The number of wealthy individuals in Indonesia is set to grow in the next years, giving wealth managers a significant opportunity according to data and analytics firm GlobalData.
The HNW population is expected to grow at an average of 7.7% annually over the next four years: from an estimated 40,400 in 2018 to 51,900 in 2022, said GlobalData in its report Indonesia Wealth Management: Opportunities and Risks to 2022.
The number of mass affluent individuals - defined as those with liquid assets of $50,000 to $1m - has risen from 943,370 in 2014 to an estimated 1.3 million in 2018, representing an average annual growth rate of 7.3%. The number is expected to grow further to 1.5 million in 2022, said the data and analytics firm.
Increasing employment levels and strong predicted retail investment growth will further push the rise of affluent individuals in Indonesia over the next four years"
"Increasing employment levels and strong predicted retail investment growth will further push the rise of affluent individuals in Indonesia over the next four years," said GlobalData wealth analyst Shivani Gupta.
Over a quarter (26.8%) of Indonesian HNW investors' wealth is held outside the country, with tax efficiency being the main reason for offshore investment.
According to GlobalData, Indonesian HNW investors hold the bulk (89.9%) of their investments in liquid assets such as equities, mutual funds, deposits, and bonds. Deposits remain the top choice among retail investors, accounting for two-thirds of total liquid retail savings and investments in 2018.
"However, wealth managers must remain aware of the slowly increasing investments in illiquid assets, with their proportion expected to rise over the coming years," said the report.
Bank Central Asia (BCA), Indonesia's largest private bank by market capitalization, is expanding its wealth management services as interest in investing continues to rise. Wealth management services contributes 5 percent to the bank's revenue.
The country has been seeing a growth in retail investors, with the latest data from the Central Securities Depository (KSEI) showing 2 million investors with single investor identification (SID) licenses in the first semester of 2019. Of this figure, 1.9 million are mutual funds investors, while the rest are stock investors.