In the Wealth Management industry, blockchain has triggered all passions for about two years. This disrupting technology is qualified in many articles and posts as a major revolution in a highly intermediated sector, where commissions are everywhere.
Numerous articles try to better explain and understand these excitements and anxieties; such as the one conducted in January 2018 for the Financial Times, which revealed that a whopping three quarters of the value created by your savings were consumed in distribution and management fees.
With significant investments done by the main asset managers all over the world, there is no doubt that blockchain, as public or private network, will reduce the number of transfer agents and cut their costs. With fewer agents and more widely shared information, stored in distributed and secured ledgers, opportunities are huge. But how is blockchain potential acknowledged by decision makers when it comes to savings?
But how is blockchain potential acknowledged by decision makers when it comes to savings?
Let’s try and answer this question in the most simple manner possible.
Just imagine that your mom, very far from these excitations on cryptocurrencies and not necessarily very confident about the products sold by her financial advisor, asks you why and how the blockchain will have an impact on her savings. Here of course, no technical jargon is admitted trying to explain a peer to peer network or a distributed ledger.
There are two options to explain her the benefits of this technology: either from an economic point of view, or from a social one.
If you chose the economic angle, you would make sure you can quantify the financial impact of this disintermediation technology on her savings. Lower fees, lower commissions! But how much lower exactly?
The second option is to introduce the blockchain as a technology enabling “Direct to Consumer” distribution, connecting people to producers, allowing sellers and advisors to be transparent on their services; enabling those who know, to share information and recommendation with those who do not know. In other words, this technology is designed to create trustworthy places for your mom’s savings.
No doubt that the huge investments committed by asset managers on the blockchain will improve their existing business models, which actually makes sense. But this looks closer to a transformation than to a revolution.
But this looks closer to a transformation than to a revolution.
We think it would be unfortunate to forget the disruptive nature of this technology, which, like the Internet 25 years ago, can open up new horizons. Creating new ecosystem ex nihilo with new business model in accordance with the people’s expectations, from GenX to Millennial’s, is most certainly the real strength of blockchain.
Jean-François Andro
CEO of Lili
