Why Choose Yoonify?

Tokenized Illiquid Assets add value to client’s investment portfolios

Tokenized Investments for Financial Advisors

Financial advisors have traditionally recommended various types of investment vehicles including stocks, bonds, mutual funds, and real estate to help their clients achieve their financial goals. However, with the innovations in technology, the emergence of digital assets, and blockchain technology, tokenized investments have become increasingly popular. The purpose of this paper is to explore the potential benefits of incorporating tokenized investments into the traditional portfolio of a financial advisor.

 

Tokenized investments enable investors to hold diverse digital assets that are backed by blockchain technology. An investor who invests in tokenized investments gains full ownership of a digital asset, which is represented by a blockchain-powered digital token. Unlike traditional securities, tokenized investments provide investors with greater liquidity, transparency, and security. As a result, tokenized investments have become popular among early adopters who believe in the growth potential of blockchain technology.

Benefits of Tokenized Investments in Client Portfolios

Financial advisors can benefit their clients by recommending tokenized investments. These benefits include better diversification, lower costs, faster processing, and greater transparency.

Diversification

Tokenized investments allow easy access to different asset classes, including real estate, precious metals, fine art, and stocks. Clients can invest in global real estate, which was previously unavailable for them. For example, clients can avoid high costs like travel, legal fees, and other property purchases. Tokenizing assets enables investors to have fractionalized ownership rights, thus allowing them to participate in assets with significantly lower minimum investment requirements.

Lower costs

Tokenized investments provide a cost-effective means for investing. Traditional investment vehicles incur high transaction and operation fees that may reduce the returns of an investment over time. Tokenizing assets enable clients to invest in expensive assets, which they would otherwise not afford, for lower fees. Clients can eliminate intermediaries and avoid fees incurred during middlemen transactions. Moreover, clients can easily transfer their assets on the blockchain without incurring high transaction fees.

Faster processing

Tokenizing investments enables investors to conduct transactions faster than traditional means. Investors can purchase, sell, or transfer their assets immediately without waiting for multiple intermediaries to facilitate transactions. Tokenization lowers administrative costs and increases transparency since all transactions are recorded on the blockchain. Furthermore, tokenization enables fractional ownership, and it is possible to sell small percentages of assets quickly, making it easier to trade and liquidate investments.

Greater transparency

Tokenized investments enable clients to add the highest level of transparency to their portfolio Smart contracts enabled by tokenization ensure that the investment portfolio can be automated to a significant extent. Every transaction and transaction history for the tokenized assets is stored in the blockchain. The investors can track the movement of their assets, view their positions and balance, and monitor the progress of their investments, eliminating the need for intermediaries. Clients can view every transaction made, making auditing and the audit trails more productive.

Risks of Tokenized Investments

Despite the advantages of tokenized investments, there are still risks to consider before investing. Some of these risks include regulation uncertainties, volatility, and cybersecurity risks. Financial advisors should caution their clients to invest in reputable blockchain-based platforms that have passed regulatory compliance. Further, advisors should consider integrating tokenized investments with traditional investment vehicles to diversify their clients’ portfolios.

Conclusion

The use of tokenized investments is an innovation that can revolutionize the investment industry. It provides benefits that traditional investment vehicles do not, such as better diversification, lower costs, faster processing and greater transparency. Financial advisors, who incorporate tokenized investments into their clients’ traditional portfolios, can help maximize their clients’ returns and reduce their risks. Thus it is essential for financial advisors to keep up with the latest technologies and asset classes, such as tokenized investments, to provide optimal advice to their clients, enabling them to achieve their financial goals.

Have a Question?

Call : 310 634 8905
Email: reema@yoonify.io