Tom Hendrickson discusses the crypto survey

by Arthur · February 21, 2023

VettaFi’s President Tom Hendrickson appeared on Nate Geraci’s ETF Prime to discuss the latest Bitwise/VettaFi Benchmark Survey of Financial Advisor Attitudes Toward Crypto Assets. Afterwards, Geraci was joined by Dimensional Wes Crill for additional perspective on the growth of their ETF business, mutual funds to ETF conversions, value investing and more. For the last segment, Alpha Architect Wes Gray explained their white labeling service and spotlighted two recent ETF launches.

Hendrickson took a moment to highlight the Exchange’s partnerships with three nonprofits: Surf rider, Susan G. Komenand Junior achievements. Hendrickson shared, “our mission is to transform financial services from an industry to a community, and the Exchange is the physical embodiment of our mission.”

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The survey says that crypto remains a hot topic

After being stuck in a brutal winter that saw bitcoin down 65%, the FTX scam and Terra Luna’s implosion, crypto has bounced back a bit in 2023. Although nowhere near its highs, the signs of life have brought it back to mind for investors. According to Geraci, the SEC has recently come “crypto guns blazing” from a regulatory standpoint.

In collaboration with Bitwise, VettaFi released a new survey on investor attitudes towards crypto. This is the sixth survey Bitwise and VettaFi have put together on the matter. This year’s edition was carried out between 25 November^th and January 6^th. “This is almost hot off the press, almost 500 respondents,” Hendrickson said, setting the table for the results.

An immediately eye-catching statistic from the survey was that 90% of advisors receive questions about crypto. “Start with that. Almost every advisor gets some kind of question about what’s going on in this space,” Hendrickson said. He also shared that 59% of their clients invest in crypto outside of their client-advisor relationship.

Another interesting result from the survey, according to Hendrickson, is that 37% of advisors invest in crypto themselves. “This is not a retail versus advisor binary — there is certainly a propensity to invest in the space by advisors themselves,” Hendrickson said, noting that while that is down from 2022’s 47%, it is still well over 17% – the result from 2020.

Crypto stocks

The survey also showed that there was strong interest in ETFs for crypto shares such as Amplify Transformational Data Sharing ETF (BLOK) and Bitwise Crypto Industry Innovators ETF (BITQ). “If I put myself in an advisor’s shoes,” Hendrickson said, continuing, “one of the things that’s good in the advisor’s handbook is understanding the power of diversification.” Hendrickson sees the ETF wrapper as providing additional diversification benefits beyond just directly owning individual coins.

Geraci noted that the number one answer to the question of what prevents advisors from allocating assets to crypto is regulatory concerns, which was cited by 65% of respondents with volatility following. “I don’t think most advisers want to bark up the wrong tree with regulators,” Geraci said.

Hendrickson agreed, saying it makes sense that advisers as managers of clients’ capital can be cautious around nascent areas that are still finding their regulatory footing.

A majority will have a spotbitcoin

Although the regulatory climate surrounding crypto is currently difficult, a majority of 68% would prefer to invest in bitcoin through a spot ETF. Hendrickson pointed out that this slide continues to grow, with 58% answering this question the same way last year.

More than one dimensional

Wes Crill joined Geraci to talk about a variety of ETF-related issues. With 30 ETFs and over $82 billion in assets, Dimensional boasts tremendous growth in just two and a half years. Despite not debuting on the ETF scene until November 2020, Dimensional is currently the 8th.^th largest issuer and largest active issuer.

Conversions from mutual funds to ETFs are a big reason for success. “It is very rewarding for us to be 8th^th largest ETF issuer,” Crill said, praising their clients for making their introduction to the room so heart-warming.

Although Dimensional has been very successful, Geraci wondered why other issuers are struggling. According to Crill, “the ETF structure itself is not a panacea.” Crill noted that Dimensional typically has mutual fund counterparts to its ETF strategies, and that the conversions were a special case, given the focus of those products on tax efficiency and the ETF wrapper’s unique ability to deliver on that.

“I think you see the value of the ETF structure,” Crill said.

Alpha Architect launches two ETFs

Last November, Alpha Architect launched Alpha Architect High Inflation & Deflation ETF (HIDE) followed up in December with the launch of Alpha Architect 1-3 Month Box ETF (BOXX). In addition, their white labeling service has them well positioned.

“We are a leader in innovating and bringing the cost of ETFs as low as humanly possible,” said CEO Wes Gray.

According to Gray, the ETF’s tax-deferral capabilities make it a highly sought-after wrapper, and Alpha Architect has helped issuers create tax-free conversions for everything from hedge funds to mutual funds. “ETFs are just a better way to manage them because of the tax benefits.”

White labeling services allow issuers to share and market their idea, while firms like Alpha Architect handle the more technical side of regulatory compliance. “The whole process with the SEC and our board is about four months,” Gray said.