Thoughts On Collecting Art – Forbes

The recent death of famed art collector Sheldon Solow has raised in my mind the more common question for estate planners about what to do with art in an estate. Once a person starts accumulating Art, their mind often turns to forming a Collection. Any estate planner for the collector should ask some hard questions. The fact is that Art of every description are sold each year as adding to a collection; unhappily, most of these collections fail in the long or short term to be financially or artistically successful and end up being broken up at the death of the Collector. If you are intent on creating a collection, here are a few thoughts on what to do, and not do, from an estate planner’s perspective.

           Since the great majority of collections are financed out of your own pocket, the high failure rate of collections to add financial or social value should be a sobering statistic for your family. It may be fortunate for the art economy as a whole that so few buyers are daunted by the decline in the financial value of art, but it is hard on the individuals who inherit the art to make it a lasting collection.

           Much of the popular material on Collecting is ebullient in its optimism. It can be hard to keep one’s head in the face of popular literature extolling the giant winners in the game— Saatchi, Guggenheim, Kravitz and their peers, creators of new collections, indeed new categories of Art, which dominate the market and return hundreds of times the initial investment. The giants are an integral part of the mystique of Art collecting, but a Kravitz comes along once in a lifetime.

           The odds against hitting big are astronomical. Accordingly, books which record the anecdotal history of how J.P. Morgan or Henry Frick put together their collections make fine reading, but the home-run expectations they promote can be dangerously intoxicating. A Collector faced with the “go, no go” decision—whether or not to invest his savings in a new collection—is fooling himself if he stacks the reward side of the equation with the possibility of making hundreds of millions of dollars. It sometimes happens, of course, and someone has to win the lottery, but the vision of those sugarplums is not a sound basis for an intelligent collecting decisions. To be sure, it remains realistic for many collectors to think of big rewards, perhaps even millions of dollars, albeit after a long period of enormously hard work and great risk. Nonetheless, it is important to understand that in the vast majority of the collections—indeed, for the majority—the returns on the founder’s investment (and that investment must be calculated to include opportunity costs) are modest. Many founders may be satisfied, but their heirs find that, at the end of the game, the Collection has either lost money.

There is a saying, attributed to Lord Palmerston, that many foolish wars have been started because political leaders read small maps. Many collections have been imprudently started because of the founder’s inability to understand how difficult it is to achieve a significant Collection. Some art investments have, in fact, outperformed the stock market in the postwar years and, in many cases, quite handsomely. There have been periods when 25 percent compounded rates of return have been available to the investors; indeed, substantially higher rates have been achieved by many contemporary art collectors, and over long periods of time. But it is an economic impossibility to compound any substantial sum of money at a 25-percent rate of return indefinitely. It is o0ften the estate planner’s job to point out that reading the success stories in the papers is all well and good, but you need to focus on is the hard work and risk involved in collecting .

           Having said all this, what is good advice for a collector who is making the threshold decision to take their art and make it into a successful Collection?  

           First  understand that is “stuff” and what is a collection. Stuff, even stuff of significant value and rarity, is mainly decorative. A collection is acquired based narrower personal criteria on qualities of the art, mainly based on the collector’s experience. Once you understand that just buying what you like is fine for stuff but not for collections you can build a collection, and to properly build a collection of art, you should buy 1) Art do you like, 2) Art that is reasonably priced, and 3) Art that experts consider “good” artwork. 

           Eventually, you may need to hire a curator for your collection. In some cases, this may be a graduate student as the part time curator for your collection. With a curator focuses on cataloging, and formatting, the collection to include the entire history of the  collection with a specific eye towards complementing the current collection at  a museum.   

           For most Collectors part of the ownership of art is a stewardship of the work, and that art should be on display. So, you should think about having an active loan program, and be active in having events where the artwork is on display. 

           Creating a successful collection is not about wealth, it is about  knowledge. Your experience of gained by many long years means that you can balance the various factors which determine price (condition, rarity, etc.) and earn the respect of the art dealers you work with. In events like an auction, go in person. Left bids will get gamed, and driven up as the amount is “bid in”. 

Conclusion

           As an estate planner, I know that not everyone who owns art is a Collector. Do not be tempted by the tale of easy riches and fame from the inheritance of storied Art Collection in the press. These returns are the result of hard work and time spent developing the Collection so that it “comes alive”. You will need to develop the  skills and experience of the Collector or hire a curator and other professionals who already have that experience, to be an able successor to the owner of the collection.

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