Wealth And Worth - Spotlight On Art Collecting
The 2017 U.S. Trust Insights on Wealth & Worth® survey asked high-net-worth individuals about building a collection, inheriting art, and integrating art into a wealth strategy. The study reveals missed opportunities to realize the full value of an art collection.
THE COLLECTORS
Art holds a place of great value among many high-net-worth families, and is likely to play a key role in intergenerational wealth transfer over the coming decades as Baby Boomers pass on approximately $30 trillion in assets to their heirs.1 This looming “great wealth transfer” can play a part in inspiring family conversations about passing down and receiving art as an inheritance.
Art is appreciated across the spectrum of high-net-worth individuals; almost one in five overall is a collector and another 16% are interested in collecting. Yet there are notable demographic distinctions. Women, Millennials, and Gen X-ers are all more likely to currently be collectors than men and older generations. Millennials show the greatest interest in becoming collectors, at 43% compared to 26% for Gen X.
Wealthy Millennials have a variety of reasons for collecting art, but they are the most likely to say that they enjoy being a part of the art world and artist community (38%, as compared to 28% of Gen X and 7% of Boomers). Thirty percent of Millennials also believe that art can be a safe haven amid volatile markets – this compares to just 17% of Gen X individuals and 7% of Boomers.
THE INHERITORS
Many high-net-worth individuals plan to pass down their art to heirs, but there is a marked generational disparity among those who are expecting to inherit art.
Millennials are most likely to have inherited their art (32%) and to expect to receive art as an inheritance (23%). This compares to just 8% of Gen X and 2% of Boomers who expect to receive art as an inheritance. Overall, only 19% of high-net-worth collectors inherited their art. Women are also twice as likely as men to be inheritors of art (27% compared to 11%).
Eight in 10 collectors plan to pass down their art to family, and two-thirds of them have had conversations on the responsibilities of caring for art. However, only 40% of inheritors or those who expect to inherit have discussed their lack of interest in art with family members. This may point to a need for more-detailed discussions on art inheritance, allowing families to ensure their heirs are both willing and prepared to manage a family collection. If not, alternative legacy plans may be crafted.
BUILDING WEALTH
Seventy-one percent of high-net-worth collectors are not integrating art into their broader wealth strategy. This is in line with the fact that 69% note their primary interest for collecting art is for its aesthetic value.
That said, those who inherited rather than created their collections are much more likely to consider art as part of their wealth strategy (63%, compared to 16%). Millennials are also the most likely of any generation to consider art an asset that can be leveraged to build wealth (25%, compared to 22% for Gen X and just 6% of Boomers).
Collectors are considering art as part of their wealth planning by factoring it into charitable giving (18%), accessing capital by borrowing against their art (12%), and using art to minimize estate taxes (12%) or capital gains taxes (11%).
Critical family discussions on the tax implications of inheriting or passing on art are often not happening: just 27% of art collectors have held these discussions. Inheritors, or those who plan to inherit, have had these conversations in larger numbers (55%), but only 24% of those who plan to pass down art have had these talks
ACCESSING LIQUIDITY
High-net-worth collectors often may not realize that they can leverage their art as a wealth-strategy tool – including accessing liquidity for more art purchases or other opportunities.
The art-lending market stands at $15 billion to $19 billion (value of average of loans outstanding). More men than women (8% to 1%) plan to borrow against their collection in the near term (within the next two years).
While individuals often may not realize they can leverage their art, the incidence of using art as collateral is increasing: in 2016, 7% of collectors said they owned art in order to leverage the assets as collateral. In 2017, 12% of collectors say they borrow against their art.
A larger percentage of men than women (41% to 17%) also anticipate purchasing one or more art pieces over the next two years.
Notably, collectors who have a professional advisor are more likely than those without an advisor to finance art with a bank-structured loan, and to strategically leverage, lend, or gift their art.
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[Voiceover] Art.Is it more about the artist’s intent or the viewer’s interpretation? Why do people perceive the same piece differently? While art raises many questions, not everything is so abstract.
The 2017 Wealth and Worth survey asked high-net-worth individuals and families their views
on art collecting. And the results may help shine a light on a powerful asset.
Collecting art is a passion among high-net- worth families.
And while most started their own collection…
They do plan on leaving it to future generations.
and they are twice as likely to leave it to their female heirs.
However, if passing down art is the norm… discussing it with family is not as common.
Such discussions could help collectors determine the future of their collection.
While different generations have different reasons for collecting art, for most collectors, the greatest value is simply the enjoyment of it.
Younger generations have an added incentive.
Millennials are especially driven by the experience of being a part of the art world.
They’re also more attuned to the financial implications of collecting, using it as an alternative strategy to grow and protect wealth.
In terms of building a collection, personal savings is still the most common source of funding.
But a growing number of collectors arealso unlocking the value of their collection by borrowing against it to acquire new art or for other investment opportunities.
As the way collectors value art is changing, so is how they are integrating it into their wealth strategy, and using it to build a legacy.
For more information about this year’s survey, please visit our Detailed Findings Report at ustrust.com/survey.
[Disclosures: On screen only; not part of voiceover]
IMPORTANT INFORMATION
Opinions and findings expressed herein reflect those of the 2017 U.S. Trust Insights on Wealth and Worth® survey, and may differ from those of U.S. Trust and Bank of America Corporation and its affiliates. The information presented in this video is for discussion purposes only and is not intended to serve as a recommendation or solicitation for the purchase or sale of any type of security.
This video does not constitute investment advice and is issued without regard to specific investment objectives or the financial situation of any particular recipient.
SURVEY METHODOLOGY
The 2017 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 808 high-net-worth and ultra-high-net-worth adults with
at least $3 million in investable assets, not including the value of their primary residence. Respondents were divided among those who have between $3 million and $5 million, $5 million and $10 million, and $10 million or more in investable assets. The survey was conducted online by the independent research firm Phoenix Marketing International in January and February of 2017. Asset information was self-reported by the respondent.
Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95% confidence level.
Nonfinancial assets, such as fine art, are complex in nature and involve risks including total loss of value. Special risk considerations include complex tax considerations, and lack of liquidity.
Nonfinancial assets are not suitable for all investors. Always consult with your independent attorney, tax advisor,investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy.
U.S. Trust operates through Bank of America, N.A., and other subsidiaries of Bank of America Corporation. Bank of America, N.A., Member FDIC.
Media Contacts
1Accenture, The “Greater” Wealth Transfer: Capitalizing on the Intergenerational Shift in Wealth, 2015.
2Deloitte Art & Finance Report 2016.
ustrust.com
Neither U.S. Trust nor any of its affiliates or advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.
Study Methodology The 2017 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 808 high-net-worth and ultra-high-net-worth adults with at least $3 million in investable assets, not including the value of their primary residence. Respondents were divided among those who have between $3 million and $5 million, $5 million and $10 million, and $10 million or more in investable assets. The survey was conducted online by the independent research firm Phoenix Marketing International in January and February of 2017. Asset information was self-reported by the respondent. Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95% confidence level.
