The Evolving Role of Wealth Managers in the Digital Asset Era

Wealth management is undergoing a structural transformation driven by digital innovation and the democratization of private markets. Technologies such as tokenization, exchange‑traded notes (ETNs), digital marketplaces and smart contracts are lowering barriers to alternative investments, enabling advisors to offer institutional‑grade strategies to a broader client base. Surveys show that 92 % of financial advisors currently incorporate alternatives, and 91 % plan to increase allocations over the next two years. This shift requires wealth managers to adapt their skill sets, adopt new tools, and rethink how they assess risk, incentivize advisors and build client trust. This paper explores the evolving responsibilities of wealth managers in the digital asset era and provides practical guidance on navigating the opportunities and challenges ahead.

Introduction: A New Frontier for Wealth Advisory

In the traditional wealth‑management model, alternative investments were reserved for ultra‑wealthy clients. Managers would allocate capital to private equity, hedge funds or real estate through bespoke feeders or limited partnerships, often requiring high minimums, complex paperwork and lengthy lock‑ups. These structures limited the ability of advisors to offer alternatives at scale. At the same time, clients increasingly seek differentiated sources of return and diversification amid volatile public markets. Preqin projects that alternative assets under management could grow from about $16.8 trillion in 2023 to more than $30 trillion by 2030, while advisor surveys indicate strong demand for increased allocations. Technology is making it possible for wealth managers to meet this demand efficiently and transparently.

Adopting New Instruments and Distribution Models: Exchange‑Traded Notes and Tokenized Funds

Wealth managers can now access private markets through exchange‑traded notes (ETNs) and tokenized feeder funds, which reduce minimum investments and simplify cross‑border distribution. The Q&A document created for LYNK Markets explains that a single global‑ISIN ETN allows advisors to subscribe from existing custodial accounts and avoid duplicative KYC/AML processes, lowering costs and accelerating time to market. Tokenized feeder funds—such as Hamilton Lane’s secondaries fund—have reduced minimums from $5 million to $20,000, allowing advisors to allocate to private equity for clients who would otherwise be excluded. Fractional ownership and on‑chain settlement enable 24/7 subscriptions and redemptions, giving clients more flexibility than traditional limited partnerships.

Digital Marketplaces and Discovery Tools

Advisors need platforms that aggregate alternative products, standardize due diligence and facilitate transactions. iCapital Marketplace connects wealth managers with over 760 alternative asset managers and issuers and counts more than 115,000 financial professional users. Advisors can filter by strategy, region and risk, view fund profiles and auto‑populate subscription documents directly from investor profiles.  SEI Access, launched in 2025, offers an advisor‑centric marketplace with integrated e‑signature, custodial forms and subscription processing, expanding distribution opportunities and simplifying workflows. These platforms reduce the time and cost of discovering, evaluating and subscribing to alternatives.

Centralized Onboarding and Compliance

Historically, clients investing in multiple offshore funds had to complete separate KYC/AML processes for each vehicle. The Q&A document highlights that certain structured products centralize KYC/AML at the issuer level, allowing clients to onboard once and then invest in multiple strategies without duplicating paperwork. Digital onboarding platforms validate documents electronically, integrate with custodians and keep risk profiles updated. This centralization reduces friction, lowers operational costs and improves the client experience.

Incentive Structures for Advisors

Rebates and trailer fees remain important incentives for wealth advisors distributing alternative products. According to the Q&A, rebates (upfront payments) and trailer fees (ongoing percentage of AUM) compensate advisors for marketing, due diligence and client service. Transparent and well‑managed incentives can encourage advisors to allocate client capital and maintain positions over time. However, full disclosure is essential to avoid conflicts of interest, and managers should use platforms that automate rebate calculations to ensure accurate accounting.

New Skills: Assessing Digital Alternatives

Risk and Liquidity Metrics

Traditional metrics like beta and duration do not fully capture the characteristics of digital alternative products. Wealth managers need a framework that includes:

Volatility and drawdown: Understand the variability and worst declines of returns to gauge market risk. Volatility measures dispersion around the mean, while drawdown quantifies the maximum peak‑to‑trough decline.

Duration and convexity: For fixed‑income‑like structures, these metrics indicate sensitivity to interest‑rate changes.

Collateral quality: Evaluate what backs the note or token—whether it is U.S. Treasuries, private loans or real estate—and the creditworthiness of issuers.

Liquidity windows: Identify how often investors can redeem or trade the product and what notice periods apply. For tokenized funds, 24/7 trading may exist, but redemption windows could still be monthly or quarterly.

Payment waterfalls and triggers: Understand performance triggers (e.g., knock‑in/knock‑out levels) and how cash flows are distributed under different scenarios. Smart contracts can encode these rules, but advisors must examine them carefully.

Evaluating these parameters helps advisors compare structured products and tokenized funds on a like‑for‑like basis, aligning investments with clients’ objectives and risk tolerance.

