It’s been two weeks since Morgan Stanley put the pressure on competing Wall Street banks to offer wealth management clients access to Bitcoin, and Goldman Sachs has already followed suit.
Goldman Sachs revealed its interest in offering Bitcoin to wealth management clients via a company memo sent to staff on Wednesday. The memo, obtained by InvestmentNews, announced the firm's new initiatives around digital assets with the hiring of Mary Rich, Goldman Sachs’ first-ever global head of digital assets group for Private Wealth Management.
“Mary will leverage the firm’s capabilities to ensure we can best meet client interest across digital asset classes and technologies,” according to the memo. “As a firm, we believe in the possibility of blockchain technologies, and it is imperative that we continue to drive innovation and deliver solutions to our clients.”
In this newly created role, Rich is tasked with working closely with advisers to educate clients about blockchain technology and the digital assets ecosystem, while seeking to deliver content, investment offerings and services, according to the memo.
“Morgan Stanley started this trend, and Goldman’s decision will further pave the way for all other firms to do likewise,” said Ric Edelman, founder of Edelman Financial Engines and the RIA Digital Assets Council. “Investors are demanding that their advisers help them with investment decisions in this new asset class.”
Morgan Stanley and Goldman Sachs may be leading in the race for Bitcoin offerings. Now, the industry is wondering: Who’s next?
Wall Street has always been in “fast follower” mode with competitors, particularly when something gains momentum and mainstream adoption like crypto, said Tim Welsh, CEO and founder of Nexus Strategy.
“Once one firm toe-dips into murky waters, the others are always prepared to follow immediately, particularly for the non-bank owned firms such as Morgan and Goldman,” Welsh said.
Morgan Stanley and Goldman Sachs have a leg up in the Bitcoin game, largely due to the fact that the firms aren’t inside a conservative bank, as Bank of America Merrill Lynch and Wells Fargo Advisors are, giving them agility and flexibility to move on trends quickly, Welsh said.
“Wells [Fargo] is under such regulatory scrutiny, that their ability to take on any risk is extremely limited,” he said. “Thus, it stands to reason that the next wirehouse firm will be someone like UBS.”
However, UBS has previously expressed the firm’s skepticism over Bitcoin’s rally and volatility. UBS posted via its website in January its general guidance around cryptocurrencies that outlines the firm's concerns around the asset class.
Despite UBS’ bearish outlook on Bitcoin, the introduction of an offering by two leaders within investment management poses a much bigger threat of losing wallet share to competitors, where firms previously only had to worry about fintechs and retail investors, said Brendan Melanophy, principal consultant at Capco.
“With Morgan Stanley and Goldman Sachs offering these products to their high net worth investors, other competitors in the market who have a focus on financial planning for high net worth customers may soon also be offering these types of investments for small allocations, or as discretionary/aspirational investments,” Melanophy said in an email.
Advisers may also begin to see the evolution of products offered by these large firms as Morgan Stanley began the race with access to just Bitcoin funds and Goldman Sachs is already looking to eventually offer the full spectrum of investments, including physical investment, traditional investments and derivatives, Melanophy said.
Product evolution is in motion. JPMorgan Chase & Co. revealed plans in March to launch a structured note offering tied to a basket of Bitcoin-friendly stocks for investors interested in trading cryptocurrencies given there is no cryptocurrency-backed ETF in the U.S.
Fidelity Digital Assets announced a new offering in December that enabled advisers on Fidelity’s institutional-grade digital assets custody platform to pledge Bitcoin as collateral for cash loans.
For advisers, firms like Blockchange offer separately managed account options that enable RIAs to outsource the management of their client’s digital portfolios. There are other tools out there for advisers to get involved and educated in digital assets. Part of the reason Edelman created the RIA Digital Assets Council, he said, was to help tech companies build products that serve the advisory community.
Overall, the push for more Bitcoin access from Wall Street isn’t very surprising, said Julie Coin, president of DriveWealth. The debate over Bitcoin, she said, has been focused on the form it would take: crypto as a store of value or crypto as a transactional currency.
“In terms of transactional speed and security, crypto is not ready to replace Visa and MasterCard, but consumer demand for a safe and secure way to invest in crypto as a store of value has gone mainstream,” Coin said.
Bitcoin’s rally, too, has put the pressure on Wall Street banks and larger institutions to consider getting involved with the thriving crypto market, which has a market cap of $1.9 trillion, according to CoinMarketCap.
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