CELEBRITIES such as Sir Elton John and Victoria Beckham are among a growing number of art investors basking in impressive returns as both Old Masters and contemporary works fetch record prices.
Art auction sales last year rose 15% and contemporary art prices are up 81% in the past decade, according to Artprice.com. Britain’s leading art investment advisers have also started making their services available to private-bank customers.
Alexander Hope, an Old Masters specialist at Christie’s, the auction house, said: “Demand for Old Masters is definitely strong at the moment — especially at the top end — and the prices being paid do not look unsustainable.”
One of the main factors boosting the market is increasing interest from wealthy investors, who like art because it usually follows a different pattern from equities and bonds — reducing the risk of all their investments failing at the same time.
Heather Maizels, a director at Barclays Private Bank, said: “Many of our clients are entrepreneurs who have sold their businesses and want to invest in art because it can be used both to decorate their homes and diversify their portfolios.”
A growing number of private banks are offering art advisory services to help their clients avoid dud pieces and decide when to sell works from their collections.
Swiss bank BSI, for example, has recently engaged the services of Fine Art Investment & Research (Fair), the London organisation that runs the Fine Art Fund, to advise its clients on art investments.
Philip Hoffman of Fair said: “We look at art from a financial, rather than a passionate perspective. The service we are providing to BSI’s clients includes providing background information on artists, including financial data, and advising people on when to buy and sell particular works of art.
“We will also check any potential purchases against the Art Loss Register, as stolen paintings sometimes re-emerge and are reclaimed by the former owner — leaving the buyer out of pocket.”
Hoffman said he could prove his service added value for art collectors, pointing to successes such as a painting he advised a client to buy for £325,000 selling for £490,000 a year later — despite £325,000 looking high when compared with the auction-house estimates at the time.
He said: “We take a very disciplined approach and provide clients with a full due-diligence report. It’s basically like employing a surveyor to make sure that there is nothing wrong with the structure of a property. And we have no qualms about advising a client not to buy a picture if we think it’s the wrong move.”
This view is backed up by others in the art world. James Mitchell of John Mitchell Fine Paintings, a London art dealer, said: “About 15 years ago Citibank was the only private bank offering art advisory services, but we come across them a lot now.
“I think services of this kind definitely add value for collectors because it is increasingly important for people to get independent advice before buying a piece. After all, it’s not in an auction house’s interests to tell you that a painting is a bad example of a particular artist’s work, even if that is so.”
Fair’s fees depend on the size of the deal it is advising on and the number of deals it is looking after for a client, but are generally about 2% of the purchase or sale price.
It is not the only art-advisory firm farming its services out to private banks, though. London-based Seymour Management, for example, recently began advising clients of Butterfield Private Bank.
Spencer Ewen, Seymour’s managing director, said: “We work closely with auction houses and art dealers, but we give collectors and other buyers a completely independent service. We can also offer expert advice on other tangible assets such as antiques, jewellery and fine wine.”
As with most art-advisory services, the fees charged vary depending on the value of the art, as well as the relationship Seymour has with the client.
Ewen said: “We charge about 10% of the purchase price on works worth between £10,000 and £100,000. On a £1m picture, however, we would obviously charge a lot less than 10% and the fees will also fall if we have a long-term relationship with a collector.”
Art aficionados can also opt for a private bank offering in-house art-advisory services.
Karl Schweizer, head of art banking at Swiss bank UBS, said: “Our art-banking division has been going for about eight years, so we have a tried and tested system.
“We think it is important for clients to take advice when buying art because it is easier for us to look at potential purchases objectively.”
When advising a client UBS looks at a number of factors, including how comparable pieces have fared at recent auctions, how good the piece is compared with other work by the same artist, what sort of condition it is in and the strength of the market for that type of piece.
Again, the fees vary. Schweizer said: “We charge €300 (£206) to €500 to advise on a purchase, depending on the level of the adviser involved. Bigger purchases involving substantial works are generally overseen by senior advisers.”
Not all private banks advise their clients on art, however. Coutts, the Queen’s bank and part of Royal Bank of Scotland, does not offer a service of this kind because it does not think clients should be investing in art for financial gain.
Peregrine Banbury at Coutts said: “The only advice we give in relation to purchasing art is that clients should always buy something they really enjoy, without the expectation of making money from it.
“Essentially, art should not be viewed as an investment — you don’t get any dividend yield and changing fashions make it near-impossible to judge what will be worth more money over a given period.”
However, Ewen argues that private banking and art collecting go hand in hand, and that art-advisory services can also source pictures for those who invest for pleasure rather than investment purposes — and ensure they don’t pay over the odds.
He said: “I have no doubt that there is a lot of demand for art advice within private banks. It’s not all about investment, though.
“We have a pretty much constant dialogue with keen collectors and would definitely let them know if there is a work coming up for sale that we think they would like.”
Art lovers who are not private-bank clients can still take advantage of art-advisory services, although not through the banks.
Both Fair and Seymour offer separate services for wealthy clients who come directly to them. And you don’t need millions to become an art investor — even if you prefer Old Masters to contemporary art.
Hope said: “Not all Old Masters cost millions of pounds. Some go for as little as £1,000.”
You could also take advantage of Own Art, an interest-free loan scheme for buyers of contemporary art up to the value of £2,000. Visit artscouncil.org.uk/ownart for more details.
However, for clients who want to buy art as an investment, Ewen recommends spreading the risk by joining an art club, rather than buying pieces individually.
He said: “We advise those looking at art purely as an investment to consider joining an art club, which buys art as a consortium and takes opportunities to sell pieces on at a profit.”
Visit seymourmanagement. co.uk or call 020 7493 2662 for more information on investing this way.
