bankingciooutlook

Blockchain Opportunities in Wealth Management

Banking CIO Outlook | Monday, February 24, 2020

Wealth management is increasingly influenced by blockchain, which adds transparency and modernizes conventional wealth management functions.

FREMONT, CA: Hyped as the next-generation technology in the financial services industry, blockchain has the potential to positively impact wealth management. The ability to act as a digital wrapper around any asset and the exchange of those assets on decentralized networks makes blockchain important in wealth management. This has opened up new paradigms of wealth management where investors can participate in a global exchange of assets outside conventional structures.

Blockchain in wealth management would facilitate faster client on-boarding and provider switching. Data privacy protection and investment 

profile propositions will also become cheaper with the aid of smart contracts. This would result in increased efficiency in terms of data exchange and would propel positive client interactions. Digital investment portfolios could also address the essence of asset allocation and the need for diversification while providing alternative investment opportunities for wealth managers. Moreover, the latest autonomous financial instruments and automated investment vehicles developed on the blockchain can replace traditional wealth management functions like client advisory and portfolio management.

Tokenization is a way through which blockchain enhances its offerings in the financial world. Major value assets like real estate, gold, and fine art pieces are restricted by geographical region and wealth of individuals. Such limitations can be disregarded by tokenizing a property. Thus the individuals with limited wealth can invest in tokens as part of the property. Moreover, tokenization will remove intermediaries like brokers from the wealth management picture. The investment profile will also benefit from diversification, which will occur as a probable consequence of tokenization. The fractional ownership will also allow the investors to disseminate risk across diverse assets.

All the above means that experimentation with blockchain solutions should not be ignored by wealth managers anymore.

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