Despite recent market volatility, most high-net-worth individuals own special collectible assets—such as jewelry, art, precious metals and cars—for emotional reasons rather than for purely financial purposes. This situation has prompted some experts to suggest that advisors should treat such personal treasures as part of an individual’s total wealth, and not necessarily as a portfolio holding.
Overall, 82% of high-net-worth U.S. investors hold collectible assets, partly for enjoyment; 76% for their heritage value; 59% for social motivations; 28% for their rarity and 7% for monopolization motivations, according to Barclays’ latest Wealth Insight report.
Only about one-fifth (21%) of wealthy investors, for instance, hold these assets as security or protection against the risk of problems with their conventional investments, according to a Barclays report released Monday. while just 23% do so for strictly financial reasons.
“The collectibles market has seen a surge in activity — most recently demonstrated by the record sale price of Edvard Munch’s ‘The Scream’ in May,” said Daniel Egan, behavioral finance specialist in the Americas for the Wealth and Investment Management division of Barclays, in a press release. “However, while treasure has grown in popularity, it hasn’t necessarily translated into strong financial returns for investors and strong caution should be exercised in viewing it as an alternative to traditional asset classes.”
Precious metals are largely held for financial reasons (60%), though it is the only “treasure asset class” more likely to be held for financial than emotional reasons. Meanwhile, wine (93%) and classic automobiles (91%) are held overwhelmingly for emotional reasons.
Seventy-one percent of all respondents, including those who do not own treasure assets, report that emotions influence their overall financial decision making, Barclays Wealth explains in the report “Profit or Pleasure? Exploring the Motivations Behind Treasure Trends.” This percentage is even higher for those that do own such assets, with 98% of those surveyed agreeing that they hold these objects in part for emotional motivations. The study reveals that the emotional motivations for holding treasure assets are complex and interconnected, with respondents reporting multiple reasons for owning their treasure assets.
Precious jewelry, fine art pictures and antique furniture are the most popular collectible investment types in the U.S., the Barlcays report says.