What to expect from blockchain applications when it comes to wealth management?
Will Blockchain Technology disrupt Wealth Management?
So far, the wealth management industry has primarily escaped disruption by blockchain technology. Presumably, challenges in scalability, regulatory uncertainty, and a cautious new technology adoption approach are some reasons.
Meanwhile, wealth owners and family offices have discovered the power of blockchain and the growth opportunities it presents.
So, is there game-changer potential in wealth management?
Some excerpts from the interview
(the complete interview can be found on the Centro Law Site):
In my experience, a distinction should be made between digital innovations to add automation and efficiency versus added service and product novelty. Your market success will be granted if you can succeed in both dimensions.
So maybe the blockchain and other technical inventions will enable new uses cases that will add efficiency and novelty simultaneously.
Regarding the blockchain, we need again to distinguish between mainly efficiency-driven uses cases like, for example, much faster clearing and settlement in a centralized (non-public) environment where only banks and exchanges can participate.
These are the typical “blockchain technology is tremendous” use cases you mentioned earlier. These projects are no revolution but efficiency-driven evolutions.
But when we look at the fundamental blockchain innovation, Bitcoin, there is a more critical aspect to it, the decentralization of trust.
This rather revolutionary approach in finance, where central trust has always been a significant element, brings the opportunity for revolutionary products and services in the financial industry.
As mentioned earlier, blockchain will improve efficiency and transparency (traceability) in financial services as technology advances. Therefore, a large part of the investment universe will eventually be listed and traded as digital assets.
Suppose the decentralization aspects remain predominant in the public blockchain environment, not as in the case of the internet, where gigantic and centralized companies became very dominant. In that case, one can also imagine somewhat disruptive disintermediation of the financial service providers, at least as far as the processing of transactions is concerned.
However, blockchain will not replace good and sound investment advice.
As always with investments, the higher the return, the higher the risks. The public blockchain sector poses a variety of threats. They include legal, technical, market, and economic risks, and there is also a high rate of exploits and, finally, quite simply, fraud. Not to mention the problem of money laundering.
Therefore, in terms of risk and return, most crypto investments are comparable to high-risk venture capital investments.
Crypto investments still carry additional risks, such as software bugs and corresponding exploits.
As mentioned above, professional and sound advice is still vital. It will also allow you to invest according to your risk profile and avoid losses that you cannot bear.