The case for crypto services in wealth management

The wealth management industry has enormous potential to offer crypto investment services to clients. According to Avaloq’s recent research, cryptocurrencies such as Bitcoin or Ether remain a popular choice among investors globally, with an overwhelming majority expressing keen interest in crypto if offered by their traditional financial provider.

Enduring popularity

Avaloq's latest investor survey underscores a compelling trend – a resounding 92% state a willingness to invest if their traditional financial provider offered crypto services. This latent demand represents an untapped market within existing client bases, highlighting the potential for wealth managers to diversify investment portfolios and meet evolving client expectations.

Despite recent volatility, cryptocurrencies have maintained their popularity. Avaloq's research, conducted among 3,000 affluent to ultra-high net worth individuals in Europe and Asia, indicates that cryptocurrency ownership remains robust at 37%. In the UK, ownership has grown from 22% in 2022 to 29% in 2023. This is broadly in line with Germany, where the number of investors holding crypto is up from 34% in 2022 to 40% in 2023. Switzerland (57%) and Hong Kong (50%) also registered minor increases.

Singapore deviates from this trend, dropping significantly from 48% in 2022 to 29% in 2023, potentially influenced by negative newsflow and a subsequent government crackdown. Japan maintains stable ownership at 15%. However, 41% of Japanese investors who do not yet hold crypto state that they are not interested in the asset class, in stark contrast to the global average of 24%.  

The demographics of crypto ownership  

When broken down by wealth bands, crypto ownership is highest among those with investable assets of USD 10 million to USD 50 million (57%), followed by those in the USD 1 million to USD 10 million bracket (43%) and those with USD 50 million or more (38%). The affluent segment lags behind at 28%.¹

The survey also highlights a generational divide in cryptocurrency adoption, with the asset class being more popular among younger investors. 47% of Millennials and 36% of Generation Z investors hold crypto, followed by Generation X at 34%. In contrast, only 16% of Baby Boomers currently invest in crypto.²

Avaloq’s data shows that out of the 63% of investors who do not already own cryptocurrencies, the reasons for not doing so primarily revolve around market volatility (43%), a lack of trust in crypto exchanges (30%) and not knowing where to start (27%).  

Wealth managers’ strategic role

Wealth managers have a great opportunity to address these concerns. They can offer trusted advice and reassurance for those who are looking to venture into the world of crypto assets but who lack the knowledge and confidence in crypto exchanges, which currently dominate the market. Currently, 38% of investors hold crypto assets via a wealth manager, with crypto exchanges remaining the most popular choice (at 77%), despite trust concerns, indicating a possible reversal in the years to come.

Avaloq’s research highlights the potential for wealth managers to enter a market where the expertise and brand heritage of traditional players will offer reassurance to investors. Recent developments, such as US regulators for the first time approving exchange-traded funds (ETFs) that invest directly in Bitcoin and the European Union’s wide-ranging efforts to regulate digital finance (“Markets in Cryptoassets” or MiCA), are a sign that crypto investing is moving into the mainstream.  

Dr. Nils Bulling, Head of Digital Assets Product Domain at Avaloq, agrees and calls the introduction of Bitcoin ETFs a significant milestone in democratizing cryptocurrency investing. He adds, “In a rapidly evolving landscape, it is vital that wealth managers adapt to clients’ requirements, including demand for crypto assets. In order to compete with challengers and exchanges, wealth managers need to invest in technology to seamlessly integrate this new investment opportunity into traditional portfolios.”

Visit the Avaloq website and find out how the Avaloq Crypto product enables financial institutions to seamlessly integrate crypto into traditional portfolios and into digital banking channels.