Executive Summary

Blockchain is driving innovation in asset management. The asset management industry is characterized by many intermediaries providing different kinds of service, like settlement of securities. Thus, wealth managers have historically exploited trust arbitrage, and the information asymmetry between them and their customers. Blockchain by definition aims to decentralize transactions and thus may revolutionize the industry. While the first application areas focus on digitizing traditional tangible assets like Royal Mint Gold, more disruptive ones focus on fund management – like for example Melonport. The first very promising proofs of concept are being tested, and there are many trail-blazing start-ups entering the field. This is exactly what the asset management industry needs now – fresh ideas and real use cases to swing over all the stakeholders, including the regulator.

The main opportunities to leverage distributed ledger technology for wealth management centre on trust and safety. Offerings in the realm of digital identity and asset safekeeping, also for traditionally non-bankable assets, appear to be the sweet spot for wealth management firms. In addition, wealth management firms might want to look into offering additional DLT-enabled services as they mature and gain wider-spread adoption. Irrespective of the opportunities these services present, challenges remain for blockchain solutions to scale and inter-operate in a partially heavily regulated environment. The last chapter in this part argues that blockchain innovations have the power to democratize the whole investment management industry, due to its decentralized characteristics. In summary, there is no doubt that blockchain will disrupt how the industry works, leading to lower costs, faster execution and better services to customers going forward.

Summarized, this part discusses the basics of blockchain and soon dives into the possible ramifications of blockchain across the investment management and wealth creation realm from a capital market perspective where maximum wealth is created or lost. It speaks about the possibilities of digitization and benefits from eliminating intermediaries and ends with an extrapolation on the blockchain market share.