Registered investment advisers (RIAs) — the personalized financial planners that manage everyday investors’ portfolios — are now gatekeeping the next phase of crypto’s adoption.
Despite soaring valuations, crypto has struggled to reach beyond its core investor base. Even spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds (ETFs) — which finally launched in the United States in 2024 after years of anticipation — have yet to break the mold.
To reach everyday investors — and vastly enlarge its market — crypto must win over RIAs.
“The reason that we’re here today is because of the retail channels adopting crypto ETFs and crypto more broadly,” Federico Brokate, who heads US business for 21Shares, a crypto ETF issuer, told Cointelegraph, “The next category is RIAs, and this is where we need to see the majority of ETF flow over the next five years.”
Skeptical gatekeepers to a $9 trillion market
In the US alone, ETFs represent a $9 trillion market, according to Cerulli Associates, a fund researcher. “RIAs will probably drive somewhere between 30% and 50% of those flows,” Brokate said. He added that RIAs are among the fastest-growing segments of US wealth management and the largest buyers of ETFs.
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The problem is that RIAs aren’t yet sold on crypto. Upward of 55% of advisers “have no expectation of using or discussing cryptocurrency investments with their clients at any point in the future,” Matt Apkarian, a product development director for Cerulli, told Cointelegraph, citing a 2024 Cerulli survey. He added that only 2.6% of RIAs are actively recommending crypto to clients.
The hesitance is partly due to crypto market volatility. “RIAs I have spoken to are looking for confirmation that crypto prices aren’t going to plummet,” Bryan Armour, director of passive strategies research at Morningstar and a fund researcher, told Cointelegraph. Armour added that regulatory ambiguity has also stymied adoption.
Crypto funds attracted billions of dollars in inflows after spot BTC ETFs launched in January 2024. Source: CoinShares
“I’d suggest thinking of crypto investments as extra money you can afford to risk. Its value can go up or down by 90% very quickly,” Will McGough, director of investments at Prime Capital Financial, a $24 billion RIA based in Overland Park, Kansas, told Cointelegraph.
“We have not begun allocating to crypto ETFs in our portfolios,” McGough said. He added that his firm has “definitely seen an uptick in questions about them since spot Bitcoin ETFs and, most recently, Ether ETFs launched.”
Crypto ETFs are changing attitudes
Advisers are gaining interest in crypto as more clients say they want in. Around a quarter of RIAs are now exploring crypto following requests from clients, and another nearly 18% expect to do so soon, Apkarian said.
“We are seeing more willingness among RIAs to invest in spot Bitcoin ETFs — particularly with larger, liquid products” such as iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC), Roxanna Islam, head of sector and industry research at VettaFi, a fund researcher, told Cointelgraph.
Fund managers say Ether ETFs — which only launched in July — are also gaining traction with RIAs.
“A pleasant surprise to me has been the significant interest from the adviser community” in ETH ETFs, Kyle DaCruz, director of digital assets product for asset VanEck, an asset manager that sponsors crypto ETFs, told Cointelegraph.
“I thought it would take years to get advisers up to speed on Bitcoin and assumed Ethereum, being more complex, would be even harder to explain. However, the feedback I’ve received is quite the opposite.”
Compared to Bitcoin, advisers find Ether “easier to value and explain to their clients” because the blockchain network “is cash flow producing” and resembles a technology stock, DaCruz said. Ethereum validators earn fees in ETH for processing network transactions.
Eventually, issuers are hoping to see crypto ETFs comprise 5% or more of RIA’s client portfolios, Armour said.
Catalysts for growth
At wirehouses, “the sales process is different, with a much tighter gatekeeping process from a compliance perspective,” Brokate said. “The independent RIAs are where we’re starting to see some traction.”
That could change soon. Several issuers told Cointelegraph that wirehouses are exploring adding BTC to portfolio models. When that happens, RIA allocations to BTC could more than double, Matthew Sigel, VanEck’s head of digital assets research, told Cointelegraph.
“When advisers can add [crypto] to models and push the product, it will be a game changer,” DaCruz said.
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Ethereum ETFs may benefit from another growth catalyst. Adding staking — depositing ETH as collateral with a validator in exchange for a cut of network fees — will “absolutely” drive adoption, Brokate said.
So far, US regulators have blocked issuers from adding staking to ETFs, largely on liquidity concerns. Staked ETH usually takes days to withdraw, whereas ETFs must be able to promptly redeem shares for underlying assets on request.
Issuers expect to find a path forward. “The way we’ve seen other global markets unfold from a regulatory perspective is similar to what we’re seeing in the US. You start with Ethereum without staking, and down the road, you add the staking ability to the products,” Brokate said.
Ultimately, adoption hinges on legitimacy and trust, which — thanks to the ETF launches — crypto is finally earning among RIAs.
“The availability of digital assets in the ETF wrapper is definitely a game changer for financial advisers who are fielding client demand,” McGough said. “The ability to access these investments through regular investment channels will likely lead to greater adoption over time.”