Wealth managers should overcome their reluctance to discuss cryptocurrency investments with their younger rich clients, to prevent them from turning to other specialists for advice, according to consultant Capgemini SE.
More than 70 per cent of millionaires below the age of 40 believe it’s important they receive information on cryptocurrencies from their primary wealth managers, according to a Capgemini survey published on Tuesday. Only 13 per cent of those aged 60 or above viewed such advice as necessary.
Private banks “don’t necessarily need to offer products, or advice on specifics, but just to get into a level of conversation and have an opinion would be a good starting point,” said David Wilson, Capgemini’s head of Asia wealth management. “If you can’t engage on a conversation level with the next-gen clients, then you’ll be out of the conversation and they will go to someone who can.”
Surging global interest in cryptocurrencies propelled Bitcoin prices more than 1,400 per cent higher last year, though they have given up much of those gains in 2018. This year’s sell-off occurred amid a string of cyber heists, including the nearly $500-million theft from Japanese exchange Coincheck Inc. in late January and a smaller hack in South Korea this month.
Only 35 per cent of those surveyed by Capgemini said they had received information about cryptocurrencies from their wealth managers. Private banks are deterred by the newness of the market and the lack of consistent guidelines from global regulators, Wilson said. Many wealth managers have yet to develop enough expertise on crypto assets, he added.
Beyond the wealth management industry, the financial world remains divided on the issue of cryptocurrency investment. Vocal skeptics include two of the world’s richest billionaires, Bill Gates and Warren Buffett, as well as JPMorgan Chase & Co.’s Jamie Dimon.
Another potential challenge for the private banks is the interest shown by younger millionaires in having a major technology firm act as their wealth manager, according to the survey. About 88 per cent of those under 40 said they’d like to get such advice from companies like Alphabet Inc.’s Google if it enters the wealth business, Capgemini said.
Interest in having a technology firm as an adviser was especially strong in Latin America and in Asia excluding Japan, according to Capgemini. Microsoft Corp., Amazon.com Inc. and Apple Inc. were also mentioned as “desirable” wealth managers, should they decide to enter the business.
Wilson said it’s a matter of “when, not if” the big tech firms start to offer wealth management services. Private banks are boosting their investment in technology, such as artificial intelligence and automation, as they adapt to the changing market, he added.
Capgemini surveyed more than 2,600 people with at least $1 million in investable assets across 19 wealth markets in the Americas, Europe and the Asia-Pacific region. About 47 percent of those surveyed were under 40.