The Importance of Market, Technical and Transactional Expertise in the Purchase of Art as an Investment

The purchase of an art work and the creation of a collection should be considered as a medium-to-long-term form of asset diversification. The international art market demand for prime works shows that prices continue to rise steadily. Increasing numbers of new buyers are competing with museums and art foundations for a finite market of museum-quality works.

It is therefore of utmost importance that buyers choose an experienced art advisor who is free from commercial biais and who will accompany them on visits to galleries, auction houses and art fairs.

The art advisor will have accumulated market expertise to source works that reflect the buyer’s taste via a profound analysis of the works quality, current market price, reference and position within art history. Her technical expertise will then be used to perform due diligence with respect to the confirmation of value, authenticity and condition. Finally, her transactional expertise will then be used to negotiate and secure the purchase reflecting relevant tax issues, insurance and shipping requirements.

Post-transaction expertise of major pieces often includes collection management, for example, lending the work to exhibitions to consolidate its provenance and thus increase its intrinsic investment value.

Recent case study

An Asian client who is a francophile bought a new home in Asia. He was looking for an important work by a 20th century Asian artist who lived and worked in France. He wanted a large piece and had a substantial budget. He was concerned by the number of fake works circulating in the market, both in Asia and in Europe.

The art advisor sourced three works that corresponded to the buyer’s criteria and performed due diligence (see below). The client made his choice and negotiations began. The transaction took 6 months and involved the art advisor acting as an intermediary between the private seller, the private buyer and restoration, legal and art transport professionals both in France and in Asia.

Authenticity and provenance research
The potential buyer was provided with a report detailing the aesthetic quality and historical significance of these work within the context of the artist’s production. This included verifying the attribution with recognised experts and then confirming provenance, exhibition history and bibliographical sources.

The art advisor assessed and established the current market value analysing recent auction and private sale results.

Technical analysis and condition reports
The art advisor worked with a national museum art restoration specialist to prepare condition reports to check for physical deterioration, fading, discolouration and previous restoration that would adjust the value of the work.

Specialised art packing, insurance and transportation
The art advisor collaborated with a leading fine art transporter to handle the details of export licenses, insurance, packing and delivery against payment using a fiduciary system to eliminate risk of non-payment.

Tax planning regulations
The art advisor liaised with the tax representatives of both the seller and buyer to structure a payment that was legal in both countries, discreet and tax-efficient.

Collection management
The new work is now a welcome addition to the Asian client’s collection and it is catalogued and filed with the necessary accompanying documents. The art advisor will monitor museum programming to ensure that the work will be shown in relevant exhibitions that will add to its provenance and thus increase its value.

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Helen Szaday von Gizycki

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