As the financial services industry shifts towards a more digital and decentralized future, advisors also find themselves approaching one of the greatest wealth transfers of all time. Coined “The Great Wealth Transfer,” millennials are gearing up to inherit $68 trillion from boomers over the next three decades, implying not only a shift in wealth, but also a shift in investing goals and strategies. This wealth transfer will likely spur the universal adoption of digital assets as millennials drive the exponentially increasing capital inflow towards Bitcoin and other cryptocurrencies.
The impending wealth shift towards decentralized finance and digital assets offers an equally lucrative opportunity for financial advisors to align themselves with the future of their clients’ interests. According to Grayscale’s October 2020 Bitcoin Investor Study, Bitcoin’s largest investor group is between the ages of 25 and 34, while more than half of millennials surveyed indicated that they would invest in digital assets if their financial advisors recommended they do so. Thus, advisors must ready themselves for the upcoming shift in wealth and investor interests by building the resources and knowledge base about the crypto ecosystem to support the future needs of their clients. If advisors fail to act, they will miss out on the next frontier of investing.
Additionally, the shift towards personalized digital investing via platforms such as Robinhood and Coinbase, gives everyday folks the opportunity to invest without the need for a financial advisor. As Coindesk reports, 80% of Robinhood’s investors are millennials, indicating that the once niche practice of investing is less viewed as something only professionals and wealthy individuals can engage in. Rather, personal investing platforms are normalizing investing for smaller-scale investors as they are steered towards cheaper fees and more transparent portfolios.
While most traditional investors in the boomer demographic remain invested in the stock and fixed income markets, the upcoming wealth transfer and alternative interests of millennials will likely make way for a significant reallocation of this capital into digital assets. In recognizing this upcoming shift in wealth and strategy, advisors must prepare to provide the necessary advisory services to digital asset investors before their services are nullified by the emergence of personal investing platforms.
While digital asset investing intersects with the new era of personally managed investments, advisors should not shy away from incorporating digital asset investment opportunities into their offerings. Digital asset custodian platforms give advisors the ability to uphold their traditional fee structures when managing their clients’ investments, allowing for easy integration when advisors are ready. As much as the era of personal investing enables the common person to invest on their own, there will always be a need for strategic financial advisory, especially in the maturing crypto space.
By Liam McDonald