Whether clients desire art for its esthetic value, because peers collect as well, or as an asset class, investing in art is a part of managing wealth that takes special expertise. Universities do it. Pension funds sometimes do it. And your wealthy clients may do it often. Invest in art, that is.
Because of the unique nature of every piece of art, and the volatile and emotional connection that many collectors have with their pieces, art is really not a typical investment. Nobody would normally bid up a stock or bond because of an emotional attachment or longing to possess a particular share or bond. Yet, one hears about it often in the art world. Because of this, art can be extremely difficult to put a value on. And placing a value on the art clients possess is essential to protecting it, to understanding where it fits into a client's asset mix and what needs to be done to maintain its value.
At Schwab Impact, Dreweatts Deputy Chairman Clive Stewart-Lockhart (left) enriched a rapt audience with his views on how to buy, sell, value and protect the art that means so much to clients. Dreweatts is a U.K-based Fine Arts Auction house.
Two Picassos, Miles Apart
Stewart-Lockhart opened with two of Picassos paintings. One was a 1965 portrait of his wife, Jacqueline Roque, "Woman With The Large Hat, Bust." The other was a painting of his mistress, Marie-Thérèse Walter, called "Nude, Green Leaves, And Bust." When they were sold, one day apart, "which one was worth more?" Stewart-Lockhart asked the crowd.
While the painting of Picasso's wife sold for "$9 million," he says, the painting of Marie-Thérèse Walter was auctioned for "$106 million." Why the $97 million difference? Picasso's mistress was a "great sitter," the painting had "provenance," it had belonged for years to Picasso's agent, so it had been "absent" from the art market for a long time, says Stewart-Lockhart. In addition, he said, it had been the beneficiary of "great marketing by auctioneers.'
'What Is It Worth?'
There are really three kinds of valuations placed on art, according to Stewart-Lockhart:
- "Retail replacement value—what you would insure it for (three times auction value)"
- "Fair market value—willing buyer and seller"
- "Marketable cash value"
It's important to appraise the art for insurance, taxes, collateral and division of assets in an estate or divorce, Stewart-Lockhart explains.
'Sir George' Is Divorcing, Again
As an auctioneer, Stewart-Lockhart is used to being in front of a crowd and is very entertaining. He tells the story of "an habitual divorcee, Sir George." One day, Sir George called Stewart-Lockhart, at 10 am, in need of "a particular sum, and help to identify an asset to dispose of." Sir George had, says Stewart-Lockhart, "a need for speed."
Stewart-Lockhart called a friend in the business, who arrived at Sir George's house by noon. They agreed on an "asset," and a price, and the money was in Sir George's account "by 1 pm. That's incredibly swift," notes Stewart-Lockhart. Indeed.
