Digital assets: More than byte-sized
Digital assets—a term that covers cryptocurrencies like Bitcoin, as well as stable coins, crypto investment funds, security tokens and asset-backed tokens—have become a mainstream investable proposition in recent years in Asia: They are now a top-five holding for affluent investors in the region—behind only equities, fixed income, cash and real estate—according to Accenture research.
Our latest research also found that 52 percent of affluent investors in Asia already hold digital assets, and 73 percent intend to do so by the end of 2022. In contrast, most wealth management firms in Asia do not offer clients yet a digital assets proposition—and two-thirds of firms currently have no plans to do so.
Accenture estimates that digital assets are a US$54bn market opportunity in Asia, with transaction fees comprising US$40bn and the rest shared between advisory fees and custody fees. Even those wealth management firms in Asia that currently do offer such a proposition mostly target only the US$7bn custody element.
Why the reluctance?
The reasons for not offering digital assets today may vary. Some firms may have adopted more of a “wait and see” approach; others might not believe in the asset class itself or feel that setting up a digital assets proposition is too complex given regulatory and operating model factors. While there are obstacles, some firms have shown that these could be overcome. One consequence of wealth management firms not engaging on digital assets is that clients seek advisory information online from very different sources, which could result in a far less reliable basis of information.
38 percent of investors interested in digital assets use online forums and social media to glean investment advice
The way forward
Wealth management firms in Asia should consider offering some form of a digital assets proposition as their clients look for exposure to different types of digital assets; Relationship Managers (RMs) would like to offer this as well; and the revenue opportunities of doing so could be sizeable. This is even more important given the interest for this asset class among next-generation clients who stand to inherit large sums of money over the next years.
Crafting an approach to offering digital assets starts with knowing what clients want.
Which digital-asset services do clients want?
A digital asset offering would also require giving RMs what they need. RMs told us in our survey that they want to be able to provide insights and data for their clients, and improved tools so they can better engage with customers in an advisory capacity.
When creating an operating model to offer digital assets, firms should formulate a strategy so they can build a sustainable and scalable digital assets proposition. This could be done e.g., through setting up an in-house capability group with responsibility to design and manage the process—with all efforts underpinned by a culture of experimentation and rapid iteration.
Building a digital assets proposition will take time and effort, yet successfully doing so could position firms to deliver what clients want: the opportunity to invest in a fast-growing asset class in the way they want.
