Old Folks’ Home

Those who can afford a plane flight are amongst the richest globally. The most avid travellers are the middle aged to geriatric. They have the most disposable income and time.

Private banks cater to the middle aged and elderly because they have the most cash. The advertisements of private banks in airports provide a clear glimpse into which age cohorts bank desire. Usually the advertisement features a elderly couple with young grandchildren. The message is clear: invest for the future. You might be dead, but your progeny deserves the fruits of your labor.

Due to the target market, private banks are conservative and stuffy. Impressive bank edifices subtly suggest a solid, stable, and responsible financial institution. Once accepted into the the high net worth (HNW) members club, you can expect impeccable service and egregious transaction fees.

Your banker / babysitter will present him or herself as the epitome of class and sophistication. The costume jewellery worn: Hermes ties, Louboutin heels, Chanel totes etc., assure you that this person is professional, classy, and can relate to your life experiences.

After handing over your minimum low digit millions of USD to a venerable institution, a plethora of “suitable” investment opportunities are presented to you. Given the age demographic of clients, the search for low risk, greater than inflation yielding assets is the name of the game.

The money printing orgy since 2009 has decimated returns for elderly fixed income investors. The dash for trash in search of yield necessitated buying junk debt at lower and lower yields, and equities at higher and higher P/E ratios. No investors believe the market is undervalued. Investors of all ages and styles are now alternative investors looking for the next uncorrelated hot thing.

Bitcoin and digital currencies in general are finally a tiny fixture of the investment universe. Anything that asset managers can sell to their clients at high fees will be adopted. The question is what is the general perception of the said asset class.

Up until this year, Bitcoin and altcoins were playthings of anarchists and drug users. When the digital currency complex reached $100 billion market cap, they became alternative investments. Private bankers, with a straight face, can push their stuffy, conservative, geriatric clients into digital currency investments. The best part is, because the asset class is so new, yuge fees can be charged.

Falcon Private Bank in Switzerland received the green light to offer a Bitcoin investment product to its clients. Banks want to be a close second. Falcon is under duress due to a loss of its banking license in Singapore relating to the 1MDB scandal. They have nothing to lose in order to repair their damaged brand. Going full crypto in the hopes of differentiating their product offering is prudent at this stage.

Singapore is the Switzerland of Asia. The Monetary Authority of Singapore (MAS) will certainly feel pressure to allow one or more private banks to offer similar products. The MAS has a strong government mandate to make Singapore a FinTech hub globally. A properly sanctioned roadmap to offering Bitcoin and other digital currency products will materialise.

Other FinTech and private banking friendly jurisdictions will adopt similar frameworks to encourage domestic private banks to offer similar products. Investment advice surrounding digital currencies presents a juicy fee pool. Regulators cannot ignore the requests of their member banks for a way to skim more money from their clients. The current traditional product offering is boring and yields little.

As more banks and asset managers become comfortable with wallet security, a trickle, then a flood of money will find a home in crypto. The chain-split / hard fork drama is a minor distraction to traders with a time horizon greater than 6 months. Political, regulatory, and media capital invested in promoting a new asset class portends to a bright future.