Art as Wealth Management Strategy
From Rococo and Neoclassical to Abstract Expressionism and Minimalism, the world of fine art has a long history of innovation, with artists constantly exploring new ways to express their experiences and challenge our perceptions. Great art is without a doubt revolutionizing. Yet, very little of the world in which we see from moment to moment, every single day, gives credit to this art, and the innovative artists that created it. That's probably why art, up until recently, seemed like a hobby for the rich, instead of a brilliant investment reflecting ones business or personal ipseity.
Contrary to the massive changes in genres of art, the art market hasn't changed much at all, which more so follows the institution seeped in tradition. Concerning the art markets minimal if not slight innovations, advances in society such as technology and rising wealth in developing nations, have been reshaping the art market, bringing higher appraisals, a global surge of collectors, and shifting attitudes toward the very worth of art.
By utilizing art experts such as art appraisers, art brokers, and art consultants, collecting art has become one of the biggest booming investment strategies in the world- to date.
Take the United States, China, India, Russia and South America for example. The increase in interest is reflected in a significant rise in market prices over the past decade. While sales differ by collecting category or period, overall sales climbed from about $36 billion in 2005 to $68 billion in 2014. After a minor dip in 2015, they have been increasing exponentially in the last 2 years with record highs. And many of us have already seen the record high auctions sales, particularly for the recent Basquiat for $110.5 million. It's time everyone takes notice, and has the pleasure of both benefiting from art in an aesthetic and investment copacity.
Traditional veteran collectors, who buy solely because of their passion for art, are being joined by a new breed of collectors who apply the financial savvy and business sophistication of their professional lives to their collecting. Evan Beard, from National Art Services, has stated “While they too may have a deep passion for art, many are also keeping an eye on the financial potential of their collection and how it fits into an overall portfolio of assets they own.” While some don't buy art purely as an investment, Beard again says, “Many now employ art lending strategies to unlock capital from their collection and art planning strategies to capture tax efficiencies.” What does this mean for lenders? Well... currently private banks and wealth management firms have expanded their offerings related to art and tangible assets to meet the sophistication of their clients.
Art procurement has caught fire, and collecting art for pleasure, as well as for the purpose of investing, has now become, to many, common sense and intelligent business practice.
Viewing art as a capital asset has prompted these collectors to seek advice from specialists that have the inside knowledge of fine art, and the up and coming talent that may not be fully discovered yet. They also highly rely on the specialists knowledge base concerning ever changing tax laws in regards to art, monetary policy shifts, and the global art market. Just as they would speak with a financial adviser about their investment portfolio, collectors can now turn to U.S. Trust, Merrill Lynch, Cross Harbor Capital, Bank of America, and most notable lenders and banks, to unlock capital from their collection, develop a philanthropic plan, and even consign works at auction houses or flip work through their art broker or art consultant.
It's no surprise that two auction houses- Christie’s and Sotheby’s, have dominated the global art scene for decades, their revenues typically dwarfing those of other competitors. Again, drenched in tradition for the last century, collectors tended to be passionate and academic, an exclusive group gathering at auction houses to buy important works. But in today’s modern world we have many new collectors, who are equally passionate about fine art, but often find the atmosphere at places like Art Basel, Miami, New York and Hong Kong (which have expanded sixfold in about a decade) to be less intimidating and more social. This expansion has helped democratize the art market by giving collectors an alternative to the auction houses and easier access to works of art. All of a sudden, the world of art has been in reach for anyone with an interest. And with a plan and strategy set up by you and your consultant, you can make your investment and art work smarter so you don't have to work harder.
Although independent collectors have received this insight far earlier, businesses and corporations are fast recognizing how imperative curated artwork is in their establishment, and how it unequivocally increases profit margins, as well as being one of their most intelligent investments regardless of what their business market entails.
Recent innovations from technology is also helping open up the art market to a broader audience. Video streaming allows bidders to engage in live auctions from almost anywhere, and collectors can now go online to check prices and provenance. Sites are organizing listings and information from art consultants and dealers, creating what is essentially a virtual art market. And it's no surprise that apps have been developed, making it easier to bid on items, alerting collectors when artworks come up for sale. This digital age has helped lead to a broadening interest in art and greater transparency, while "easing transaction complexity,” says CollectorIQ, an art market data and analytics platform. The format for art sales seems likely to expand given the global visibility afforded by internet access, and by the emerging art experts who take the guess work out of purchasing for pleasure and investment.
Now back to the primary focus. Anyone moved to collect fine art typically does so with a passion and true interest in what the work does and says to them. But what about using adored works of art as collateral for monetary loans or lines of credit? Some art lovers may be only vaguely, and I mean vaguely, aware of how to monetize their collections. Others may be wary of turning a passionate pursuit into a financial tool, feeling like they are gambling, or even dabbling in a world much like Wall Street. Let me spell it out for you, art investing is not like Wall Street. As an avid art lover, art broker, and art curator, I believe that anyone who purchases a piece of art does so because they feel a connection to it. However, fine art can also be a powerful financial asset that may be considered as part of a collector’s overall wealth management strategy. Yes, this is a real thing. And it isn't just an opportunity for the traditional collector with an art aficionado mentality, it can be for anyone, and is quickly becoming a common practice for collectors, businesses, and investors, around the world. Dare I say, art may be the next currency?
Collectors are able to use their collection as collateral to gain liquidity for other financial opportunities such as acquiring additional artwork or taking advantage of other business prospects. By engaging in art lending and art collecting, you make your art work for you, while you enjoy the work, and it continues to add quality to your life.