shouldn’t be overlooked 

The South African Reserve Bank (SARB) announced the intention to declare cryptocurrency as a financial product. 

“The introduction of regulations in South Africa and, globally, is a clear sign that cryptocurrencies are here to stay. Most people haven’t realised that the introduction of regulations will result in large financial institutions offering customers access to cryptocurrencies through their existing platforms,” said Sacks. 

“This point shouldn’t be overlooked! The introduction of regulations will result in the banking sector unlocking access to this asset class to billions of people, the result of which should see the value of cryptocurrencies significantly increase,” he concluded. 

Writer’s thoughts 
As Sacks mentioned… it’s a clear sign that cryptocurrencies are here to stay. With 92% of clients seeking guidance from their financial adviser on cryptocurrency investing, does this not pose an opportunity? For those that are not advising clients on cryptocurrency investing perhaps now is the time upskill to provide the relevant advice and partner with a fund manager who manages a basket of cryptocurrencies. If you have any questions please comment below, interact with us on Twitter at @fanews_online or email me.

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