How Crypto elevates Wealth Management
Contrary to the common believe, wealth managers are becoming crucial for their clients thanks to crypto and technology.
31% wealth management clients believe that technological advancements will increase the future role of wealth managers
41% is willing to pay more for a better and more personalized advise
29% (and 44% Millennials) believe that crypto will have the biggest positive impact on the financial market
David & Goliath — Crypto & Wealth Management
The digital asset industry grew form the valuation of $100 billion in 2019 to a market capitalization of more than $2.5 trillion today [2][4]. Despite its astounding adoption, it is still far behind the assets managed in the traditional wealth management: $38trillion in the US only and 100trillion in the world (with the modest, compare to crypto 11% growth).
$2.5 trillion is the total value of digital assets vs $100 trillion of total assets in the traditional asset management industry
The largest wealth manager in the world — UBS Wealth Management — advise clients on $2.4 trillion assets. The number of UHNW is expected to grow by 28% globally in 5 years, according to Knight Frank
According to the Forbes 2021 World’s Billionaire List “a new billionaire was minted every 17 hours in 2021”, as 493 new people joined the billionaires club last year. This tendency will continue, as Knight Frank predicts 28% growth in UHNW in the coming 5 years.
Once we link the double-digit growth trajectory of the wealth management market with the interest in crypto of the wealthy clients (almost 80%), it is expected that a part of this wealth will be re-allocated to crypto.
Impact of crypto on Wealth Management
In its latest report Refiniv (London Stock Exchange Group) has surveyed over 1,500 mass-affluent and high-net-worth investors across 13 countries. The reports confirms the major trends re-shaping the wealth management today — ESG and crypto.
The crypto-currencies has been listed as one of the top innovations with biggest positive impact on the financial market. The major areas, which will be
- ACCESSIBILITY
Crypto makes financial services accessible to any person (with the access to the Internet) in the world. This is quite significant, as today more people in the world have access to the Internet than have a bank account - SPEED
Both domestic and international payments are executed in seconds and there is no need to have a bank account to send/receive (crypto) transfers. - NO MIDDLE MAN
Financial services (e.g. payments) are executed without any intermediaries between - FULL TRANSPARENCY
DeFi (Decentralized Finance) and blockchain technology, on which DeFi is built on, comes with the unprecedented level of transparency. Each DeFi application (and each crypto token) allows full insights into its treasury, history, all customers (and their balances), historical transaction, … - OPEN SOURCE CODE
The source code of DeFi application is open to anybody to read, check, validate … and copy.
What does it mean for wealth managers and crypto?
- Affluent and wealthy clients want a personalized advise more than robo-advisors, ETFs, funds in TradeFi (traditional finance).
- In crypto — Yield Farming, Crypto Funds or ETFs — will not replace the need for a crypto wealth managers advising on personalized crypto strategies.
Wealth Management and Private Banking is and always will be about the personal relations and trust. However, given the pace of development and impact of the technology on our lives and the financial sector, wealth managers will have to embrace themselves in a new technological solution to meet the new clients expectations. The clients still want to turn to wealth manager for the financial and crypto advise and are willing to pay more for the right answers.
Crypto Wealth Management article series:
- Where do Wealth Managers stand on Crypto?
- How Crypto elevates Wealth Management
- Behind the scene of Defi. Introduction for Wealth Manager
- From TradeFi to DeFi? Getting-started Guide for Wealth Manager
Stablecoin article series:
Sources:
1) Refinitiv, 2022, Getting personal: how wealth firms can attract and retain the modern investor
2) McKinsey, 2022, US wealth management: A growth agenda for the coming decade
3) Knight Frank, 2022, The Wealth Report
4) Roland Berger, 2022, The rise of the crypto economy
5) BCG, 2022, Global Asset Management 2021 The $100 Trillion Machine
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