Due Diligence and Manager Selection

Wealth managers must perform rigorous due diligence when selecting alternative strategies, particularly when working with emerging managers. The Q&A document emphasizes that emerging managers should demonstrate a clear investment process, provide a verifiable track record, implement strong governance (e.g., independent boards, reputable service providers), maintain transparency and communicate proactively. Advisors should examine the manager’s operational infrastructure, audit reports, risk controls and co‑investment. Digital platforms that host due‑diligence reports and quantitative analytics make it easier to evaluate managers systematically.

ESG Integration

Clients increasingly demand sustainable and impact‑focused investments. Wealth managers should help clients define environmental, social and governance (ESG) objectives, identify material metrics for each asset class and integrate ESG factors into due diligence. For example, a real‑estate fund might be evaluated on emissions, energy efficiency and tenant well‑being, while a private‑equity strategy could be assessed on job creation and governance practices. Advisors should monitor progress and report to clients regularly, leveraging platforms that provide ESG data feeds and reporting templates.

Operational Tools and Automation

Consolidated Portfolio Management

Managing multiple alternative investments requires tracking cash flows, valuations and reporting across various vehicles. Portfolio management platforms now consolidate positions, perform risk analytics and automate reporting. Advisors can view internal rates of return, volatility, correlations and stress tests on a single dashboard. Automated reporting capabilities generate client statements and regulatory filings, reducing manual effort and errors. Some platforms also manage capital calls, distribution notices and document storage, further streamlining operations.

Real‑Time Settlement and Collateral Management

Tokenization and stablecoins enable near‑instant settlement and continuous liquidity. Stablecoins processed about $32 trillion in transactions in 2024 and support average daily USDT transaction volumes of $20–25 billion. Tokenized money‑market funds allow shares to be pledged as collateral while continuing to earn yield. Deposits tokens, such as J.P. Morgan’s JPMD, settle cross‑border transfers instantly and embed KYC/AML into settlement flows, saving institutions roughly $150 million per year for every $100 billion in deposits. Wealth managers should understand how these instruments work and how they can improve liquidity management for client portfolios.

Education and Communication

Perhaps the most important role for wealth managers in the digital asset era is education. Many clients conflate tokenized funds with volatile cryptocurrencies. Advisors must clarify that tokenized products represent real assets—such as U.S. Treasuries or private credit—wrapped in a digital format and subject to regulatory oversight. They should explain the benefits (fractional ownership, 24/7 settlement, transparency) as well as the limitations (potential illiquidity, technology risk, regulatory complexity). Regular communication and clear disclosures build trust and help clients make informed decisions.

Challenges and Considerations

Regulatory landscape: Wealth managers must navigate evolving laws across jurisdictions. The GENIUS Act and MiCA provide guidance for stablecoins and tokenized securities, but local rules may differ, and new requirements could emerge. Advisors should partner with platforms and legal counsel that track regulatory changes.

Custody and security: Digital assets require secure storage. Advisors must evaluate custodians’ technology, insurance coverage and operational resilience. Clients may need education on hot wallets, cold storage and multi‑signature setups.

Market depth: Secondary markets for tokenized alternatives are nascent. Liquidity may be limited, and pricing may be volatile during market stress. Advisors should manage client expectations and consider staggered redemption schedules.

Systemic concentration: A few issuers and platforms dominate the tokenized market. For example, one stablecoin issuer holds a 61 % market share. Reliance on a small number of providers introduces counterparty and systemic risk.

Looking Ahead: The Advisor as Digital Architect

As private markets and digital assets converge, wealth managers must become architects of multi‑asset portfolios that blend traditional and tokenized exposures. The role will involve curating products from global marketplaces, performing sophisticated risk analysis, integrating ESG metrics and guiding clients through new technologies. Advisors will need to collaborate with technologists, compliance specialists and custodians to ensure secure and compliant delivery. Incentive structures should reward not just sales but also client education and long‑term stewardship.

Ultimately, the digital asset era presents an opportunity for wealth managers to expand their value proposition. By embracing new instruments, leveraging data and maintaining rigorous due diligence, they can democratize access to institutional‑grade strategies and help clients achieve more resilient and diversified portfolios. The journey will require continuous learning and adaptation, but those who invest in the necessary skills and tools will be well positioned to thrive.

Key Takeaways

Advisors are embracing alternatives: Ninety‑two percent of financial advisors already allocate to alternatives and 91 % plan to increase allocations. Technology allows them to offer these strategies to a broader client base.

New vehicles lower barriers: Global‑ISIN ETNs and tokenized feeder funds reduce minimums and simplify cross‑border distribution, enabling mass‑affluent clients to access private equity and credit.

Platforms improve efficiency: Marketplaces like iCapital and SEI Access aggregate products, automate subscription processing and provide analytics. Centralized KYC/AML and digital onboarding reduce friction for clients and advisors.

Risk assessment is evolving: Wealth managers must evaluate volatility, drawdown, duration, collateral quality, liquidity windows and payment waterfalls to compare digital alternatives. They must also perform thorough due diligence on emerging managers and ensure strong governance and transparency.

Education is paramount: Advisors must demystify digital assets for clients, explaining both benefits and risks. Clear communication, robust reporting and compliance will help build trust in the digital asset era.