AFTER THE LATEST CRYPTO WINTER, WEALTH MANAGEMENT FIRMS COULD BRING ABOUT A CRYPTO SPRING

DESPITE THE HEADLINES AROUND THE FTX COLLAPSE, INVESTORS ARE KEEN TO MOVE INTO CRYPTO WITH A TRUSTED PROVIDER

When we started our research into the appetite for crypto investments earlier this year, we couldn’t have predicted that we would publish the research at a time when crypto was receiving such prominent negative coverage. However, our research reflects the market because it shows that many investors are interested in working with an established wealth management firm to start their crypto journey. Digital assets are appealing to investors, but there remains some understandable caution that highlights the role of trusted wealth management firms in delivering crypto services.

Investors Want To Engage With Crypto

We spoke with 267 investors in the UK to learn more about their interest and engagement with crypto and wider investment preferences. Half of those interested in crypto and nearly 60% of current crypto investors would consider investing in crypto with an established bank or wealth management firm. The market segment most likely to use established organisations in the UK is the mass affluent (GBP 100k – 1m). This is a significant opportunity for British financial services because those with the most to invest are also those with the most trust in established organisations to deliver crypto services.

Understandably, volatility came up as a major concern with investors. While the fintech challengers may have been first to the market, established financial organisations can leverage the trust, experience and robustness that investors are looking for. These characteristics will be particularly important when offering support to clients during “crypto winters” and ensuring that both the bank and its customers weather the inevitable fluctuations in the market.

The Industry Is Planning To Deliver Crypto Services

We spoke with 50 UK banks and wealth management firms. Just 2% have no interest in implementing crypto. 62% already have a crypto offering and 24% have ongoing initiatives to deliver crypto in the near future. Of the rest, 10% have no active projects but plan to implement crypto in 1-3 years and 2% state that crypto is under consideration. The reasons stated – including customer attraction and retention, and the creation of an additional revenue stream – show that the industry recognises the commercial opportunity and the importance of addressing customer demand.

However, there is a lack of alignment with investors’ goals and motivations. UK organisations selected the age range of 30-40 years old for their target market and over half would target customers in the upper mass market with 10k to 100k in assets. The stated ideal target represents just 4% of the people who would use established banks and wealth management firms for crypto. Current crypto investors have 15-30% of their investments in crypto and those who are High Net Worth Investors (HNWI) should be prime targets for organisations looking for commercial growth.

Understanding The Market Demand For Crypto

The good news is that the opportunity of crypto is clearly larger than expected. A true understanding of the market ensures that established financial institutions can align to the market segments where they have existing brand awareness and craft a service provision that matches those needs and their expertise. Our research with current crypto investors shows that they are quite satisfied with the digital investing tools that they use. However, the responses didn’t offer a resounding endorsement and 16% would invest more if they had not have more reliable tools. Crypto may be an opportunity to attract new business from HNWIs not currently served by their existing firm.

EDUCATION, EDUCATION, EDUCATION

70% of our survey respondents – both current and future crypto investors – that are very likely to use traditional providers would expect crypto education and information as part of the service. Established firms can leverage their position of trust and their expertise in investment to help customers looking for more support. The opportunity that crypto presents to reinforce customer loyalty and attract new business is clear and rooted in the need for education and support.

Partnership And Positive Ux Are The Cornerstones Of A Successful Crypto Strategy

Given the size of the commercial opportunity that crypto investing represents, it’s important that financial institutions act quickly before fintechs are too dominant in the market. This urgency underscores the need for partnerships with organisations that can deliver an expert, high quality crypto service. Firms will need to partner with providers that align with their current regulatory standards, and it is for the crypto industry to level up and meet that demand. The need for education and support also highlights the importance of an easyto-use digital interface that aligns with the brand and supports the need for education and market information.

Our experience with delivering a positive user experience that includes open banking functionality means that CREALOGIX is well-placed to support the crypto ambitions of our clients. A dashboard that provides a consolidated view of all accounts and investments, together with built-in solutions for financial education, will be a powerful tool for attracting both current and future crypto investors. CREALOGIX can also support a hybrid service provision and can therefore connect investors with their adviser via a simple, secure digital interface. This may be particularly important for those new to crypto, but it will also show some value for those current investors looking to invest more in this area – and for all investors during periods of volatility.

Embracing The Crypto Opportunity

Our research shows that firms may be directing their attention too narrowly when it comes to the target market and may not have incorporated the full spectrum of customer needs and expectations into their plans. However, it does also show that crypto has hit the mainstream and most financial institutions are currently delivering or implementing a strategy in this area. A resurgent crypto spring, with established firms at the forefront, may be just around the corner.

JOHN ENNIS MANAGING DIRECTOR, NORTHERN EUROPE, MIDDLE EAST AND APAC CREALOGIX CREALOGIX.COM