Democratising Indonesia’s Private Wealth Market with Commonwealth Bank’s SmartWealth Digital Advice

Ivan Jaya is a man with a mission. He currently serves as Head of Wealth Management & Premier Banking in Commonwealth Bank Indonesia, and he believes that the bank’s new SmartWealth 360 degree wealth management app will help democratise the private wealth space in the country, and keep Commonwealth Bank Indonesia at the cutting edge of the sector. Hubbis met up with him recently by video link and we found a private banker who is both remarkably energised and genuinely excited by the opportunity that lies ahead. He reports that the private wealth market in Indonesia offers immense growth potential across all segments of private wealth. He believes that the positioning of Commonwealth Bank Indonesia for the wealth market of the future is remarkably adept, especially with its SmartWealth app, developed alongside Swiss FinTech additiv and already at the cutting edge of the technology-enabled evolution of wealth management products and services amongst Indonesia’s vast population.

Jaya’s enthusiasm for his role and for the market potential ahead come through from the first words he utters as the interview begins. He starts by explaining that Commonwealth Bank Indonesia is in the process of evolving its private wealth management model from a successful one to what he believes will be a truly market-leading presence.

“We have been successful for many years and had become known as the supermarket for mutual funds,” he reports, “but we have been truly forward-thinking, changing our focus somewhat and evolving away from the positioning as a product-led advisory to digitally-led hybrid advisory that is personalised for every client segment in the country.”

To set the scene more accurately, he also explains that in his current role, he is responsible for providing wealth management services by developing investments, bancassurance products and foreign exchange for retail bank clients in high-end affluent, affluent, and emerging affluent segments. In addition, his responsibilities also include digitising customer experience by providing digital financial solutions and developing Premier Banking value propositions in order to grow the number of high-end affluent and affluent clients.

Evolving the digital proposition

And it is the digital proposition that he and the bank find most alluring. He reports that he and his team are proud of winning two awards in 2019 in their capacity as the first bank to provide a comprehensive digital wealth management solution, through the CommBank SmartWealth app, which he says is the first app in Indonesia that provides digital-advice services for wealth management clients.

Jaya explains that the digitally led hybrid advisory proposition delivered through CommBank SmartWealth offers what is a major competitive advantage in the market for mass affluent and HNW clients. “We have also expanded the coverage more to serve the emerging affluent segment as well,” he reports. “The direct-advice model that is delivered through robo-based investment management offerings like goals-based investment will be increasingly in demand from this emerging affluent segment.”

To help achieve this, the bank has been collaborating with Swiss FinTech additiv to develop SmartWealth. “We saw how advanced they were with their experience in the European market,” Jaya reports, “and this collaboration has been incredibly positive and still is today as we keep pushing the boundaries of what we can do with this digital wealth management platform.”

Evolving the wealth model

Jaya explains that his mission is to help clients with the three phases of their wealth management requirements, starting from wealth creation and wealth accumulation and then including also wealth protection. “In the future as wealth managers, we need to selling outcomes instead of just product solutions,” he reports. “We have witnessed a key trend in the form of digital-savvy older millennials taking over their baby-boomer parents’ businesses and inheriting significant wealth. We have witnessed a trend for these customers to demand more control over their financial affairs, as well as greater transparency in the fees charged for every transaction. And we have also seen increasing competition in wealth management with the e-commerce start-ups and FinTechs offering low-fee entry points for investment and insurance products.”

Evolving the advisory-led wealth management UX

With all these developments taking place Jaya believes that the CommBank SmartWealth app will help the bank position itself ideally to be able to compete in the environment currently and in the anticipated market of the future. “We will be able to also develop the app in a nimble fashion to make sure we are always at the cutting edge of the market and anticipated developments ahead in the wealth management space,” he reports.

SmartWealth has been developed stealthily and smartly by mining down into some of the issues faced by actual or would-be clients. “They wanted to see their unrealised gains or losses on their investment without needing to contact their wealth manager,” he reports. “They wanted to be updated regularly on news that might impact their portfolio and be offered advice on courses of action. And they wanted 24/7 access for transactions. The result is SmartWealth, that achieves all these aims, and many more. And with the in-app notification as well as chat feature, we give the customers access to consult with their wealth manager at the click of a button.”

