Tokenization could be the key to unlock and deliver highly personalized investment portfolios for Asia’s rapidly expanding population of high-net-worth individuals (HNWIs), a new report says.

These personalized portfolios could unlock up to US$3.3 trillion in assets.

Asia, home to 6.6 million HNWIs holding a combined US$11.1 trillion in assets, represents one of the most vibrant wealth markets globally. However, despite their substantial holdings, many of these individuals, particularly those with US$1-5 million in investable assets, remain underserved, according to the white paper produced by HSBC, Calastone, Marketnode, and Northern Trust.

The primary challenge in servicing this segment is scale, with customization costs for wealth managers prohibitively high. Some thresholds for personalized portfolios now often exceed US$10 million.

According to the report, dissatisfaction with existing offerings is widespread. Around 40% of HNWIs in the region, controlling US$1.1 trillion in assets, express dissatisfaction with the level of personalization they currently receive.

Moreover, loyalty is on short supply with 30% of these investors likely to switch wealth managers if they can secure bespoke services tailored to their unique needs.

Breakthrough solution

Tokenization, the white paper says, offers a breakthrough. By converting traditional and alternative assets into digital tokens, it enables fractional ownership and seamless trading across a blockchain-based ecosystem.

This approach has the potential to revolutionize wealth management by offering:

Cost efficiency: Automation through smart contracts can reduce operating costs by replacing manual processes like fund subscriptions and reconciliations.

Access expansion: Investors can gain exposure to previously inaccessible asset classes, such as private equity, real estate, and even fractionalized luxury goods.

Scalability: A single legal and technological infrastructure can support diverse personalized portfolios, breaking down the barriers imposed by regional fragmentation.

The report quantifies the potential windfall for asset managers, saying tokenization could boost revenues by more than 25% as managers capture a larger share of HNWIs' portfolios and provide cross-asset customization. Additionally, streamlined operations could dramatically reduce the total expense ratios (TERs) associated with tailored portfolios.

Challenging path to implementation

The vision outlined in the white paper is ambitious but not without hurdles. Asia’s wealth management landscape is fragmented, with market-specific regulations and licensing requirements complicating cross-border solutions. The costs of compliance and localization remain significant obstacles.

Furthermore, the development of a robust tokenization ecosystem requires collaboration across multiple stakeholders, including custodians, blockchain providers, and regulatory bodies. The paper underscores the importance of establishing standards and frameworks to facilitate secure and efficient operations.

To unlock the full potential of tokenisation in financial ecosystems, the report advocates a phased approach encompassing three crucial dimensions.

Regulatory harmonization emerges as a foundation, stressing the need for consistent rules across jurisdictions to foster interoperability while alleviating compliance complexities. Complementing this, investment in technology is paramount, calling for the development of blockchain platforms capable of managing complex asset types and ensuring real-time transparency.

Lastly, the report underscores the importance of stakeholder collaboration, urging partnerships among technology providers, asset managers, and financial institutions to co-create scalable, innovative solutions.

This comprehensive strategy aims to establish a robust framework for tokenisation, driving seamless integration and sustainable growth across financial networks.

Unprecedented opportunity

The convergence of institutional-grade technology and wealth management services through tokenization represents a watershed moment for Asia’s asset management industry.

If implemented successfully, it has the potential to unlock trillions of dollars in new assets, enhance client satisfaction, and establish Asia as a global leader in digital wealth innovation.

With Asia's HNWI population expanding by more than 300,000 each year, the timing for advancing tokenization has never been more favourable. By bridging the gap between mass-market solutions and ultra-high-net-worth services, the report says tokenization offers a pathway to a more inclusive, dynamic, and prosperous wealth management future.