Will Wealth and Asset Management Adopt Blockchain Technology or Be Left Behind?

In recent years, blockchain technology has seen an increase in popularity in certain parts of the financial services industry. However, when it comes to wealth and asset management, this area of finance has typically been slow to adopt the new technologies due to many barriers to entry. But now, industry players are being forced to look at welcoming a digital revolution to reduce costs, increase efficiency, and improve their offerings as a result of regulatory and fee pressures and changing client demands. Thus, blockchain could be the game-changing factor between who ends up at the forefront and who is left behind.

There are numerous ways blockchain can make a difference in the industry. For example, security tokens, legacy technology, and intermediary disruption could have a significant impact.

Blockchain started in 2009 as the technology that supports Bitcoin and subsequently the broader cryptocurrency landscape.

Bitcoin’s volatility has been well documented. It saw an increase of more than 1,500% in 2017 from below $1,000 to $14,156. But, concerns over regulation caused investor confidence to drop, and Bitcoin fell dramatically in 2018, now trading around $3,500.

Although Bitcoin has fallen, blockchain technology itself is seeing a rise as significant players across different industries including healthcare and automotive look at ways to use the technology.

Authors of the book Blockchain Revolution: How the technology behind Bitcoin is changing money, business and the world, Don Tapscott and Alex Tapscott, explained blockchain as the tamper-proof digital ledger of economic transactions that can be programmed to record not just financial transactions but essentially everything of value.

In short, a blockchain is a shared record (or distributed ledger) of all transactions for a particular entity, providing many opportunities to the investment management industry.

Yet, the asset management industry has been slow in the use of blockchain, especially when compared to other areas of finance, like payments.

For instance, Mastercard has launched its own blockchain network that allows banks and merchants to make cross-border payments, while blockchain powers Visa’s B2B Connect payment platform.

But, some companies have been willing to embrace blockchain technology.

In 2017, Natixis’ Ostrum Asset Management announced that investors had bought shares in its funds through FundsDLT, a blockchain-powered fund distribution platform that was introduced in December 2016 as a result of a collaboration between Fundsquare, InTech and KPMG Luxembourg.

Furthermore, BNP Paribas Asset Management has completed end-to-end fund transactions via blockchain, and last December Calastone revealed plans to shift over 1,700 clients to the blockchain because it expects to save £3.4bn in fund distribution this way.

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