Morgan Stanley Considers Allowing Brokers to Recommend Spot Bitcoin ETFs to Clients

Morgan Stanley, one of the leading financial institutions, is reportedly exploring the possibility of expanding its sales of Bitcoin exchange-traded funds (ETFs) by allowing its approximately 15,000 brokers to actively recommend these products to customers. This potential move comes as the firm aims to tap into the growing demand for cryptocurrency investments, according to a report from AdvisorHub.Currently, Morgan Stanley offers Bitcoin ETFs on an unsolicited basis, meaning that customers must approach their advisors independently to express interest in investing. By enabling advisors to actively recommend these products, the firm could potentially broaden its customer base, although it would also expose itself to additional liability.

Morgan Stanley is Establishing Safeguards

Morgan Stanley is in the process of establishing certain safeguards, or “guardrails,” for solicited purchases, the report said, citing two senior executives familiar with the matter.These measures would include requirements related to risk tolerance, limits on allocation, and trading frequency. The executives did not provide a specific timeline for when the firm might implement these policy changes.The approach taken by Morgan Stanley aligns with that of its peers in the industry. Other major banks, such as Bank of America’s Merrill Lynch and Wells Fargo, introduced Bitcoin ETFs shortly after their regulatory approval in January. However, they also limited access to unsolicited purchases, and in some cases, exclusively catered to ultra-wealthy clients. Merrill Lynch, for example, set a minimum asset threshold of $10 million for customers interested in purchasing a Bitcoin ETF. 

Not All Institutions Offer Crypto ETFs

In January, the Securities and Exchange Commission (SEC) approved 11 applications for Bitcoin ETFs, including those from BlackRock, Ark Investments, Fidelity, Invesco, and VanEck. However, not all of these firms have made their Bitcoin ETFs available to investors. Some financial institutions, like Raymond James Financial and Vanguard, have chosen not to offer cryptocurrency products, citing concerns about their suitability for long-term portfolios.LPL Financial, the largest independent brokerage with over 22,000 brokers, announced plans in February to evaluate which Bitcoin funds it could offer to customers. However, there has been no official update on their progress. Cetera Financial Group, another independent broker-dealer, approved four Bitcoin ETFs for its advisors in March. The firm implemented allocation limits and required customers to have aggressive risk tolerances.While customers have shown considerable interest in Bitcoin ETFs, a second executive from Morgan Stanley noted that it is still regarded as a speculative investment. 

“Our clients aren’t betting the ranch on Bitcoin,” the executive said. “For most of those people, it’s quite interesting, so they put in a little bit of money.”

Meanwhile, Hong Kong is gearing up to launch its much-anticipated spot Bitcoin and Ethereum ETFs by the end of April. The Hong Kong Securities and Futures Commission (SFC) recently granted approval to several fund managers to offer these ETFs in a bid to establish itself as a hub for digital assets by introducing a range of cryptocurrency ETFs.