Over the past several years, high net worth individuals have increasingly been viewing collecting art as an investment, rather than simply a passion. With several contemporary artworks commanding never-before-seen prices at auction, it would seem to an outsider that investing in art is a no-brainer. But just like a conceptual work of art, there is much more than meets the eye when it comes to investing in art.
ArtBinder was invited to this year’s Deloitte Art and Finance conference at The Armory Show by Tom Sapienza, Executive Director of ARCIS, the new standard in art & collection care. At the conference, the investment value of art was hotly debated. along with the central question of: can art be considered an asset class?
The conference was led by the Deloitte Art & Finance group, which was developed to guide private wealth fund managers on how to advise art collectors to maintain their art collections efficiently in accordance with existing taxation laws, import and export regulations and other logistical concerns. The department was created in 2008 after the Luxembourg government worked with Deloitte to open an international Freeport for storing luxury goods such as fine art in a VAT-free facility. Originally established in the Luxembourg office, many of Deloitte’s offices around the world have since adopted the concept and formed their own departments of art business advisors, highlighting the growing need for these types of services.
After discussing the evolution of fine art in the private banking and wealth management worlds, two advisors from Citi Private Bank began a conversation on art lending cases. Suzanne Gyorgy and Adam von Poblitz explained that there are a growing number of individuals who report art as making up over 50% of their net worth. Although a wealth manager would likely believe these to be low net worth individuals, they are in fact multi-millionaires and billionaires.
For non-American collectors, they highlighted the need to be aware of American estate taxes, especially if US property is owned. When it comes to estate planning, the same preparations one would normally apply to property should be applied to art, unless it is held in another structure.
In our next post we will take a closer look at investing in fine art. Stay tuned!