Even if your clients aren't "Keeping Up with the Kardashians" on reality TV, they probably have heard of the Paris robbery last October in which a $4 million 20-carat diamond ring and 12 other expensive jewelry items were taken at gunpoint from Kim Kardashian.
The theft attracted attention because of the media's fascination with anything Kardashian and because of the value of the jewelry. Missing in all the coverage, however, were two questions that remain unanswered: For how much was the jewelry insured and will the loss be covered?
Curiously, many financial advisors' affluent clients would be stumped if their jewelry were stolen or lost and they were asked the same questions. To be sure, most advisory clients don't share the same personal wealth as Kardashian, but with the increasing popularity of fine jewelry and the strong price appreciation of gold and precious gemstones over the past decade, many clients would suffer significant financial harm — not to mention emotional pain — if their jewelry were stolen or lost..)
"The financial cost is probably greater than they realize because few people insure their jewelry," said Janece White, a trusted colleague and jewelry expert who holds the Accredited Jewelry Professional (AJP) designation from the Gemological Institute of America (GIA) and serves as North American vice president of underwriting and jewelry specialist at Chubb Personal Risk Services. The skyrocketing value of fine jewelry was discussed in my November Investment Advisor column, "Fine Jewelry Appreciates in Value — and Risk."
Sizeable Jewelry Assets
White noted that today's gold and gemstone prices can easily result in an affluent couple having jewelry worth $100,000 or more and perhaps double what they paid — without them being aware of its current value or what would happen if their items were lost or stolen.
Despite jewelry's often significant, if not widely recognized, contribution to a client's total wealth, it is an asset class that many advisors often do not consider relevant. Yet these same advisors are missing an opportunity to provide added value and attract referrals by being a source of information and guidance about jewelry and adequate protection.
Here's some background: Although 95% of jewelry sold is for women, 40% of all jewelry purchases are made by men. Traditionally, big jewelry spenders have been urbanites, adults age 55-64 years old and high-income earners, according to Idex Magazine. Today, millennials are spending more on fine jewelry than any other age group — an estimated 28% more than the average household, often purchasing their items online, according to a 2015 report by Edahn Golan Diamond Research & Data.
Many purchases are being made. In 2015, global diamond jewelry demand reached $79 billion. The bridal market remains a centerpiece of the U.S. diamond jewelry business, accounting for 28% of total demand value in 2015, reported De Beers in The Diamond Insight Report last year. That's not surprising since the average diamond engagement ring costs about $6,000, according to The Knot's 2015 Jewelry and Engagement Study.
While homeowners' insurance policies typically cover jewelry, most provide coverage only if an item is stolen, not if it is lost or misplaced. Also, maximum coverage limits are common with most insurers' policies, so if a stolen item is worth more than it's covered for, it could not be replaced with something similar.
