Earlier this month Edward Munch’s “The Scream” sold for $119.9 million, the highest amount ever for a painting sold at auction and only the most recent reminder of the dynamic market in art. The previous record was set only two years ago when Picasso’s “Nude, Green Leaves and Bust” sold for $106.5 million.
While few people possess paintings of such renown, high-net-worth families often amass significant art collections. Fully 64% of families with $5 million or more in investable assets consider themselves to be serious or enthusiastic collectors of fine art, and 43% of them report having collections valued at $1 million or greater, according to recent research by ACE Private Risk Services.
Managing such collections can pose significant challenges. Collectors often happily devote themselves to acquiring the next prized piece, but they may not be as passionate about properly tracking and protecting the entire collection. As the collection grows in size and value, maintaining up-to-date documentation and values becomes increasingly complex. If left unmanaged for long, the insured value of the items can fall far behind the cost of replacing them, exposing the collector to significant financial loss if damage or theft occurs.
Here are three steps to maintaining proper coverage levels on an ongoing basis.
Step 1: Drop the spreadsheet and use a database tool specifically designed for tracking collections.
In ACE’s research, 82% of respondents said they had formalized documentation of all the items in their collection, but experts in the field say the methods that collectors perceive as sufficient often are not. “A number of collectors use programs such as simple spreadsheets to document collections, but this choice often falls far short of task,” says Gerald Escobar, president of Asset Archives, Inc., an Atlanta-based global collections management firm that has a relationship with ACE. By contrast, the online database tool offered by Asset Archives allows collectors to store and manage in real time all pertinent information, including pictures of the items, appraisals, invoices, receipts, artist resumes, and documents pertaining to provenance.
Step 2: Get the right appraisers to determine accurate replacement cost.