What You Need to Know
- Eighty-nine percent of advisors said clients don't understand the volatility of cryptocurrencies, hot ETFs and meme stocks.
- The popularity of such investments reveals a generational divide.
- Fifty-four percent of advisors “refuse” to let their clients invest in these speculative sectors.
Two-thirds of financial advisors in a recent survey from Incapital said clients were confused by their adult children’s encouragement to invest in cryptocurrencies, meme stocks and hot ETFs. And 89% of advisors said clients do not understand the volatility of those sectors.
Although 58% of advisors said their clients were curious about such investments, and 35% said their clients want to invest in these opportunities, 54% of advisors said that they “refuse” to let their clients do so.
Just 43% of advisors said their firms provide them with enough information to educate investors about these types of investments. Nearly half of advisors also reported that their clients have opened electronic trading accounts at other firms.
“The popularity of investments like cryptocurrencies has taken everyone by storm and reveals a generational divide,” said Chris Mee, Incapital’s head of wealth management solutions distribution, in a statement.
“Younger investors have time on their side and can afford to take the potential risks that accompany these types of investments.”
That’s not so for older investors approaching or in retirement, Mee said, as they may not have time to recover from substantial losses from an investment such as cryptocurrencies, or even from overexposure to equity market risk.
“Retirement-minded investors may benefit from risk-managed strategies that help them stay invested for growth, but with protection from too much downside risk exposure,” he said.
Qualtrics by Red Zone Marketing conducted an online survey in late April among 346 financial professionals from some 50 broker-dealers and RIAs residing in 41 states.
Risks and Opportunities
Thirty-four percent of financial advisors surveyed saw the greatest risks over the next six months in cryptocurrencies, 29% in bonds and 19% in meme stocks.