Based on the findings of the 4th edition of the Art&Finance Report published by Deloitte last April, we analyse in three articles new and interesting developments in the art and nance industry, with particular emphasis on the role of art and collectibles in the broader wealth management context. We start by highlighting primarily art market threats and problems and then look for solutions and studing the trend.
The lack of transparency are undermining trust and credibility in the art market: there is a consensus on a number of common themes across different stakeholders (collectors, art professionals, lawyers, and wealth managers) when it comes to price manipulation, conflicts of interest, lack of transparency, and secret commissions. Nearly three out of four wealth managers, collectors, and art professionals share these views.
It’s clear there is strong awareness on what the problems are: previous studies and initiatives show that, in principle, art market operators agree on the need to take self- regulatory action. This highlights the problem of reaching a coherent and coordinated industry effort, without reducing the competitiveness vis-à-vis other art markets.
Another important point that emerged during the survey that influences the art market is the guarantee of the authenticity: around 75 percent of all stakeholders surveyed agree that authenticity, lack of provenance, forgery, and attribution are the biggest threats to credibility and trust in the art market. A number of new initiatives aim to solve the problem of fakes and forgeries, such as the i2M Standards launched by the Global Center of Innovation, a not-for-pro t institution previously known as the SUNY Center of Innovation. It is based at the State University of New York at Albany, in the US. The center brings together academics, and government and private sector shareholders from around the world to collaboratively establish de nitive, third-party, peer-reviewed industry standards and solutions for art identication and authentication. The technology could develop new standards and ways of addressing these market threats in the future. The cloud platform of cataloging and management of artworks MyTemplArt® developed two new solutions to support the certification and authentication processes of artworks: the process related to the validation of certification in a computerised way and the electronic safeguarding system for the Certificate of Authenticity in paper version by QR-Code (for more information read the article MyTemplArt® revolutionizes the authentication process of the artworks at MIA Photo Fair 2016 in Milan).
So is it necessary a government intervention, or simply self-regulation?
According to the survey of wealth managers, art professionals, and art collectors, the majority (two thirds) of opinions are in favor of self-regulation of the art market. However, a signicant minority (36%) of wealth managers call for more government regulation of this market. Many art markets already have a rich history of self-regulating organizations in the form of trade associations. In the UK, there are three major bodies (LAPADA, BADA, SLAD), all of which hold their members to account via Codes of Practice/Conduct/Ethics. In France, the Comité Professionnel de Galeries d’Art recently announced that it would launch an updated and revised code of practice, which suggests that the global art industry is already responding to the need to reinforce self-regulation.
Art market transactions increasingly involve due diligence and written agreements as the value of art increases, so does the expectation of fair play.
Therefore, we are moving from informal agreements to a more clear and regular art market.
The lack of appropriate legislation is also evident in the almost total absence of quali cation standards for art market professionals. One way to improve the current situation is to invest in educating art market professionals on behavior that is illegal, and making it a requirement that they should inform themselves on the law.
But it’s important to underline often the laws are there but it is necessary that governments invest more resources to facilitate its implementation and cooperation between countries to an adequate safeguarding of art heritage.
Improving law enforcement instead of adding more layers of regulation: litigation is hugely expensive and inconvenient for private individuals and businesses alike. An example of how to improve the current situation would be for governments to invest more resources to facilitate the enforcement of existing laws rather than invest in adding more layers of regulation. The regulatory landscape is changing as laws have been established or amended in several countries imposing anti-money laundering requirements on art dealers: stakeholders in the art market can learn from regulated nancial institutions and gradually implement essential measures to identify ultimate bene cial owners, understand customers (“know your client”), and monitor deal transactions. These measures will ultimately reduce the risk of abuse of the art market by money launderers and lower the risk of civil nes, criminal charges, and reputational damage to stakeholders.
MyTemplArt® Communication Manager
Source: Art&Finance Report 2016 by Deloitte in collaboration with Art Tactic
Copertina: ©SUMO. Art&Finance Report 2016, p.52.
This post is also available in: Italian