Here is the reason why Wells Fargo is offering crypto investment to rich clients
Recently one of the largest US wealth managers, Wells Fargo Investment Institute, started allowing its rich clients to add crypto holdings in their portfolio.
The interest of the clients of Wells Fargo, on crypto world, made the global investment team published their first ever research report on the investment rationale for cryptocurrencies where it specifies the main reasons for investing in crypto which are "insignificant long-term correlation of crypto with other traditional investments," increasing stability and declining volatility of the asset in spite of wild fluctuations of crypto prices.
The report states that short term crypto prices show that they are being driven by macroeconomic and financial conditions and long-term crypto prices are different from traditional asset class. The research team sees the long-term supply and demand dynamic of most cryptocurrencies as beneficial to their stability. Darrell Cronk, president of Wells FargoInvestment Institute and the chief investment officer for wealth and investment management, said, "Anytime you reduce the supply of anything, even if demand holds constant, it should increase the price. Over time, as people become more familiar with these and as they become more mainstream, I think it will naturally go up, we've seen that happen quite consistently over the last decade, but we've seen it accelerate during the pandemic because there's been more digitalization of platforms."
As per Darrell Cronk, the president of Wells Fargo Investment Institute and the chief investment officer for wealth and investment management, they are working for long time to implement "a professionally managed solution" to manage cryptocurrency strategy for high-net-worth clients and was expected to join the platform around mid-June. Wells Fargo's wealth and investment management branch that include its private banking services and Wells Fargo Advisors consists of $2 trillion in assets.
The implementation of active strategy is expected to be limited to qualified investors. As per Cronk “plenty of risks” related to investing in crypto including additional regulation, technology failures, operational risks such as handling and storing crypto, and the contentious issue around the heavy energy cost in mining crypto are still there.
Initially there was no official recommendation on crypto given to the analyst team of Wells Fargo. Their clients were unable to hold Bitcoins and other crypto assets as the research team had no clear knowledge about the regulatory strictness implemented in crypto world. As Cronk said in May, "We think the cryptocurrency space has just kind of hit an evolution and maturation of its development that allows it now to be a viable investable asset,". As per Darrell, as crypto assets are still evolving it requires deeper analysis and hence it can be taken as "alternative investment". Interested and qualified investors can invest on crypto assets.
Other firms started involving in crypto assets
Other firms have started offering banks crypto exposure to clients. JPMorgan will be the first major US bank who allowed its financial advisors to allow all their wealth-management clients access to cryptocurrency funds through its retail channel. In March, Morgan Stanley asked its advisors to start offering them access to three funds enabling bitcoin ownership.
CBW - External Analyst