Buying Art - Passion or Investment?

Continuing along with yesterdays post on art as an investment, Reuter's recently had an article about how financial advisers are working with clients to invest in art, and to safeguard the investment with recommendations for appraisals and proper insurance coverage.  The article starts out how 10 years ago the process was more a passion process or purchase, now it mixes that passion with money, investment and returns.

Reuter's reports

Financial advisers should make sure their clients are getting their collections appraised often - (bold added for emphasis, ed)  typically once a year for pieces that make a large part of the investor's overall net worth and for contemporary pieces, which can fluctuate in value frequently. Everything else should get appraised roughly every five years or less, Bruins said.

If you think your client's net worth is weighted too heavily to art, talk to them about using their collection as collateral for a loan. That money can be reinvested in stocks or other assets. Traditional lenders, like Citi Private Bank, offer these kind of loans, as do auction houses such as Sotheby's.

And check your client's insurance protection.

If they are simply relying on their homeowner's policy, read it carefully to see what's covered. In some cases you can spend extra so that each piece of art is covered separately, said Irvin Schorsch, president of Pennsylvania Capital Management, a wealth adviser and long-time antiques collector.

For more valuable collections, the client can invest in policies designed specifically for art. For instance, Privilege Underwriters Reciprocal Exchange, a White Plains, New York-based insurer to the wealthy, has policies that not only cover the cost to repair a damaged piece, but also the change in market value the damage may have caused.

If nothing else, financial advisers should make it standard practice to ask clients if they own valuable art, jewelry, wine or other collectibles, said Martin Hartley, chief underwriting officer for Privilege.

Source: Reuters