Accelerating needs

He believes that SmartWealth had come along at an ideal time already, but that the pandemic has created an even more robust demand for digital tools and solutions. “SmartWealth offers personalisation as well as digitalisation and is therefore a tool for the modern world and for times we face today, as well as for the post-pandemic environment,” he states.

He also reports that the wealth management business in Indonesia offers solid returns, even if in the future there will be enhance pressure on fees. “We estimate that some 70% of revenues here in Indonesia come from the wealth management business,” he reports, “so this is a top and bottom line priority for the group, and this is why there is substantial effort and investment being made to expand our wealth management services not only to affluent or high net worth individuals but also to the emerging affluent, or even mass market, and this is why we have been evolving out business model towards digital and hybrid. This is why we have been winning some prestigious awards from media locally and regionally for our products and services.”

Indonesia’s vast potential

He then offers some insights to the Indonesian market to back up his comments, noting that Indonesia is the fourth biggest country in the world in terms of population at roughly 270 million people, while the number of domestic investors is merely around 1% of that number, or even less.

“The penetration rate of Indonesians who actually invest in the financial markets is incredibly low, as you can appreciate,” he elaborates, “and by comparison, the rate in Malaysia is around 50%. In short, there is massive potential ahead, especially as the individual wealth of the population has been rising steadily for many years and should expand again quite rapidly once this virus is under control.”

Flat-out acceleration

By way of example, the roughly 2.6 million investor market he is talking of currently was less than 1 million in 2016. “That shows you how incredibly dynamic growth has been in recent years,” he explains, “and we see incredibly strong growth ahead. Given this very strong growth and the types of products liked by these market segments, it is not surprising that competition has intensified, and that is why I am so pleased that with SmartWealth and our overall vision, we are at the leading edge of the market here.”

He explains that the competitive environment now not only includes the traditional selling agents like wealth managers that are able to serve the customers or introduce the customer to wealth management products, but also now some of the e-commerce and other app-based delivery systems, such as taxi-hailing apps like Gojek.

Fending off the competition

“We have seen these new names coming to compete for the mass affluent and emerging wealthy segment to offer wealth management products,” he reports. “In some ways, this is good as it increases the penetration and it will make the wealth management more and more visible and should help overall demand.”

He reports that well before SmartWealth, Commonwealth Bank Indonesia has been a vigorous competitor for more than a decade and has been long at the forefront of the online and digital offerings in the country.

“We actually introduced the transacting for mutual funds through internet banking and mobile banking some 13 years ago,” he explains. “As a result, we are now one of the top two banks in Indonesia in terms of the number of mutual fund holders in the country. And close to 85% of our transactions right now are via digital. So, we are absolutely in tune with trends and why we are focussing on how we can serve more segments. With the solutions and user experience SmartWealth offers, we can also free up the time of our RMs to focus on higher-added value customers and their specific needs, freed up from many of the more time-consuming and basic tasks they needed to perform before, and which SmartWealth now achieves for them.”

Cutting edge

In short, Jaya maintains that Commonwealth Bank Indonesia is at the cutting edge of democratising wealth management. “We therefore nowadays focus both on the small ticket sizes amongst a larger number of customers as well as bigger ticket sizes amongst the smaller number of much wealthier clients. Technology is helping us evolve our business model to cover this much broader landscape of actual and potential customers.”

Jaya offers some further insights into the growth potential for Indonesia and for the wealth management sector. “I can cite some research from BCG offering some realism on the short-term impact of the virus, but also noting that 89% of those the firm surveyed believe the Indonesian economy will improve and that the market will continue to evolve, with younger investors increasing their investment exposures and their life insurance purchases in the next 6 to 12 months, and many more likely to buy private health insurance as well.”

A buoyant market

He reports that Commonwealth Bank Indonesia also sees the millennials in the 26 to 39-year-old age group showing similar trends ahead, and they are also increasingly interested in equities currently, as the Jakarta Composite Index had dropped by 40% at one point. “These types of clients have seen the 25% recovery from the bottom, and seen that with solutions such as the SmartWealth app, how much easier it would be to more easily capture this type of opportunity when it arises.”

A wish-list

Jaya rounds off the discussion by conceding that although the market in Indonesia offers vast potential, there is more progress that could be achieved and faster. “I have often said I would like to see many more financial planners in the country, in fact I would like to see double or triple the number, but we need to see further encouragement to achieve this from the regulators and other participants,” he says.

