In the age of rapid innovation within the U.S. financial services sphere, wealth managers looking to keep pace with current and emerging trends may find greenfields in the digital assets space. The proliferation of cryptocurrencies in particular – bringing as it does both a new avenue for investment but also risks relating to volatility, security, lack of regulatory oversight and (in the case of stablecoins) redundancy – presents wealth managers with an opportunity to add short and long-term value for their clients as they navigate this fast-evolving ecosystem.
One low-touch method wealth managers can utilize is offering a suite of educational crypto resources to clients. Here, clients will have the opportunity to learn about digital assets through internal platforms which could include a lecture series, whitepapers, and self-guided courses. By providing these unique and curated resources to both new and existing clients, firms create an opportunity to attract and serve high net worth individuals with a desire to learn about cryptocurrency, likely drawing in net new assets.
A recent survey showed that over 25 percent of both Gen X and Baby Boomers lack knowledge on how to purchase cryptocurrency. Being unable to find the starting block, these generations have largely refrained from investing in cryptocurrency.1 If a wealth manager can bridge the gap between knowledge and action, firms may be able to build further trust and successfully open or deepen relationships with prospective and existing clients.
Another concept wealth management firms can implement is the use of crypto wealth dashboards. It can be burdensome to track crypto performance as many wallets do not have the capability to do so. A cryptocurrency specific dashboard would present as a unique cutting-edge resource to eliminate the complexity and tediousness of tracking crypto returns, and tax lot information. Wealth managers can create or white-label platforms which would allow their clients to view overall performance, historical data, and detailed information relating to transactions. Firms could potentially avoid the expensive process of developing their own dashboard technology by partnering with a third-party vendor who has the capability to combine several wallet APIs into a singular and user-friendly platform.
There are currently multiple budding crypto wealth dashboards readily available for use with retail investors. Key players such as Onramp and Addepar are driving the industry with their simplistic user interfaces.2 Onramp can pull crypto performance from various mediums, such as exchanges, to depict the digital assets in client performance statements as a standalone product. Through its acquisition of AdvisorPeak, Addepar is able to integrate crypto trading and performance into its already wide-reaching wealth offering.3 Wealth management firms can leverage these growing fintech’s for their custodian and platform services to quickly get ahead of the curve and showcase the technology on a larger scale.
Wealth managers typically lag their banking counterparts in providing their clients with enticing card incentives, but with interest in cryptocurrencies on the rise there is a tremendous opportunity for these wealth managers to add crypto rewards cards to their suite of product offerings.4 Thirteen percent of Americans do not currently have a card that earns cryptocurrency but would be interested in such an option, and by providing credit card rewards in the form of cryptocurrencies, wealth managers can draw more customers to their products and win further wallet share.5
Visa has been the primary network provider for most crypto rewards cards, with around 65 crypto wallet partners and reported that their customers made about $2.5 billion in payments using these cards in the first quarter of 2022 alone.6 MasterCard is also in the space, most notably via their partnership with Gemini. As traditional wealth managers are already integrated with these legacy payment network providers, these managers would have ample opportunity for a quick go-to-market with a crypto card product.
From a customer perspective, crypto rewards cards function similarly to traditional credit cards in that users can earn rewards points for their purchases and can then redeem those points at a third-party custodian. Once points are redeemed, the cryptocurrency custody partner then sends the cryptocurrency of choice to the end customer’s wallet. In this case, wealth managers would function as intermediaries between the crypto custodian and end customer. This model would allow wealth managers to immediately offer crypto rewards products without building a custody solution.
Firms probing for opportunities at innovation can view the rise in crypto investing within the U.S. as a clear indication that now is the time to adapt to remain competitive.