Why Do High Net Worth Individuals Avoid Crypto?

A recent report suggests that, in spite of the fact that high net worth individuals (HNWIs) are growing more wealthy all the time, these investors are not yet taking part in the cryptocurrency market to the same degree as other demographics. The recent Capgemini World Wealth Report 2018 suggests that one of the reasons for this hesitation to adopt one of the trendiest new investment areas in the financial world may have to do with the wealth management industry.

29% Have 'High Interest'

The report, cited by Bitcoinist, suggests that 29% of millionaires have a “high degree of interest” in entering the cryptocurrency space as investors while another 27% “sit on the fence.” Altogether, then, a full 56% of HNWIs are either prepared to invest in digital currencies now or could likely be swayed to do so in the near future. Some 44% of HNWIs have expressed a lack of interest in the space.

Given the breakdown above, one might expect that a relatively large proportion of millionaires would be active as cryptocurrency investors. However, only about a third of the more than 2,600 millionaires included in the study have received information about investing in cryptocurrencies from their wealth managers.

Caution: Necessary or Overblown?

Wealth managers may still be largely cautious about the long-term health of the digital currency space, or perhaps they lag behind individual investors when it comes to their understanding of cryptocurrencies and their potential. While the traditional financial world has remained broadly hesitant when it comes to digital currencies, there have been some signs that mainstream investors and some financial institutions are warming up to the concept, or at least to the blockchain technology that supports the cryptocurrency space.

Wealth management firms are typically focused on traditional and institutional investing practices, meaning that they are less likely to be at the vanguard of cryptocurrency investment opportunities. Nonetheless, Capgemini believes that a shift may be approaching: The report suggests that “the strong demand for information on cryptocurrencies from younger HNWIs is likely to force wealth management firms to at least develop and offer a point of view during the months ahead.”

The report also indicates that investment returns for HNWIs are above 20% as of last year, marking the second year in a row that this demographic has grown substantially wealthier.

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns bitcoin and ripple.