Entering the fine art market can be a wonderful compliment to anyone’s investment portfolio and high-net worth. But, it can also be a fair-weathered investment, fickle and subject to the ebb and flow of world financial markets.
Understanding what you’re buying, it’s value and viability to retain that value can’t be overlooked. Additionally, your pocketbook can take a hit after the purchase if you’re not careful.
Why? You’ve got to know what you’re doing.
Appraisal and taxes
Two institutions are widely considered the leaders of assessing the fine arts marketplace around the world, though there is debate which is the premiere authority by art-world enthusiasts. The European Fine Art Foundation (TEFAF), a revolving-location art fair headquartered in Holland, issues a report annually, as does the global art fair Art Basel, begun in Basel, Switzerland, one of the three locations the organization hosts its arts gathering every year, along with Miami and Hong Kong.
The global fine art market rose significantly following the end of the Great Recession, peaking at $68.2 billion in sales in 2014, according to TEFAF. Sales and marketplace value can be two different things in any given year, so having an accurate value appraisal of your piece or collection is important.
Maintaining appraisal records is your responsibility and will keep you from landing in hot water with the IRS, who will assess a fair market value on the piece in question at the end of the tax season. There are many lessons to be learned as a collector and understanding taxation on your pieces is one of them.
Trends
This is a big one where collectors, especially those new to contemporary art, can make mistakes. Any art show with a high degree of publicity can tend to inflate the value of a particular piece or collection, and with a trendy new artist, that point is punctuated moreso.
However, don’t get caught up with the Joneses. Be smart and look at the big picture. Celebrity or popularity in art pieces, not to be confused with Pop Art genre of the 1960s, can dramatically bloat the sale price of a piece, which doesn’t translate to value retention. But if you like a piece then you like it; such is the saying, “Art is in the eye of the beholder.”
It’s very fashionable to have a works considered in vogue, but be wise if you want pieces to have an investment quality to them.
Another issue to watch for are limited edition runs of prints. This is really up to you, but buying limited edition prints as a form of investment should be considered cautiously.
Nothing beats an original work of art and anything that is a copy, even with a signature, well, is just a copy.
Proper documentation
Every piece you acquire must come with authentication paperwork and billing receipts. Its history needs to be traced.
Many attorneys and experts see the problem of forgeries time and time again, so it cannot be overemphasized — buyer beware.
Never purchase a piece that is not certified, which comes at the consensus of more than one expert, credible art gallery or auction house.
Another reason for keeping proper records and having the piece’s record history is to prevent being held liable for purchasing a stolen piece. Think of it in terms of forensics: With billions of dollars changing hands every year, fine art is a commodity. As such, it is subject to the same scams, thieves and heists that money, jewels and other luxury items are, so protect your pieces by having them authenticated if they are already and make sure to have a purchase history, certification and any appropriate documentation coming with certain mediums of fine art.
Paul Mascard 