Bitcoin is garnering more attention and allocations from institutional investors and more big-name banks are making the cryptocurrency available to clients.
For example, Morgan Stanley recently generated some buzz when it announced it's making select Bitocin funds available to wealthy clients. More banks are following suit or will do so in the near future. Still, the prevailing wisdom when it comes to the “home game” traders transacting in and out of Bitcoin and other cryptocurrencies on a regular basis is that those are younger investors.
They're the ones that understand the technology behind digital coins and fintech in general. Younger investors are the ones that see the long-term adoption case for Bitcoina and they're the ones that can handle the asset's turbulence and wild price swings.
At least that how the conventional wisdom goes, but not so fast. Advisors ought to prepare for a surprise demographic inquiring about and wanting to embrace Bitcoin: Baby Boomers.
Big-Time Opportunity for Advisors
Knowing that the birth range for boomers is 1946 through 1964 means the demographic today is 56/57 years old up to 74/75 years old. As advisors well know, that's a lot of clients already well into retirement and a bunch more getting close to retirement.
In bygone eras of financial advice, constructing retirees' portfolios wasn't always easy, but it was more straight forward. Dial back risk, boost allocations to income-generating assets, include some inflation protection and most clients would be comfortable and happy. However, the world is changing around us with staggering velocity.
Interest rates are likely to remain low at least through 2023, which, forgive the pessimism, probably means 2024 because the Federal Reserve may not want to hike nearing a presidential election. The dollar is weak and inflation is an increasingly legitimate concern. Each of those scenarios on its own is efficacious for Bitcoin. All three happening in unison is a potentially compelling cocktail for Bitcoin and that explains boomers' rising interest in the digital asset.
That interest is backed by professional data and opinions. For example, noted Bitcoin bull Michael Novogratz, founder of Galaxy Digital, said at the Reuters Digital Assets Week last month that $1 trillion could soon flow into Bitcoin courtesy of boomers. He says that move happening imminently, perhaps as soon as this month.
JMP Securities estimates $1.5 trillion from investment banks' wealthy clients could soon move into crypto assets. Predominantly, those wealthy clients are boomers.
“Around $30 trillion of assets in the U.S. retail wealth management industry currently do not have direct access to bitcoin,” according to JMP.
Translation: There's a massive opportunity set for advisors looking to engage boomer clients on the Bitcoin front.
Wait, There's More
Understandably, it may be difficult for some advisors to wrap their heads around a 70-year old client wanting to be involved with Bitcoin. Many market participants, even professionals, are programmed to believe Bitcoin is volatile, its store of value traits remain in question and that older investors should be conservatively positioned.
Still, data confirm advisors should shift their thinking. A recent deVere Group survey of global clients indicates 70% 55 and up are already crypto investors.
“The over-55 respondents to the survey frequently cited a key factor for their interest in crypto is the historic levels of money-printing as central banks around the world attempt to prop-up their economies following the fallout from the pandemic,” notes deVere CEO Nigel Green. “They’re aware that if you are flooding the market with extra money, then in fact you are devaluing traditional currencies – and this, and the threat of inflation, are legitimate concerns, prompting them to seek out alternatives.”
This is a prime example of advisors needing to see the writing on the wall. Clients will thank you.
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