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2018 Insights on Wealth and Worth — Art Collectors

Putting wealth into action

Female Millennial admiring artwork in gallery

Today’s collectors are finding value in art that goes beyond aesthetics. The 2018 U.S. Trust Insights on Wealth and Worth® survey found that these financially driven collectors are increasingly incorporating art into their long-term wealth plans—and more actively buying, selling, gifting, lending and donating pieces from their collections. However, there is still opportunity for collectors to incorporate art into their overall financial strategy, since many collectors have not yet had meaningful conversations with an advisor about integrating art into their plans. 

Collectors Today

Figure 1 – Reasons For Collecting Art (Among current/interested art collectors): “Aesthetic values”: 62% all, 41% Millennials; “It’s an asset expected to increase in value over time”: 33% all, 31% Millennials; “Art appreciation is a family value”: 31% all, 34% Millennials; “Enjoy being part of the art world”: 20% all, 35% Millennials; “Safe haven in volatile markets”: 16% all, 32% Millennials; “It’s an asset that can be leveraged to build wealth”: 16% all, 33% Millennials.

The globalization of the art world has attracted a new breed of younger, more diverse collectors. While Baby Boomers and older generations still make up the majority (53%) of collectors, Millennials are the fastest-growing segment, with ownership among all Millennials rising to 36%, up 8% from last year.

Aesthetic value continues to be the primary reason for collecting across age groups (62% agree), but younger collectors tend to be more financially driven. In fact, a third of Millennial collectors see art as a key component to be leveraged to build greater wealth, which is twice as much as other collectors (33% compared to 16% of all collectors) (see Figure 1).

In addition to generational changes, the art world is also seeing gender shifts in its collector base. Whereas men have largely dominated the traditional art world, women are now a rising presence. Today, 1 in 3 high-net-worth women either owns or is interested in collecting art. Even though the majority of current collectors are men (64% men to 36% women), women are demonstrating a slightly higher interest than men in collecting.

Market Dynamics

Figure 2 – Plans to Buy and/or Sell Art This Year (Among art collectors): Those who plan to buy: 78% of all – 28 somewhat likely, 50% very likely; Millennials – 12% somewhat likely, 85% very likely; Gen X – 29% somewhat likely, 58% very likely; Boomers – 34% somewhat likely, 30% very likely. Those who plan to sell:  46% all – 18% somewhat likely, 28% very likely; Millennials – 24% somewhat likely, 61% very likely,

Survey results reveal an active market with expected increases in both acquisitions and sales.

In fact, more than three-quarters of art collectors anticipate making a purchase in the next year (78%), including nearly all (97%) of Millennial collectors, 87% of Gen X collectors and 64% of Baby Boomers (see Figure 2).

And while just 41% of Gen Xers and 24% of Boomers plan to sell this year, 85% of Millennials plan to sell their art in the next year—indicating that younger collectors tend to be more dynamic, selling works as they build their collections. This also suggests that the market may see increasing turnover going forward.

Additionally, the survey shows a rapid growth in online acquisitions. Over the past year, 43% more collectors bought art online compared to the year prior. And while about three-quarters (78%) of Millennial collectors have bought art online in the past year, compared to one-fourth of Baby Boomers—the biggest growth in online acquisitions was driven by women (16% in 2017 to 36% in 2018).

Charitable Strategies

Figure 3 – Actions Taken and Future Plans for Art (Among current art collectors): “Gift/pass art on to family members”: 37% past action, 50% future plans; “Donate art to a nonprofit that uses art as part of its mission”: 16% past action, 30% future plans; “Donate art to a nonprofit that doesn’t use art as part of its mission”: 20% past action, 21% future plans; “Loan art to an art gallery or museum: 26% past action, 29% future plans; “Borrow against existing art”: 23% past action, 20% future plans.

Today, collectors are also increasingly creating estate planning and legacy opportunities through gifting, lending and donating. In the next year, about half of all collectors plan to gift a work of art (46%) and nearly half intend to loan (46%). Furthermore, while 37% of collectors have gifted or passed art on to family members in the past, half (50%) plan to do so in the future (see Figure 3). Plans to gift or loan fine art generally follow the same patterns as buying and selling, with younger collectors citing the most active plans in this area.

Collectors may be considering these avenues for potential tax benefits and as part of a charitable giving strategy related to their collections. In fact, 30% of collectors plan to donate one or more pieces to nonprofit arts organizations, while 21% plan to donate to other nonprofits—transactions that would likely have tax implications. Overall, 19% of collectors are thinking strategically about how to reduce taxes, up from 12% last year.

Building Wealth

Figure 4 – Those Who Incorporate Art Into Their Wealth Management Strategy (Among all art collectors): In 2017, 29% do, 71% don’t; In 2018, 42% do, 58% don’t.

As the art market expands and prices rise, more collectors are incorporating tangible assets like art into their long-term wealth plans.

Historically, the vast majority of collectors have not considered art to be part of their wealth planning strategy, but today that is changing. Up from 29% a year ago, nearly half (42%) of all collectors, including 72% of Millennial collectors, now incorporate art into their wealth structuring and planning (see Figure 4).

This more financially driven collector base is also driving an expansion of art-secured lending. Today, more individuals are using their collections to unlock capital to redeploy into other areas of their financial life, like real estate, a private company or even to fund the purchase of more art. In fact, 23% of collectors have accessed capital by borrowing against existing art as collateral and another 20% say they have plans to do so. Similarly, 21% of collectors have used their art as collateral for a loan to acquire new art, up from 7% just a year ago.

Despite increasing recognition of art as a key component for building wealth, there is still a significant opportunity for collectors to consider it in their overall financial plan. Today, only 21% of current collectors and 18% of those interested in collecting are talking with a financial advisor about integrating art into their long-term wealth strategy.

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