Boston Consulting Group’s (BCG) Global Wealth Report 2019 reveals a world where global wealth continues to expand. Yet, the realities of volatile global geopolitical conditions, fluctuating equity markets, and challenging currency effects against the US dollar have created substantial headwind for wealth growth over the last 12 months. These negative impacts contributed to wealth growth of just 1.6 percent in 2018, the lowest rate for five years.

While growth has slowed, the total value of global wealth still stood at a staggering US$206 trillion in 2018. That’s more than 200 times the total GDP of Indonesia in 2017. But while North America and Europe account for 65 percent of that wealth today, the rate of wealth growth paints a changing picture around the world. Wealth in Indonesia is on the rise, and wealth managers must be ready to adapt.

Indonesia sits at the heart of a wealth-growth success story, with Asia set to be one of the fastest growing regions for personal wealth in coming years. While the traditional wealth strongholds of America and Europe broadly stagnate, the wealth picture in Asia remains more positive, with the region (excluding Japan) expected to experience 9.4 percent growth to 2023.

Personal wealth in Indonesia has seen steady growth over the last five years, rising from $0.4 trillion in 2013 to $0.6 trillion in 2018. That represents an average compound annual growth (CAGR) rate of 11 percent. The future looks equally bright, with BCG projecting 10 percent CAGR to reach $1 trillion in 2023. Approximately 30 percent of that wealth is held cross-border today, with $0.2 trillion of $0.6 trillion held overseas, a ratio expected to continue to 2023.

Of course it is important when looking at wealth to reflect on how those assets are shared. Wealth is not just concentrated in ultra-rich pockets. The largest share of Indonesia’s wealth (48 percent) in 2018 is held by those with personal wealth up to $250,000, with 34 percent held by those boasting over $100 million in personal holdings, and the remainder falling somewhere in between.

It is undeniable that challenging inequalities clearly exist between the lives of Indonesia’s wealthiest individuals and the nation’s poorest, but looking at the wider national ecosystem, it is encouraging to see that personal wealth is growing. Growing alongside it comes a need for wealth managers to adapt to this modern wealth environment.

BCG’s findings reveal that there is an increasingly lucrative gap in the services offered to the emerging global affluent population — that is those individuals with wealth between $250,000 and $1 million.

This affluent class represents just 5 percent of Indonesia’s total wealth, but is predicted to experience wealth growth of 11 percent to 2023. Crucially, it is a segment that is poorly served by traditional market structures, with retail banks providing oversimplified template products, and branded firms more suited to higher affluence bands offering broadly overpriced services.

A comparable mismatch can be observed across wealth segments in Indonesia today. Two of the country’s largest priority banking services set a minimum assets under management (AUM) of $35,000, with a threshold of $70,000 for priority services. With access to favored off-shore private banking in markets such as Singapore requiring approximately $1 million AUM, this arbitrary measure of affluence creates a situation where Indonesians with $950,000 under management receive the same offer of services as those with $70,000 AUM.

Wealth managers seeking to leverage this opportunity should work to build a deeper understanding of customer segments, utilize technology to personalize services at scale, and ensure they embed the right incentives and performance indicators to promote mutually beneficial wealth management relationships.

These recommendations reflect a broader need to evolve wealth management. Leveraging powerful digital technologies will be essential to firms in amplifying their reach and delivering sustainable success. BCG’s analysis reveals that analytics-led revenue transformation can lift top-line performance for wealth managers by 8 to 15 percent, with three key areas relevant to Indonesia:

Prospecting for client acquisition must become more personalized and more precise. Complex data insight on potential clients can be combined with internal data to deliver an informed acquisition strategy that can improve customer retention by up to 20 percent.

Pricing based on data analytics can increase revenue by up to 6 percent, providing a competitive pricing strategy based on real-world market conditions. In one example referenced in the report, a US brokerage firm enjoyed notable success by introducing a flat-fee subscription model targeted at the affluent segment.

Retention will be an increasingly important part of successful wealth management in an era of innovative new financial solutions. Using data to identify early warning signs, then taking preventative action to prevent lost clients can reduce attrition rate by up to 35 percent.

Data analytics offers a powerful new tool for wealth managers in Indonesia, but it is not one that should live in isolation. I’m sure I’m not alone in having turned away from a seemingly well-targeted product simply because customer service fell so short of the standard.

It is important to take a holistic approach through what BCG calls Enablement 2.0, merging data insight with new ways of working to deliver the best possible value to customers. That means adopting engagement models that embrace digital tools while providing a comprehensive service offering for diverse wealth segments. It means training and coaching on new ways of operating, driven by leadership from the top, and supported by measures that incentivize positive results.

In an Indonesia where wealth continues to evolve, wealth managers prepared to embrace their own evolution are best positioned to enjoy success.

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The writer is a managing director and partner with the Boston Consulting Group in Jakarta and the leader of BCG’s Strategy practice regionally.

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