Indonesia's rising HNW population is 'opportunity for wealth managers'

STRONG growth is expected in Indonesia's mass affluent and high net worth populations in the next three years, representing a significant opportunity for wealth managers, according to an Oct 14 report by data and analytics firm GlobalData.

The number of mass affluent individuals, defined as those with liquid assets of US$50,000 to US$1 million, has risen from 943,370 in 2014 to an estimated 1.3 million in 2018, said GlobalData in its report Indonesia Wealth Management: Opportunities and Risks to 2022.

This represents an average annual growth rate (AAGR) of 7.3 per cent. The number is expected to grow further to 1.5 million in 2022.

"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.

The high net worth (HNW) population, defined as those with liquid assets of more than US$1 million, is expected to grow at an average of 7.7 per cent annually over the next four years: from an estimated 40,400 in 2018 to 51,900 in 2022.

"Growth will be particularly pronounced in the higher wealth bands," said the report. The number of investors with liquid assets of US$3 million to US$10 million is forecast to grow at an AAGR of 10.1 per cent, and those with liquid assets over US$10 million, at 9.3 per cent.

Over a quarter (26.8 per cent) of Indonesian HNW investors' wealth is held outside the country, with tax efficiency being the main reason for offshore investment.

In 2018, Indonesia's total affluent population -- both the mass affluent and HNW -- accounted for only 0.71 per cent of the adult population, but held 95.4 per cent of total onshore liquid assets.

According to GlobalData, Indonesian HNW investors hold the bulk (89.9 per cent) 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.

The value of Indonesia's retail savings and investments market has tripled from US$108 billion in 2008 to US$326 billion in 2018, and is expected to cross the US$400 billion mark in 2022.