Digital Asset Services – Case Study Through Asset Management
- January 30, 2020
- 4 minutes read
“Economic Wealth is becoming Digital – Case study through asset management services”
What is Asset Management?
Asset management refers to the management of investments on behalf of others. The goal is to grow a client’s portfolio over time while mitigating risks. An asset management service is generally available to high net-worth individuals, government entities, corporations, and financial intermediaries. Asset management is the overseeing of all or part of a client’s portfolio by a financial services institution, usually an investment bank. The asset manager invests in products such as equity, fixed income, real estate, commodities, alternative investments, and mutual funds.
The Evolution of Asset Management
Asset management services started to appear during the 18th century, originating in Britain. One of the historical events that really made Asset Management as it is today is the Great Depression – The Stock market crash of 1929 led, as per historians, to the most catastrophic economic event of the 20th century, It was also the trigger that led to the birth of modern asset management services. From 1933, with the ruling of The Glass-Steagall Act, Financial Institutions were not allowed to offer both banking and security services, in other words, it was forbidden for a financial institution to be both a bank and a brokerage. All in order to protect bank depositors from additional exposure to risk.
Following the financial crisis, more and more clients turned to asset management and wealth advisors to provide valuable profits, according to the risk that businesses and individuals are willing to take on in their portfolios.
A few decades later, in 1999, the restrictions loosened and the financial industry was allowed to offer more services. Investors started to embrace services that did not conflict with their willingness to pass investment portfolios to the management of asset services.
A New Asset is Born – Digital Asset
Since the introduction of Bitcoin in 2009, cryptocurrencies have regularly been hailed as representing the future of money and global finance. But the truth of the matter is that the legal definition of bitcoin and other altcoins are still in the making and the official classification as a financial asset (security, utility or payment token) changes from country to country. However the legal approach, it is clear to all that a new kind of asset has joined the club.
Traditional Assets are Becoming Digital
The reality is that economic wealth is right at the pivot of digital transformation. Traditional assets are becoming digital: securities, bonds, collectibles, real estate, derivatives. The size and potential are huge not only due to the growing cryptocurrency market but also to the growing interests of financial institutions to digitize assets. For example, Pilots of bonds based on security tokens is not new news in the blockchain space.
Further to the current cryptocurrency market, many enterprises have started to evaluate and practice case studies on Blockchain platforms as a vehicle for financial operations. Research shows that Blockchain tech can simplify many of the processes and actions in traditional asset operations (i.e portfolio management, trading settlements of digital assets) while increasing security with encryption that further reduces errors in the process. One of the primary benefits of blockchain technology is it’s immutability the “unchangeable” character of the “ledger” and the data transferred to the network.
A New Revenue Flow for Financial Institutions
As the crypto markets grow, with a current trade of thousands of types of cryptocurrencies, it means 10’s of thousands of investment portfolios that asset managers can suggest and wisely advise on a strategy. As such could digitized traditional assets on a global scale and grow into a Trillion dollar ecosystem. Therefore a more mature market also means that more knowledgeable investors are likely to have more confidence in digital asset class, requiring in tandem platforms that deliver easier access to the current public cryptocurrency trading platform.
So you are interested in adding a new asset to your client’s portfolio? Before saying yes, you MUST know this!
Digital assets based on blockchain are a TOTALLY different IT beast then what is known in the traditional financial IT system. Blockchain protocols have a completely different technology infrastructure, and to trade digital security assets you will need to have solutions to secure and manage them. Learn how to build a fully-managed Digital Security infrastructure in 5 Days.