Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Wealth Management Insights for Fintechs and Investors
Report | Nov 28, 2024
Image: Global Asset and Wealth Management Survey 2024 (PwC)
3 Insights from PwC's 2024 Global Asset and Wealth Management Survey
PwC recently published a report called the 2024 Global Asset and Wealth Management Survey which was designed to evaluate perspectives on disruptive technologies in Asset and Wealth Management (AWM) industry from two key groups:
- 264 asset managers on how technologies like AI, blockchain, big data, and cloud computing are impacting efficiency, revenue, and changing customer interactions.
- 257 institutional investors on their expectations for tech powered investment strategies and how technologies are being used for risk management and portfolio optimization.
- Collectively, participants in the survey represented a wide range of organizations with over half managing assets exceeding $10 billion.
Below are 3 data-driven takeaways for fintech innovators and investors.
1. Institutional Investors Want Digital Assets But Asset Managers Aren’t Ready
According to survey responders in aggregate, there's currently a mismatch between institutional investors and asset managers when it comes to demand for tokenized assets. While 59% of institutional investors believe technologies like blockchain will reduce barriers to investment, only 18% of asset managers currently offer digital assets as part of their portfolios.
Why the Gap?
- Some Asset managers have said that they are hesitant to adopt digital assets like tokenization because of inconsistent rules and lack of clarity on compliance requirements.
- Others have said that many firms don’t have the systems in place to support advanced tools like blockchain. Less than 60% of asset managers feel their infrastructure can handle these innovations.
- Many managers are conservative about taking risks on new tech that might disrupt their existing operations.
See: Wealthtech Startup, Allocations, Surpasses $2 Billion AUA
This gap is an opportunity for fintech firms to build the infrastructure that makes digital assets accessible, compliant, and secure. Fintechs can act as the bridge between institutional demand and hesitant asset managers by blockchain platform solutions for tokenized trading or custody.
Image: Asset and Wealth Management Survey (PwC), Tokenization Gaining Popularity Across AWM Industry
2. Tokenization is Changing the Investment Landscape
Tokenization is one of the fastest growing trends in finance and is transforming the wealth management industry. It's not a pipe dream. It's here today and fundamentally changing how assets like private equity and real estate are managed and accessed. The tokenized investment market is projected to grow from $40 billion in 2023 to more than $317 billion by 2028 (annual growth rate exceeding 50%). More than 50% of institutional investors rank private equity as their preferred tokenized asset class followed by real estate and infrastructure.
What’s Driving Growth?
- Tokenization divides assets (including expensive ones) into smaller and more affordable digital units so more people can invest in them.
- Private equity investments that were once hard to sell (think 'securities are sold, not bought') are becoming easy to trade on digital marketplaces with ample liquidity.
See: WealthTech in Asia-Pacific: A Trillion-Dollar Opportunity
- Blockchain tech streamlines a lot of back office operations, making it easier and quicker to manage more complicated investments.
- There are still challenges ahead with only 18% of asset managers offering tokenized products.
- Investor education is still a huge barrier. Retail investors need to learn the benefits of tokenization or risk slower adoption.
Fintechs can build tools and trading systems to support asset managers and investors and help them access this growing market.
3. GenZ Investors Demand Tech First Solutions
As the next generation of investors receive the 'great wealth transfer' from boomers and older generations handing down assets, there's real pressure on wealth managers to be comfortable with and use wealth management technologies. Younger investors will inherit $68 trillion over the next decade.
Key Trends
- These investors value automation, personalization, and real-time insights.
- Many currently prefer hybrid models that combine human advice with digital tools.
- Institutional investors are preparing for the wealth transfer and investing heavily in emerging fintech, blockchain, and AI solutions that are the future of market predictions, risk monitoring, and portfolio analytics and optimization.
See: Retail Investors to Drive Growth in Private Assets Under Management Expected to Reach $18.3 Trillion by 2027
- Many asset managers are falling behind however with only 39% actively upskilling their teams on these disruptive technologies.
- Firms with traditional investment approaches that are using legacy systems will struggle to meet the speed and personalization that younger investors demand.
- Fintech innovators can own this space by offering a raft of wealthtech solutions but the challenges will be execution and adoption.
Outlook
As investment interest grows for tokenization, and the great wealth transfer continues to younger and more tech savvy investors, there will be a growing demand for fintech, blockchain, AI, and wealthtech solutions. Fintech companies have a great opportunity to lead, innovate and command the future of wealth management.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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