Art Advice Now Offered by Banks
Private banks are following the money, and are offering more help to clients who hold - or want to hold - a chunk of their assets in art and other collectables.
A number of investment banks have long-standing art collections, but for many years the help given to private banking clients was limited to tax advice and expert referrals. The lone exception was Citigroup, which has offered a comprehensive art advisory service to its private bank clients for more than 20 years. In the past few years, however, the private banking arms of JP Morgan Chase, Deutsche Bank and UBS have all spiced up their offerings. The emphasis is on art and antiques, rather than other collectables such as wine.
The main reason for the increased advisory activity is the sheer increase in the number of people with private fortunes over the past few years, combined with a sharp rise of public awareness of the arts. This has created a pool of people with an interest in collecting art who now had the means to do so, but with no prior experience of a tricky market.
Mike Holden, head of wealth management for JP Morgan Private Bank in New York, says. "Our job is to protect, manage and grow our client's wealth. If part of their wealth is held in art, we are happy to engage in that area and give advice. If it is not properly managed, it can have a detrimental effect on the client."
Alistair Hicks, art adviser for Deutsche Bank in London, says: "When we started our art advisory service here three years ago, not much was happening. But there is definitely a new interest. The increased activity of private banks reflects increased interest in art across the board. There is a realisation that the overlap between the art world and private banking is large."
An extra art service may also be a way of attracting ultra-high net worth clients. The number of people who use such a service is quite small but generally very rich and it may be a plus when they come to pick a private bank. However, it is very hard to quantify what the business is worth and only a limited number of private banks will ever be in a position to offer the service, as it calls for a heavy investment in specialist knowledge.
The banks are universally cautious about using the term "investment" for art and antiques collecting because, although it can be successful, there are no guarantees that a purchase will increase in value in the short run. They all take pains to describe the advisory role in terms of a service to clients who are pursuing a personal passion.
Francesca Guglielmino, business head of Citigroup's art advisory service based in New York, sums up this view: "Art can represent a good investment when it is acquired with knowledge and discernment. But we do not recommend investing in art in the same way as other asset classes. If an investor is looking simply for return, there are many other asset classes with higher and more guaranteed returns. An art collector should buy what he or she finds fascinating, moving or beautiful."
Having said that, it is precisely the role of an art advisory service to point to the factors that can affect the long-term value of an art purchase. These include price, quality, authenticity, condition, rarity, provenance, publication history and market trends. "The deeper these pools of knowledge, the more one can buck trends and find great opportunities," says Guglielmino.
Unlike the traditional auction houses, the banks do not act as the principal in a transaction and do not take commission, so both groups continue to need each other. The banks generally underline the fact that this frees them from any possible conflicts of interest and guarantees the independence of their advice. …