Tsunami. Hurricane. Earthquake. Civil war. Each is a disaster, with human costs beyond calculating. The destruction of material goods, however, in the form of homes, businesses, and other assets, reached $58.7 billion in 2005, according to the Insurance Information Institute's data on insured and total catastrophe losses. Included in that incredible total are countless works of art.
What has artwork to do with the average planner's clients? John Levitt, a licensed estate attorney and financial consultant with Professional Planning Services, LLC, of AXA Advisors in Long Island, says many of his clients' portfolios include substantial collections. "When you're dealing with high-net-worth clients, most people have some art. It grows sometimes larger than the rest of their portfolios," he adds. In fact, fully 10% to 15% of those clients "have art that's a higher proportion [of their portfolios] than it should be."
The threat to planning? "Often clients have no insurance on the art," says Levitt, despite sometimes allowing artwork to become "their whole nest egg." Part of providing financial advice, he says, "is to find a way to have that asset protected." He recalls clients who denied having substantial collections but, when asked again, admit to an accumulation, perhaps not of old masters or Romantics, but of sports or political memorabilia or toys in original boxes or wines--all worth thousands, and in need of protection.
Levitt initially got into this because of "clients who had a $6 million collection of Impressionist art." Although they'd started collecting as a sideline, it had become the clients' chief asset, he explains, and "they had done no planning, no wills, no insurance." Their net worth was tied up in "an illiquid, very large asset, and for various reasons they seemed to have their heads in the sand." When they realized it "could be wiped out at a moment's notice," they realized they needed to protect it.
According to Christiane Fischer, CEO of AXA Art Insurance Corporation, policies are very affordable, even for the smaller collector. A collection of $100,000 to $250,000 in value is insurable for a minimum premium of $500 annually, she says, and "we will grow with them." Most of the policies AXA offers cover collections that range from $500,000 up to $350 million. And, she points out, "contemporary collections tend to appreciate in a hot market much faster than an old masters collection." Says Fischer, "What I like to say is that we don't sell a product, but we provide a solution to a given situation. It depends on the type of collection, the collecting habits of the collector, and also on the size of the collection."
Sometimes, says Levitt, clients without appreciable assets "bought something and it turns out to be quite valuable." He recalls a case in Florida, in a condo "that you would describe as dirty and not too well kept--there were about six 18th century pieces, art of different types of birds, that were very valuable and no one knew till we got the appraiser in there." Sometimes, he concludes, people don't know what they have. In these cases, failing to insure those assets can endanger a client's financial future.
To Levitt, finding out about clients' less conventional assets is an opportunity to connect with them on a more human level than balance sheets and accounts allow. "I'll get a smile from them, because it's like their children. It's neat; you learn what makes them tick."
Marlene Y. Satter is a multi-faceted freelance business writer based in central New Jersey. She can be reached at email@example.com.