Advisors: Younger Clients Need Crypto Help

Advisors are getting plenty of information and tips for working with young clients, particularly millennials and Gen Z. Some of those words of wisdom are sound while other leave plenty to be desired.

Still, it’s safe to say that connecting with those demographics is challenging yet rewarding. It’s certainly different compared to working with baby boomers. Another point advisors should embrace – it’s definitely good news – is that millennials and Gen Z want financial advice.

The need for advice, education and advice among those groups is likely amplified in the current market environment because 2022 is the first traditional bear market (the 2020 coronavirus bear market wasn’t traditional) Gen Z has dealt with and this is the first era of rising rates and stunningly high inflation either demographic has contended with.

Then there’s crypto. Bitcoin and related have spent ample time being beloved by younger investors, but amid this year’s carnage in broader markets, millennials and Gen Z are reducing affinity for digital assets. A new Bankrate survey confirms as much. While the survey is heavily geared toward getting a pulse on attitudes toward crypto among younger clients, it’s instructive for advisors regardless of asset class.

Survey: More Than Meets the Eye

Not surprisingly, the popularity of bitcoin and other crypto assets is plunging this year because prices are doing the same.

“The popularity of cryptocurrencies such as Bitcoin has plummeted in 2022, particularly among their most fervent supporters – millennial investors – according to a recent Bankrate survey. Americans of all ages have seen their comfort level with cryptocurrency sink sharply over the last year, as these digital currencies have plunged in value at a dizzying pace,” according to Bankrate.

The sour attitudes toward digital assets are particularly acute among millennials, which is arguably surprising because these investors played an integral in fostering and expanding the 2020 bitcoin bull market.

“The decline of millennial investors’ comfort levels with cryptocurrency mirrors the steep declines in major cryptocurrencies such as Bitcoin and Ethereum in 2022. From their all-time highs set in late 2021, Bitcoin has fallen more than 72 percent, while Ethereum has sunk 73 percent,” adds Bankrate.

For advisors, the takeaway here isn’t as much about crypto as it millennials making the classic mistake of selling low. As advisors know, the act of buying high and selling low isn’t confined to a particular asset class. Likewise, they also that the relationship between an asset’s price and popularity is linear. That is to say, stocks probably aren’t too popular these days.

“It is a lot easier to be enthusiastic and believe in something when you see the value going up continually,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “But the real test of belief comes when the chips are down, and a lot of investors have realized they now feel differently about investing in cryptocurrency.”

How Advisors Should Approach This Situation

This isn’t about advising clients on how much crypto they should and should not own. Rather, the Bankrate survey is revealing in psychological terms.

It’s clear younger market participants are jittery about the goings on in the broader market and it’s reasonable to surmise that if they’re losing faith in crypto, they’re likely directing similar feelings to other assets, including equities.

That likely includes selling low on some high-quality fare, which is a clear sign many younger investors are in need of immediate financial advice and guidance.

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