In a world where change is constant, it is important for businesses to embrace innovation, challenge the status quo, and try out new ideas. This is something for which we have always stood by at Syz Group. And so, when a group of colleagues suggested tokenising a real asset - in this case, a piece of art - it felt like a natural next step in our digital asset journey. In a pioneering move, we have successfully tokenised a piece of art and distributed these unique tokens amongst our employees. This bold initiative is not only a testament to our commitment to innovation, but also a development that marks a significant stride in the evolution of wealth management, and for the long-term benefits of our clients and the Syz Group.

Tokenisation, a concept born in the realm of Blockchain technology, involves representing ownership or access rights to a real-world asset. In our case, we applied this revolutionary idea to a piece of art, creating digital tokens that represent ownership of the value of the asset. The decision to begin with an internal test among our employees was strategic. It allowed us to thoroughly assess the mechanics of tokenisation before introducing this innovative approach to our clients.

Fractional ownership
The primary motivation behind this initiative was to explore the myriad benefits that tokenisation can bring to the wealth management industry. The first examples that come to mind are the new possibilities for legacy planning by allowing the fractional inheritance of real assets. Heirs can inherit specific fractions of tokens, making dividing valuable assets among multiple beneficiaries easier. This can simplify the estate distribution process and reduce potential conflicts.

Another notable advantage is the democratisation of access to traditionally exclusive assets. Historically, high-net-worth individuals (HNWIs) were the primary beneficiaries of investments in unique and valuable assets such as art, real estate, or infrastructure. However, through tokenisation, we are breaking down these barriers, enabling a wider audience to participate in the ownership and appreciation of such tangible assets.

Moreover, the fractional ownership made possible by tokenisation aligns with the evolving preferences of modern investors. The ability to own a fraction of a high-value asset allows for a more diversified, decorrelated, and personalised investment portfolio. This flexibility is particularly appealing to a new generation of investors who value accessibility and customisation in their wealth management strategies.

By distributing tokens among our employees, we not only engage our team in a tangible way, but also provide them with an opportunity to explore the potential of this transformative technology. This internal experiment serves as a learning platform, allowing us to better understand the dynamics of tokenisation, its challenges, and its impact on wealth management strategies.

Liquidity
Furthermore, tokenisation enhances the liquidity and tradability of illiquid assets. Real-world assets, like art, are traditionally characterised by their lack of liquidity. Tokenisation introduces a new level of flexibility, allowing investors to buy and sell fractional ownership of these assets more easily. This increased liquidity benefits not only the investors but also the market’s overall stability, reducing the risk associated with illiquid holdings.

Our foray into tokenisation is not merely an experiment within the confines of our organisation; it is a strategic move towards offering our clients a new dimension of financial services. The insights gained from this internal pilot programme will inform the development of Syz Group’s further offering in the digital world - following the announcement of the launch of a custody and trading solution for cryptocurrencies about a year ago.

We might not be ready to tokenise our family art collection quite yet, but we are definitely exploring what this possibility could entail and the paradigm shift it represents for the wealth management industry. By leveraging Blockchain technology, we are not only adapting to the changing needs and expectations of our clients, but also pioneering a more inclusive and dynamic investment landscape. As we embark on this exciting journey, we remain committed to pushing the boundaries of what is possible in private banking and delivering unparalleled value to our clients. The future of wealth management is here, and we are proud to be at the forefront of this transformative wave.

Interested in reading the full report? You can read this edition of the Swiss WealthTech Landscape Report 2024 online here.