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The cryptocurrency and ESG revolutions never happened for financial advisors

The cryptocurrency and ESG revolutions never happened for financial advisors

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Cryptocurrencies and ESG have been mentioned a lot in financial news in 2022. However, the majority of financial advisors claim that none of the products are particularly important to their businesses, and few predict it will expand in 2023.

Crypto, in particular, appeared to be a dead end. 49% of advisors said they didn’t think digital currencies were a viable investment. In 2022, less than 5% of the clients of three quarters of advisors were crypto investors. None of them were for 22%. So will the crypto revolution start in 2019? No chance. In 2023, only 30% of advisors expected their clients to buy more cryptocurrency, up from 60% in 2021.

Financial Planning’s parent company, Arizent, recently published a study that shows how far media hype and reality differ. The 2023 Predictions: What to Expect in the Year Ahead survey asked 362 advisors to predict how the wealth management industry would evolve in 2023 and how their clients expected to invest. ESG investments, which stand for “Environmental, Social, and Corporate Governance”, hardly appeared.

The future also looked bleak for ESG. In 2023, the vast majority of survey respondents (69%) said they were unlikely to suggest ESG items. Only 10% said they were very likely to do so, while 21% said they were somewhat likely.

Or maybe not. Bitcoin price has been stagnant since June. Sister coins TerraUSD and Luna fell apart in May. And in November, crypto exchange FTX abruptly collapsed, forcing Sam Bankman-Fried, its CEO, to resign and be jailed for fraud. Bankman-Fried pleaded not guilty.

Given the extensive media coverage of cryptocurrencies and ESG over the past year, this might come as a surprise. The media has closely watched every high and fall of digital currencies, from Bitcoin’s peak last winter to its collapse this spring. Investment giants like BlackRock have meanwhile dived headlong into the ESG movement. Judging by the headlines, ESG and cryptocurrency seemed to be headed somewhere in the future of finance.

Republicans in politics, at the same time, have vehemently opposed ESG. State politicians in Kansas, Texas, Oklahoma and other states have proposed new legislation to crack down on what GOP leaders have called “awakened capitalism,” including Florida Gov. Ron DeSantis and former Vice President Mike Pence.

Despite all the negative press, there is one obstacle that crypto and ESG need to overcome: Advisors tend to stay away from them.

According to Ron Strobel, certified financial planner and owner of Meridian, Idaho, RIA Retire Sensibly, “I don’t promote crypto (or even really talk about it with clients because I’m obligated to). I just don’t see how we can do our due diligence on something that is so dubious primarily from a professional point of view. Others are put off by the obscurity of the technology.

“Most of my clients want to understand before they spend money on it,” said Sarah Jane Paulson, CFP and CEO of Valkyrie Financial in Appleton, Wisconsin. “Crypto is not easy to understand.” “While I often get inquiries about cryptocurrency investments, no one has requested them for their portfolio,” I said. Even among cryptocurrency advocates, many believe interest in it will wane in 2019. While Jan Pevzner, CFP and founder of Gotham Block in New York, is generally “optimistic” about the technology, he has not advised his crypto-owning clients to increase their purchases.

As expected, interest is low as many investors already hold the cryptocurrency and are having a bad year, Pevzner added. Many people are unhappy with cryptocurrency due to the recent spate of negative news. While ESG issues vary, consultants can find them just as off-putting. A typical ESG product either excludes companies believed to have adverse impacts on environmental, social and governance issues, or invests in companies believed to have beneficial impacts on these issues. The adviser must then adjust the index to the investor’s beliefs, picking the ‘right’ companies and removing the ‘bad’ ones if the fund doesn’t quite match the client’s ideas of who is harmful and who isn’t.

And some gurus still think that cryptocurrencies would make ideal long-term investments today, even after their year. According to Pevzner, there is nothing inherently wrong with crypto. Most scandals revolve around rules, compliance and dishonest people. I believe we need to get past this stage because by the time society understands how to use technology effectively, it will be too late to invest.

However, according to research from Arizent, the majority of advisors don’t expect to do much business with these newsworthy assets in 2023 — in fact, they expect to do less than they did in 2018. Many are just finding them more comfortable to be around avoid. And some gurus still think that cryptocurrencies would make ideal long-term investments today, even after their year.

Summary of the news:

The cryptocurrency and ESG revolutions never happened for financial advisors. Check all the news and articles from the latest business news updates.

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