He also hopes for a wider remit in terms of the investment products open to domestic investors, and he hopes to see more investment activity amongst younger investors, who will then naturally expand their activities through their working and retirement lives ahead.

“Clearly the wealthy baby boomers have a huge percentage of wealth and they are core clients, then the Millennials have rising levels of income through their work, their businesses and inheriting,” he observes, “and then Generation Z’s greater involvement will help in this process of democratising the world of wealth management. We see this as multi-tiered and multi-layered, so we are focusing on all these key areas for our business ahead.”

Two paths, one journey

And to achieve this, Commonwealth Bank Indonesia, he reports, will pursue two paths, the hybrid model combining the wealth manager and the automated self-service, and the second path the fully-automated self-service model where no wealth manager is involved or needed.

“These two paths on our journey will allow us to capture the great opportunities in the market that we see ahead,” he states. “And combined with that, we believe that if we can reach out to customers when they are younger, then they will become more affluent and we will have already engaged with them and won their confidence and trust. So, technology is helping us drive our vision forward.”

Vast potential ahead

Jaya closes by reiterating that the opportunities ahead must be grasped by the right strategies and the right approaches. “The potential is there, for sure,” he concludes, “so as long as we position ourselves smartly, we will be a viable and successful competitor in the Indonesian private wealth market of the future.”

Jaya’s key priorities

Jaya’s first priority is the need to drive even greater user-friendliness of the SmartWealth app by ramping up the capability to perform end to end transactions digitally. “This makes it even easier for the customers to purchase or to onboard our investment products,” he explains.

“My second mission is to enhance the delivery of news and information to the customers through notifications in our app and then also through regular digital market events,” he reports. “We see right now how video conferencing is very active during the Covid-19 outbreak and we expect this new normal to endure for the next one or two years as well, so our market update right now has shifted from offline activity to online activity like webinars, using Zoom for instance.”

His third priority is creating the communication strategy to continuously provide awareness to the market. “We used to be known really as the supermarket of mutual funds, but our future positioning is to be at the cutting edge of advisory-led wealth management delivered through our SmartWealth app, and delivered in a standardised manner using our portfolio model based on our own rules and algorithms. So this is converting the customers by offering them a rule-based digital advice that is incredibly smart as well as agile in advising them.”

Getting Personal with Ivan Jaya

Jaya currently serves as Head of Wealth Management & Premier Banking in Commonwealth Bank Indonesia. In this capacity, he is responsible for providing wealth management services by developing investments, bancassurance products and foreign exchange for retail bank clients in high-end affluent, affluent, and emerging affluent segments. In addition, his responsibilities also include digitising the customer experience by providing digital financial solutions for customers, developing Premier Banking value propositions in order to grow the number of high-end affluent and affluent clients.

Prior to joining Commonwealth Bank, Jaya was a Senior Vice President, Head of Wealth Management in Citibank Indonesia and also held various posts in Standard Chartered Bank and American Express Bank. His illustrious career thus far has included selection as one of the Indonesia Future Business Leaders in 2016 and was selected as Indonesian Young Consumer Banker in 2010 from Indonesia’s SWA business magazine.

Jaya comes originally from Semarang in Central Java and he was educated in Bandung in West Java, where he obtained a bachelor’s degree in Industrial Engineering from Universitas Parahyangan, and then a Master of Business Administration (MBA) from Institut Teknologi Bandung.

“I have been really lucky throughout my career,” he reports, “with each year offering me the chance to develop and expand my experience and my career. In 2010, I was selected as the Indonesian Young Consumer Banker of the Year from SWA Business Magazine and then in 2016 I was also chosen in the category of Indonesia Future Business Leaders, and with Citibank I helped the bank obtain the Best Wealth Management Bank of the Year and then we have won that award twice already with Commonwealth Bank Indonesia. I am proud that I have helped grow the top line by more than 50% compared to where it was before I arrived, so I hope and believe my experience has helped me and the bank in this regard.”

He says he is also really enjoying the opportunity to become so closely involved with cutting edge technologies. “Commonwealth Bank Indonesia has offered me a wonderful opportunity to evolve my skills and strategies and to develop as a private wealth management professional.”

Happily married with two children, a daughter soon to reach 16-years-old and a son soon to be 12 years old. Spare time is spent with the family and exercising, as well as watching his favourite football team, Manchester United, as well as watching games from the National Basketball Association league in the US.