Sunday, June 13, 2021

Clients Focus on Cryptocurrencies, Tax Reform

Advisors report nearly half of their clients (49%) asked them about cryptocurrencies over the last six months.

The percentage of advisors recommending crytocurrencies has increased dramatically, but still represents less than 20% of practitioners, according to the 2021 Trends in Investing Survey, conducted by the Journal of Financial Planning and the Financial Planning Association.

In 2018, when cryptocurrencies were first added to the survey, only 1.4% of advisors said they were using or recommending them to clients, the FPA said in a press release. In the ensuing two years, usage dropped below 1%. But the percentage jumped to 14% in 2021, and 26% say they plan to increase their use in the next 12 months, the FPA added.

Clients, not surprisingly, want to talk about crypto. Advisors said 49 percent of clients had asked about investing in cryptocurrencies in the last six months, up from 17 percent in 2020, the FPA said.

Advisors also reported that 49% of clients are asking about tax reform. The Biden administration has proposed a number of changes that would increase taxes, particularly on high earners with capital gains.

“Addressing tax concerns represents an opportunity for financial planners to be of great value to clients. Taxes are easily one of the largest expenses clients will pay in their lifetimes,” said Dan Moisand, CFP, practitioner editor of the Journal of Financial Planning, in the release.

Investment Choices

The annual survey examines a range of investments that advisors are currently using and how they might change their choices over the following 12 months. Sixty-four percent of advisors use exchange-traded funds, making them the most popular investments among advisors. The percentage using ETFs dropped 21% from the 2020 survey, but 36% expect to use them more often over the next year.

The research found that 28% don’t plan to change their usage of any particular investments. The survey did note that advisors are planning to decrease their use of individual bonds (21%), non-wrap mutual funds (20%), mutual fund wrap programs (9%), and fixed annuities (9%) — all increases from the 2020 survey, the FPA noted.

The FPA’s 2021 survey, released June 1, received 529 responses from advisors.

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