Legal concerns present barrier to crypto advice
Just 1 per cent of financial advisers say they have often discussed cryptocurrency with their clients, CoreData said, fuelled by concerns of heavy legal expenses if the product goes wrong.
In its Australia’s Crypto Investors report, the firm identified 89 per cent of financial advisers who said they had never advised on cryptocurrency, demonstrating the scarcity of professional advice available on the topic.
“One of the most prominent reasons why advisers are not talking about cryptocurrency is due to concerns around not being covered by professional indemnity insurance (PI). Without PI cover, advisers risk heavy legal expenses if clients claim their advice led to financial loss or harm,” it said.
Other concerns include the prevalence of scams in the space, the lack of information available on the topic and on blockchains compared to traditional assets, the lack of historical performance data, and the lack of clear regulation.
“Unlike traditional assets, cryptocurrency currently lacks research house ratings and clear advice from governing bodies. While historical data exists on the blockchain, cryptocurrency’s history is relatively short, and its future uncertain,” it said.
However, the organisation believed the reluctance of the majority of advisers to venture into the market left a gap for an advice firm looking to specialise or develop their understanding.
Some 67 per cent of crypto holders said they would be interested in receiving advice on the topic with most interest seen from those who are holding crypto because they believe it will increase in value or because they are concerned about inflation.
“For advisers seeking to develop their skills in the area, crypto-assets represent an opportunity to build a unique offering for their business. Practices which put in the effort to develop competency in the area, will have the chance to increase their assets under management among cohorts of crypto-curious investors, as well as seasoned crypto holders who have built wealth via blockchain,” it said.
“As younger, digitally native generations come to represent larger portions of the market, we are likely to see more demand for digital assets, including cryptocurrencies, as well as tokenised real-world assets. As such, building adviser competency in blockchain-based assets becomes an important consideration for future-proofing advice practices in Australia.”
AUTHOR
Laura Dew
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