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Hi readers, In today's newsletter, Miguel Kudry from L1 contends that wealth management is ripe for a transformation — a shopification — similar to e-commerce, which will unlock new opportunities for crypto-native clientele. Then, Cyrus Ip, from Bybit, says crypto is to millennials what real estate was to boomers. Thanks for joining us. |
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The Shopification of Wealth |
Before Shopify, building and running an e-commerce site was expensive, operationally intensive and a logistical nightmare. Only large retailers could afford to build and operate an online store that could truly serve a large customer base, which made e-commerce seem like a small market. Enter Shopify: by eliminating the supply constraints — enabling anyone with a product to create and scale an online store globally with just a few clicks — they unlocked a huge new market, with a market capitalization of over $100 billion as of today. Launching, operating, and scaling a Registered Investment Advisor (RIA) firm is much harder today than e-commerce ever was, and yet advisors are responsible for managing more than half of all wealth in the United States. As of 2023, there were over 15,000 SEC-registered RIAs managing over $100 trillion in assets. Qualifications and licenses are just a small part of an ever-growing checklist an aspiring financial advisor needs to satisfy in order to go into business. Wealthtech is incredibly fragmented. Custodians can create lock-ins and impose significant operational, legal, and compliance requirements. Endless layers of intermediaries require additional overhead just to keep the lights on. This is why we've seen increased consolidation in the space, with small RIAs being acquired by larger firms that leverage their existing infrastructure and economies of scale to grow their Assets Under Management (AUM). The generational transfer of wealth from baby boomers to millennials and Gen Z will challenge this strategy. Younger investors are disillusioned by traditional finance. They are digitally native and expect their money and assets to be the same. With that, wealth management is about to get Shopified. Just as Shopify democratized e-commerce, enabling millions to open online stores, on-chain rails are poised to open up the financial advisory business. According to a survey by Coinbase, 20% of Americans (approximately 52 million people) own cryptocurrency. Experiencing the freedom and power of holding their assets on-chain often changes the way they see off-chain assets — in other words, assets that can only be accessed from legacy platforms. Now for the first time, advisors can work with clients and advise them on assets that always remain under the custody of the client. Traditional RIAs operate with traditional custodians. For a client to start working with an advisor, they have to assign access or create a new custodial account for their new advisor to manage their assets. By contrast, self-custody introduces a new paradigm where a single wallet can interact with multiple advisors, layering various types of advisory and expertise in the same portfolio. The time-to-advice is reduced from weeks to minutes, as assets can be viewed non-custodially, and discretionary abilities can be granted with a single, on-chain signature. Tokenized assets: the online SKUs of the financial world Tokenized assets are transforming the investment landscape, much like SKUs (Stock Keeping Units) revolutionized retail inventory management. Tokenization allows for fractional ownership, increased liquidity, and soon, access to any asset class on-chain. In a world where your entire universe of investable products is one wallet signature away, service providers can focus less on operational hurdles and more on generating alpha, protection, and growth for their clients. Similarly this opens the door for asset managers to go direct-to-consumer. We are about to see a new breed of RIAs coming on-chain to increasingly serve this growing crypto-native clientele. Much like anyone can now start an e-commerce site with Shopify, any licensed and competent financial professional will be able to advise clients on-chain. The winners will be the investors, who will have an open, transparent, and verifiable world of expert advice to choose from, or combine, to best suit their financial goals and needs. |
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For Millennials, Bitcoin Is the New Real Estate |
Real estate as an asset class has been a source of increasing affluence as many older individuals in top-tier Asian cities, such as Singapore and Hong Kong, have seen their wealth soar due to rising property values. While some members of these generations may be cash-poor, they often have substantial assets, primarily in real estate. In Hong Kong, for instance, parents who fully own their property are likely to be millionaires already, even if it's just a tiny one-bedroom apartment. However, for younger generations, including millennials and Gen Z, the ultra-high property prices aren't just a challenge — they're a significant financial burden. Many of these owners are weighed down with long-term mortgages that have high interest rates, and are thus struggling to ascend the social ladder. In other words, rapid urbanization means that younger individuals are unlikely to build the same level of wealth through real estate as their once parents did. Even though accumulating wealth through real estate may no longer be realistic for young adults, many of them still consider this their only choice, as there aren't too many obvious alternatives. Some simply can't keep up as the real estate market continues to inflate in various Asian cities. Soon, they'll find themselves in a downward financial spiral. |
Amid this dilemma, some experts advocate for alternative investments such as bitcoin. Viewed as a form of "virtual real estate," bitcoin presents a unique opportunity for younger investors: with a capped supply of 21 million units, bitcoin is rarer than most real estate options. Its highly liquid market allows investors to trade BTC anytime they want, without the barriers associated with property ownership and hefty down payments. This makes bitcoin an intriguing investment option. In each generation, wealth is often transformed and redistributed, and bitcoin could play a pivotal role in this transition. Data indicates that younger people, driven by their tech savviness, are generally more open to cryptocurrency investments.This generational shift suggests that bitcoin may be crucial for the process of transferring wealth from older generations to younger ones. |
Source: Crypto Investment Literacy Report presented by Bybit |
Bitcoin represents a new frontier for wealth accumulation among younger generations. Instead of pursuing increasingly expensive real estate, younger investors might consider allocating funds to bitcoin. It's crucial, however, to approach this investment with a long-term mindset — that is, with an intention to hold onto bitcoin, much like one would with residential property — rather than to engage in speculative trading. This responsible and prudent approach is key to building enduring wealth in an increasingly challenging financial landscape. |
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