A survey conducted by Natixis Investment Management, has found that the worldwide bull run the financial world is currently in the midst of is causing investors to be complacent regarding risk.
The survey polled 2775 financial advisors around the world, 82% of which found that complacency has sunk in to their clients as the markets around the world climb and just under 80% of their client failed to even recognize risk.
Since investors are losing perspective about risk, they tend to be upset and surprised when the market takes a downturn. Through Natixis’ survey many of the advisors reported that their clients reacted emotionally to market volatility and that in most cases the advisors needed to act as a “voice of reason” for their clients.
Another common thread among advisors found by the Natixis survey is that professional financial advisors by in large, fear cryptocurrency investments. Natixis reported that 74% of respondents think the Bitcoin bubble will burst in 2018, which is in stark contrast to the only 21% that are concerned with an equities or bonds bubble.
Darren Pilbeam, head of UK wholesale and retail at Natixis Investment Managers suggested that after such a long bull run, investors have forgotten about the risks of investing.
“After nine years of steady growth, volatility has returned to the markets and investors have to get reacquainted with the feeling of uncertainty.”
Pilbeam and Natixis also say a diverse range of investments is the best way to mitigate risk, and “recommend implementing a broad range of alternatives.” But apparently cryptocurrency is not among the broad range of options they endorse.
It makes sense for investment management firms to question the value of cryptocurrencies because blockchain infrastructure and tokenomics threaten the industry’s power to fund businesses and the mere existence of many coins and blockchain startups threaten to replace the services advisors provide.
Natixis’ conclusion that complacency is growing in regards to risk, could explain the huge growth that we witnessed in the crypto markets during 2017. Investors who have been so used to seeing only green became willing to move some of their gains to Bitcoin, Ethereum or altcoins; but, now with more turbulence picking up in the traditional financial markets, investors may be less willing to tolerate the volatility of the cryptocurrencies.