If you're looking for wealth & asset management, wouldn't you want a more general purpose enterprise like Wells Fargo? If you're wealthy enough to need that sort of management, you're probably going to want a decent level of diversification, which Wells & others can provide, but Coinbase does not.
Although I suppose Coinbase could be the platform through which those general purpose companies work for clients that want crypto.
Coinbase is really, really good at security, in a way that Wells Fargo is absolutely not. I interviewed there recently and some of the technical details about how they store keys etc. boggled my mind. I ended up going back to Google instead, but it was easily Google-level security.
And yes, the potential market for Coinbase Custody is companies like Wells, Goldman, family offices, etc. that manage money for the actual rich people. On the application form they ask you how many millions (or billions) you have under management. They're clearly marketing it to hedge funds, WaAM divisions, family offices, etc that are managing institutional money.
Wells Fargo's fraud issues have been on their retail branch side. Of course that's should be a warning sign for other parts of their operations too. There's plenty of other options though. As for trusting them, I'm pretty sure they're on the hook for the $$ they owe you even if their wallet gets stolen. If someone hacked their brokerage accounts and stole your 1000 shares of Apple, they'd still owe you 1000 shares.
Of course this could also be where Coinbase's niche ends up: providing the backend infrastructure for traditional wealth management companies to handle the crypto plumbing for them. If I were Wells Fargo or similar and wanted to offer crypto services to my wealth management customers, I'd much prefer using Coinbase as a turn-key solution for it than try to roll my own setup. Or simply buy Coinbase itself and have a huge strategic advantage over competitors.
Of if I were in a position to make such decisions, I'd be too busy swimming through my piles of money, lighting cigars with $100 bills, and sipping single malts older than my great grandfather to bother posting here from my armchair where I have not a single horse in the game.
You can't steal shares the way you can cryptocurrency, it's an entirely different thing.
A brokerage might be the "custodian" of your shares, but you still have control over them, and there's a massive paper trail to prove that. Borderline impossible to steal.
Crypto being easier to steal wouldn't really change the legal obligations of a wealth management firm acting as its custodian. There can be a massive paper trail, and blockchain trail, to prove that too. I'm not sure I really see a distinction here. It's also not impossible to steal, wealth managers do it from time to time, it's embezzlement, and the banks make the person whole. It happened to my grandfather: His manager at the bank converted assets to money and took the money. They got caught, and my grandfather got his money back.
Sure, but if the theft is large enough the bank may not be able to cover it, I guess depending on the terms of their insurance. Easier to steal, to me, means higher chance of insolvency.
Imagine if a bank had a billion dollars of BTC that got stolen while prices were rising, and they had to rebuy on market to cover their liabilities. If that happened, and the public became aware, prices would shoot up as everyone tries to frontrun the bank. Wouldn't be surprising if the bank had to spend 2x+ to cover.
Although I suppose Coinbase could be the platform through which those general purpose companies work for clients that want crypto.