After seeing what are the threats in the art market (Art & Finance 2016. The threats in the art market) and how technology can resolve some issues related to the sector (Art & Finance 2016. The technology will save Art), in this last article on the Art&Finance Report 2016 published by Deloitte we will see how art is now considered to all effects a financial asset to integrate and evaluate in a wider wealth management.
Majority of wealth managers believe that art and collectibles should be part of a wealth management offering: the recent art and finance survey of wealth managers shows that 78% (up from 55% in 2014) say they think art and collectibles should be included as part of the wealth management offering. This is the first time in five years of monitoring the art and finance industry that we see an alignment of the wealth management industry with collectors and art professionals.
In fact an increasing number of wealth managers (48%) recognize that their clients are putting pressure on them to offer art-related services (up from 38% in 2014), especially those linked to the preservation of the capital allocated to art and collectible assets.
72% of art collectors bought art for passion with an investment view. 82% of art professionals said that this was also the main reason why their clients buy art. The emotional benefit of collecting, combined with the potential of a value increase and/or store of value, i.e., value protection, is the driving motivation among most art collectors
in the art market. This is an important point to have in mind when designing and implementing art-related services for private banks and wealth managers.
Furthermore, investment value is an increasingly important motivation among art collectors: they appear to be increasingly focused on investment returns, rising from 47% of art collectors saying this was an important motivation in 2014 to 64% in 2016. 44% of art professionals believe their clients are motivated by investment returns when buying art (down from 59% in 2014), which could signal that collectors are more motivated by the potential investment return than art professionals believe is the case. However, art professionals and collectors do agree on the portfolio diversification benefits that art could offer, with 51% of art collectors seeing this as an important aspect of buying art (up from 37% in 2014). Equally, 47%of art professionals believe their clients are motivated by asset diversification.
So wealth managers are realizing the importance of art and collectibles as part of a wealth management offering, but are not yet aligned with their clients’ expectations: wealth managers predominantly focus on traditional wealth management services, while art collectors are looking to their wealth managers for concrete art-related services, such as art valuation and art collection management. This suggests that collectors see their wealth managers also as their trusted independent advisors for their art-related activities.
73% of wealth managers in 2016 (up from 58% in 2014) said that their clients wanted to include art and other collectible assets in their wealth reports in order to have a consolidated view of their wealth. The ability to report on art and collectible assets is an effective way of providing value-added services to clients and to keep them aware of the financial aspects of their art collection.
Regarding the investment funds in the art sector, the wealth managers opinions are rather negative: only 10% of wealth managers— the lowest level reported since the launch of the Art&Finance Report in 2011—believe the art investment fund industry will expand in the next two to three years (down from 20 percent in 2014). This shows that wealth managers remain very cautious about the art investment fund initiatives in today’s market.
However, more than a third of collectors would be interested in art investment funds: this is the highest reading since the launch of the Report in 2011 and it clearly indicates collectors’ increasing interest in the possibility of having financial exposure to art through an investment vehicle.
Lack of regulation in the art market remains a hurdle for the art and finance industry: 62% of wealth managers said that the unregulated nature of the art and collectibles market remains the biggest challenge for incorporating art in their service offering. However, this was down from 83% in 2014, which suggests that although it is still a major hurdle, increasing awareness and understanding of the art market have eased the level of concern.
In conclusion, public cultural institutions can monetize their knowledge, expertise, and skills by supporting and educating wealth managers in their provision of art wealth management services. A recent example of such a collaboration is the Van Gogh Museum’s collaboration with Deloitte Luxembourg (Advisory Partner) and TIAS School for Business and Society, the Netherlands/China (Academic Partner). Thanks to this collaboration, the Van Gogh Museum can deliver both creative solutions and financial services to individuals and institutions at the crossroads of business, finance, and the arts.
MyTemplArt® Communication Manager
Source: Art&Finance Report 2016 by Deloitte in collaboration with Art Tactic
Copertina: Art&Finance Report 2016, Cover Image.
This post is also available in: Italian