By Matt Wilcox
Tangible assets in the form of collections of fine art, antiques, rare books, watches, or wine, make up a significant part of the wealth of 94% of families with a net-worth of $10 million and up. Such assets, if they are even known to a client’s financial advisors, cannot be managed in the same way as more liquid, traditional investments, nor do owners typically want them to be. Emotionally attached to their collections, the end-game for owners may be a collecting legacy for their children, a major donation to a museum, or an envisioned single-owner sale at auction. Such passionate collecting and investing often promotes a self-management approach among owners, who may not realize how their goals may be even better served by complementing their efforts with input from the right outside resources.
A collection should be:
- Appraised periodically by unbiased professionals
- Authenticated by the recognized experts
- financially recorded and reported for any relevant tax events
- Insured properly against loss, damage or theft
Failing to exercise these best practices can have major negative repercussions. Without proper planning, critical information about the objects in a collection, and the wishes of the owner can go with the collector to the grave.
Before that eventuality, collections, like any other asset, need to be managed actively. Collectors are often shocked to learn that the museum, to which they wish to donate, may only want one or two items, or will only accept the collection as an asset to be sold to raise capital. A donor who desires to maintain the integrity of his collection should investigate which institution would best honor his wishes, and plan the gift together.
A donor who desires to maintain the integrity of his collection should investigate which institution would best honor his wishes, and plan the gift together.
Similarly, heirs to a collection, due to differences in taste, logistics, or lifestyle may not want, or be prepared to take on, the custodial duties that their families’ collections demand. For both museums and heirs, often the problem is simple volume; museums tend to make room for only the most superlative pieces within their mission scope, and adult children have only so much space in their homes.
Learning if a collector’s goal is feasible as the collection stands should impact any ongoing acquisition practices and disposition strategies. The passion that began the collection may need to be tempered with practicality. Inherited minor pieces or early acquisitions, made when money was tight, might hold the most emotional value to the collector, but in the colder view of museums, heirs and auction houses, fail to impress. For any long-time, serious collector routine culling of lesser items to focus on the better ones is always a good practice. The following factors impact the quality of a collection.
Problems with the physical state of an object are often tolerated and even disregarded by the emotional collector, but the less tolerant market place, museum and art world see condition as a critical factor in the desirability of an object. Both poor condition and poor restoration can negatively impact value, so auction house professionals and experts should be consulted to determine what action if any should be taken regarding the state of an object.
The history of an object, its past ownership, exhibition and travels can have a major impact on value. Many objects simply do not have a known past, so those with documented provenance are more desirable. Moreover, in today’s art market with billions of dollars in trade of stolen and forged items, a solid, documented item is always a wise investment over a similar one without known provenance. If an object was once owned by a celebrated historical figure, it may enter the so-called “glamour market,” where values can be significantly higher.
Rarity can be a complex factor. The market favors the expected. A Picasso in the cubist style is the commodity most desired. A portrait by Picasso executed in a traditional academic style, although rare, would not fetch as much. Alternatively, the few surviving Honus Wagner baseball cards appeal expressly because of their rarity. The one-of-a-kind object, the most rare by definition, can often confound experts and collectors due to a lack of diagnostic comparables. Objects that are rare, but known, would be a wise collector’s goal.
Not every work produced by a master artist is a masterpiece. Workmanship, excellence in design, composition, color, subject matter, etc. can impact quality. In today’s market, across all collecting fields, top quality is the surest factor in sustained desirability and value. All of the other factors discussed above: condition, provenance and rarity are impact quality from an investment point of view. The best items out there tend to exhibit excellence in all areas.
A professional, qualified ppraiser will offer necessary insight and guidance to all of your collection questions, whether you’ve just started your collecting journey or you’re ready to part with it. See what Freeman’s team of trustworthy professionals can do for you today.