It’s hard to conceive of a dark side to giving holiday gifts to friends and loved ones. But unusual risks associated with three popular types of gifts could make normally happy moments turn sad. For thoughtful financial advisors, therefore, alerting clients to these risks not only can serve as a valuable and attention-getting touchpoint communication at this time of year, it also demonstrates your value as a source of practical advice. Specifically, giving art, jewelry and toys carry unexpected risks.
(Related: Top 10 Ridiculous Luxury Christmas Gifts)
A Gift of Art
With artwork, it’s true that the majority of successful clients won’t be buying museum-quality, million-dollar paintings or sculptures. Nevertheless, many clients can easily spend thousands and even hundreds of thousands of dollars on a gift of art, often without much planning for its purchase or how to transport or display it afterwards. Here are some risks associated with buying a gift of art:
Fraud. Sometimes, what you see and buy isn’t really what you get. Art experts say it’s important to always buy art from reputable dealers, whether online or at a bricks-and-mortar location. Have the dealer provide a thorough report on the provenance, or ownership history, of the piece and make sure ownership title is clear.
Transportation. Art can be easily damaged or stolen in shipping. Clients shouldn’t take art home in a cab, which exposes it to theft and damage, or have it sent by general shippers, who don’t have expertise in this area. Make sure clients use specialized art transportation companies, which will pack and ship the art carefully.
Display. Clients often place artwork where it receives maximum visibility, but where it may be susceptible to damage from heat, humidity, dirt or vibration. They should work with experts who know where and how to mount and display fine art.
Keeping inadequate records. It’s important that clients keep a full description and a photo of their artwork in a safe place, preferably with copies offsite. This is invaluable for insurance purposes if the piece is lost, stolen or damaged.
All That Glitters
In addition to Mother’s Day and Valentine’s Day, December is a peak time of year for giving jewelry. Like art, a gift of jewelry should be purchased from a reputable dealer who explains the firm’s return and exchange policy clearly in writing. In addition, a complete record of the gift — including purchase price, full description and photo — should be kept in a safe place, with a copy in another location.
• Inadequate coverage. Better insurance carriers include a jewelry purchase in your client’s coverage immediately. Other policies may provide some limited coverage. If your client intends to buy a gift of jewelry and has an idea of his or her budget, suggest they phone their insurance agent before the purchase to be certain of adequate coverage immediately. If the purchase is made spontaneously, have them call, email or text their agent from the store to arrange coverage.
At one time, perhaps the biggest risk in buying a toy as a gift was duplicating what the child already had. Today, some toys pose an oddly modern risk in the form of cybersecurity. Almost $3 billion worth of smart toys that connect to the Internet were sold in 2015 and sales are expected to exceed $11 billion by 2020, according to The Guardian.
These toys, which include dolls, action figures, games and tablets, can be terrific gifts, but they also can be targets for hackers. Some dolls can be turned into listening devices, for instance, and be used to spy on the children and their families. Meanwhile, if connected to a home Wi-Fi network, the toys can provide an access point for hackers to gain confidential information.
While toy manufacturers say they are working on security, the best advice to give clients now is to make sure each smart toy has a separate, unique password and that the toy is not linked to a home network. Although the risks in giving gifts of toys, jewelry and art are obviously different from those inherent in the financial markets, your interest in protecting your clients from such risks will be similarly appreciated.
If you have any questions about this subject, please email me at AskFran@Chubb.com.
— Check out 11 gift ideas for your HNW clients on ThinkAdvisor.