Interview: Art Finance Solutions in Wealth Management and Estate Planning
Apr 15, 2019
Drew Watson, Vice President, Art Services Specialist at U.S. Trust, Bank of America and course instructor of our Art Wealth Management Program shares the experience he gained from Christie’s, how collectors are making art part of their broader wealth strategy and how art loans can generate liquidity.
Tell us how your professional life first intersected at art and finance?
My first experience working at the intersection of art and finance was at Christie’s in New York. One of my responsibilities as a business manager for five different art sale departments was running a P&L and structuring consignment deal terms for live auction, private sales, and online sales. Auction houses employ a variety of deal structures to land consignments. These include enhanced hammers, guarantees, and auction advances, the latter effectively functioning as bridge loans to provide liquidity to the consignor leading up to a sale.
In your opinion, is art an investment asset? A financial asset? Both? Please explain.
Traditionally, collectors have acquired art primarily for aesthetic reasons. The aesthetic enjoyment is still the leading motivator for most collectors, but many are now also seeking a financial return. Our view is that art is a capital asset that can represent an important portion of a client’s balance sheet. Collectors are increasingly considering art as part of their broader wealth strategy by factoring it into their charitable giving, accessing capital by borrowing against their art, and using art to minimize estate taxes and capital gains taxes.
How can borrowing against their art collections be beneficial for art collectors and investors?
An art loan can allow collectors to unlock capital from an illiquid asset while still maintaining both ownership and possession of the art. We see many different strategic applications of art loans as a source of liquidity. Some recent drivers have been hedge fund and private equity principals unlocking capital from their collections as part of an arbitrage strategy. We have also seen developers using an art loan as a real estate development line, and business owners using an art loan as a working capital line for their business. An art loan can also generate liquidity needed to pay estate taxes, or even help accelerate an acquisition strategy to buy more art.
Find out more about Art Finance Solutions in Wealth Management and Estate Planning with Drew Watson. Enroll in our Art Wealth Management Program!> today!
For more information, contact U.S. Trust art services group at 646.855.1107, or visit ustrust.com/art. 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. Credit and collateral subject to approval. Terms and conditions apply. Programs, rates, terms and conditions subject to change without notice. U.S. Trust operates through Bank of America, N.A., and other subsidiaries of Bank of America Corporation. Bank of America, N.A. and U.S. Trust Company of Delaware (collectively the “Bank”) do not serve in a fiduciary capacity with respect to all products or services. Fiduciary standards or fiduciary duties do not apply, for example, when the Bank is offering or providing credit solutions, banking, custody or brokerage products/services or referrals to other affiliates of the Bank.
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