What Impact Will Blockchain Have On The Asset And Wealth Management Industry?

However, regulatory and fee pressures and changing client demands are forcing industry players to turn to the digital revolution to save costs, increase efficiency and enhance their offering.  

In this environment, blockchain could be the differentiating factor between the groups that end up at the forefront and those that are left behind.

From security tokens to legacy technology and intermediary disruption, there are a number of avenues where blockchain can have a major impact on the industry.

Crypto rise

Blockchain came to prominence in 2009 as the underlying technology of Bitcoin and subsequently the wider cryptocurrency landscape.

The rise and fall of Bitcoin has been well documented with the cryptocurrency exploding over 1,500% in 2017 from below $1,000 to finish the year at $14,156. However, regulatory concerns dampened investor confidence, causing Bitcoin to fall dramatically last year, and is now trading around $3,500.

During this time, blockchain has been making noises of its own as major players across different industries such as healthcare and automotives look at ways in which they can capture the technology.

Don Tapscott and Alex Tapscott, authors of the book Blockchain Revolution: How the technology behind Bitcoin is changing money, business and the world, describe blockchain as "an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value".

Simply put, a blockchain is a shared record (or distributed ledger) of all transactions for a particular entity, offering many opportunities to the investment management industry.

Intermediary disruption

The uptake of blockchain from the asset management industry has so far been slow, particularly compared to other areas of finance, such as payments.

For example, Mastercard has launched its own blockchain network that enables banks and merchants to make cross-border payments, while blockchain powers Visa's B2B Connect payment platform.

However, there have been companies willing to embrace the new technology.

In 2017, Natixis' Ostrum Asset Management revealed investors had purchased shares in its funds through FundsDLT, a blockchain-powered fund distribution platform launched in December 2016 following a collaboration between Fundsquare, InTech and KPMG Luxembourg.

BNP Paribas Asset Management has also completed end-to-end fund transactions through blockchain, and Calastone announced last December plans to shift more than 1,700 of its clients to blockchain, in a move which it expects to save £3.4bn in fund distribution.