Tokenisation could threaten 25-30% of wealth management revenue: Morgan Stanley

Morgan Stanley's report suggests that the increasing use of tokenised assets and digital currencies could impact wealth management firms' revenue. Approximately 25-30% of wealth managers' revenue stems from net interest income. As tokenised real-world assets, such as equities and bonds, continue to grow, wealth managers may face pressure on this revenue stream.

The report projects that tokenised assets could increase from $40 billion to $2.3 trillion by 2030. This growth is anticipated through the movement of collateral between platforms, tokenised money market funds, and easier access to global securities. While digital assets present opportunities for wealth managers, such as offering clients borrowing against a broader range of assets, they also pose risks, particularly to net interest income.

The report highlights that asset managers should focus on developing and distributing investment products, particularly tokenised money market funds and equities, to reach more investors. However, the benefits of tokenisation may not be evenly distributed across financial markets, as liquidity improvements in private markets through blockchain do not address underlying liquidity and pricing challenges.

For wealth managers, tokenisation offers both opportunities and competitive risks, necessitating selective investments in new capabilities while preparing for potential risks arising from digital financial infrastructure development.