For love not money
Wealthy investors have many reasons for building collections of art, antiques, automobiles and more. Profit is rarely one of them.
In this issue of UBS Investor Watch, we found that a quarter of wealthy investors are collectors. They spend significant time and money building their collections, driven by a deep passion for their subject.
Though motivated by passion, most collectors consider their collections to be valuable, estimating them at 10% or more of their net worth. Despite this, many collectors fail to treat their collections as a meaningful investment. For example, 51% of collectors have never sought an appraisal, and almost half have no insurance on their collection.
Overwhelmingly, collectors prefer to pass on their valuables to heirs rather than sell them. Yet few have educated their heirs on how to manage, appraise or sell the collection. Moreover, heirs are rarely enthusiastic about inheriting collectibles, though duty and guilt lead many to hold onto them.
Overall, just 35% of investors who inherited a collection had an interest in it. Objects, it seems, are easier to transfer than passion.
Many wealthy investors are committed to collecting…
Approximately 25% of wealthy investors consider themselves to be “collectors.” The majority has spent more than 20 years cultivating their hobby and consider their collections to be extensive.
Most collectors view their valuables as part of their total wealth. Collectors estimate their collections represent 10% or more of their total wealth on average.
Collectibles represent approximately 10% of collectors’ wealth
...and they are driven by passion, not profit
Few collectors are motivated by profit. Instead, they are driven to collect by passion for their hobby. In fact, 62% of collectors have never sold an object in their collection, generally because they have such strong emotional ties to it.
Passion is the primary reason for collecting
Collectors willingly let their emotions dictate their decisions...
While pursuing their passion can be very fulfilling, many collectors believe they occasionally go overboard. Nearly half admit they have overpaid for specific objects, and many have bought or sold pieces they later regretted. If money is needed for an emergency, four out of five collectors would sell assets in their portfolio instead of parting with a piece from their collection.
Collectors would rather disrupt their portfolio than their collection
Passion may be clouding judgment
…and they are often unaware of their collection’s true worth
Though collectors spend their lives building a collection, they often lose sight of its true value. Many can’t estimate what their collection is worth—and half have never had their collections appraised.
Collectors generally rely on their own research when managing the financial aspects of their collection. Two in three have never discussed their collection with a financial advisor.
Many collectors don’t know their collection’s value
Most collectors intend to leave their collections to heirs…
Eighty-one percent of collectors plan to leave their valuables to heirs, rather than sell them. Despite this, more than half of collectors have taken no steps to educate their heirs on how to manage, appraise or sell their collection. Yet, collectors say their biggest fear is that heirs won’t get a fair price if they sell the collection. Two out of three say it’s easy to get taken advantage of when buying or selling collectibles.
Collectors are not preparing heirs for ownership
…but heirs are reluctant to take ownership
Among investors who inherited a collection, nearly all felt honored to receive it. However, only one in three inheritors were interested in the collection and happily kept it. Another 39% had no interest in the collection, but obligation and guilt compelled them to keep it anyway. A quarter of inheritors sold or intend to sell the collection.
Most heirs are not interested in collections
The collecting bug is even stronger among wealthier investors...
Wealthier investors (those with $5 million or more in investable assets) spend more time and money pursuing their hobby and are more likely to have built a very extensive collection. Wealthier collectors also feel they are getting more in return—in terms of both monetary appreciation and sentimental value.
Wealthier investors are more serious collectors
…who are more drawn to fine art
Wealthier collectors are particularly likely to focus on fine art and to support specific artists. Most are affiliated with a local museum, and one in three plans to leave their collection to a museum or charitable organization.