Why Tokenization Is Key For Retail Asset Managers

In this four-part blog series, we make the case that asset managers must embrace tokenization and related technologies if they are to have a place in the lives of the next generations of investors.

In order to understand why this is the case, we need to understand who the next generations of investors are, and why they are wildly different to the generations that came before them. Here, we'll focus on identifying the next generation of investors. In future blogs, we will seek to understand the behaviors of this next generation of investors and what make them tick, followed by a discussion of what this next generation of investors will buy and how they will do it. Finally, we will explore how distributed ledger technology (DLT), tokenization and other new tech will allow asset managers to stay relevant to the next generation and why they must adopt these new technologies and embrace new cultural shifts if they are to survive.

The next generation of investors

We can think of the younger generations as Gen Z (born 1996-2009) and Gen Alpha (born after 2010).

We must understand that these generations (plus a few of the younger Millennials) have grown up in a different world to the rest of us-a world that is entirely digital and increasingly virtual. We must adapt to these generations, not the other way round. Next year, 2 billion people will make up the Gen A cohort and they will become the largest generation in history. Just think-they have never known a world where smartphones, apps, video calls and virtual reality was not ubiquitous. With this in mind, we can think of generations Z & A as digital natives and increasingly virtual natives.

Digital natives are used to only digital experiences, albeit those experiences probably replicate the analogue world (email digitally replicates handwritten mail, for instance). The normally younger, virtual natives use digital tools, of course, and they could swipe before they could talk, but they have no experience whatsoever of the original, pre-digital world and thus have severed all links with the analogue past (they likely use Slack or Discord instead of email for example). This means that they are free to reimagine how things can be done using the extremely powerful tools at their disposal.

The next generation of investors probably is or have been gamers (who represent 38% of the population[1]) and are entirely used to and expect 3D, engaging and immersive experiences. For them, their online, virtual life is as real to them as their physical life. As the most tech-savvy generations ever, their social identity is digital and driven by digital activity and engagement.

These younger generations are growing up in what we can think of as technological exponential age, and have more access to more digital tools than anyone before them-think AI, AR, VR, Spatial Computing, Robotics, DLT, Crypto, etc. These technologies all complement each other and accelerate the other's growth. We are in a period of technological advancement unprecedented in human history (faster than the dawn of the internet itself) which is giving us one of the most exciting, confusing and powerful social moments in history.

As we continue this blog series, we will explore what investment products the next generation will buy and how they will buy things. It is clear the game is changing in front of our eyes-the industry needs to act now as these potential investors enter the purchasing market.

To learn more about tokenization, read our whitepaper, Tokenization of Funds - Mapping a Way Forward.

[1]How Many Gamers Are There? (New 2024 Statistics) (explodingtopics.com)

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