Art advisor Willem-Joost de Gier for Cadell writes an article for Private Bankers Julius Baer discussing art as an investment. The one quote that interested me was “look for conflicts, check the facts and drive competition”. People talk to us about wealth in general, so that includes art. If you are going to asset allocate your wealth, investing into art is an option. It is also fraught with uncertainty on many levels.
Willem-Joost de Gier says “I have met countless successful entrepreneurs or investors who are excellent negotiators, numbers-driven and sceptical in their daily jobs. When they enter the art world, however, they forget everything they know.” I have to agree and think of many client stories that illustrate this point. So how to avoid making ill-advised decisions?
Here’s a start when Buying art:
Check the facts: “Never rely only on the seller’s word. Begin by checking the provenance. It tells you a great deal about authenticity and title. Continue with the Art Loss Register, catalogue raisonné and order-independent condition reports. Does all the information add up?
Communicate transparently: “Never allow yourself to be pressured into a quick decision or drawn into an apparent need for secrecy.”
Understand whether the price is justified: “Knowing about comparable transactions lies at the heart of valuation. How did the artwork do at previous auctions? For which price were similar pieces sold recently? Invest the time and work to establish what constitutes a comparable transaction. Take great care, because objects that look the same are often not worth the same. Most asking prices are far too high, typically three times the resale value.”
Use art fairs to buy for love, not as an investment: “Art fairs are great opportunities to discover young artists. Buy them for the love of it. If this turns out to be a profitable decision, that’s wonderful. However, you are betting on the future which no one can foresee. Some artists will do extremely well, but the majority won’t. If in doubt, you will surely fall in love again.”
Hire an art lawyer: “Don’t skimp. Art lawyers know exactly what to look out for and can ensure you have warranties concerning title and authenticity. Also, request advice on tax and customs issues.”
The tips above; what if you dropped the word ‘art’ from ‘Buying art’? You get ‘Buying’. Read the tips above again about buying any investment, not just art. How much due diligence to you put in? Anyway near what is suggested above? What do you take for granted? I love this “Take great care because objects that look the same are often not worth the same. Most asking prices are far too high, typically three times the resale value.” I’m betting your wealth manager is charging you way over their ‘worth’…3x is not as crazy as some people may think! As Willem-Joost de Gier says, “…don’t forget what you know”
We are not specialists in art, but we understand asset allocation and risk. So if you want to allocate assets in art, let’s have a conversation. If you want to buy an investment, let’s have a conversation.