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The new edition of Deloitte’s biennial Art & Finance report, now in its eighth edition, presents a very different profile of the industry compared to 2008, the year the initiative was launched following a bad year for financial markets but sparking a new interpretation of art as an alternative asset for investment. The industry has certainly changed since the first report was published in 2011. To understand these changes, we need to start with an objective number, namely the wealth of ultra-high net worth individuals (UHNWIs) associated with art and collecting, which is expected to reach $2,174 trillion by 2022. The Art & Finance report, produced by Deloitte in partnership with ArtTactic, predicts that this figure could grow to $2,861 trillion by 2026, due to the increase in the number of UHNWIs worldwide and the increase in their wealth allocation to art and collecting.
Deloitte survey
As luxury goods become part of the art and finance landscape, the industry will manage a larger share of wealth. A global situation of increasing geopolitical and economic uncertainty is driving this direction. It is this global economic pressure caused by a surge in inflation in 2022 that is likely to increase investor interest in art, both as an investment and as a consumer product. In general, art is a better hedge against inflation than traditional asset classes, whose valuations are largely based on expected future cash flows and the time value of money. These considerations about art and collectibles were derived from a Deloitte survey of 435 subjects (388 of whom were in 2021), such as private banks, family offices, art professionals and collectors from around the world, as well as large investment companies such as Morgan Stanley, JPMorgan Chase, Goldman Sachs, Citi and Royal Bank of Canada.
Art and Wealth Management
If in the past financial interlocutors sought to understand the interest of art in the provision of wealth management services, today there is no longer any doubt: 89% of survey participants recognize that art should be included in asset management services, “a level that has never been reached in the past 12 years”, emphasizes Adriano Picinati di Torcello, Director at Deloitte Luxembourg and Global Deloitte Art and Finance Coordinator. This is an increase of 24 percentage points compared to 2011 (65%), driven by clients’ desire for new products and services, the push for holistic wealth management products, technological and regulatory developments and an increased interest in the financial attributes of art and luxury collectibles, including watches, jewellery, luggage and vintage objects. But be careful, if asset managers find themselves managing assets and the transfer of assets, they must understand generational needs and interests. It is essential to listen to the next generation of collectors (aged 35 or younger), who will shape the future of the art and estate management industry, and to jointly develop long-term plans that include art and estate planning. A greater focus on the purchase and preservation of documents is still a manual activity for the majority of collectors surveyed (74%), with only 24% having a long-term plan for their collection.
Financial Motivations for Purchasing Art
If art (and now even luxury goods) are included in asset management service offerings year on year, the economic motivations for buying art become increasingly important. For 60% of collectors, sentimental value remains the main factor, but for the first time, the report finds that economic reasons come in second (41%), pushing social value to third (36%). Younger collectors in particular appear to be more driven by economic reasons for their ownership of art, with 83% saying that investment returns are a key driver (up from 50% in 2021). 61% of respondents said that portfolio diversification is important (up from 51% in the previous report), and about half (51%) said they see art as a “safe haven” in uncertain times (up from 34% in 2021).
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