Millennials constitute a demographic segment many financial advisors ignore — sometimes unwisely. To be sure, baby boomers and Gen Xers tend to have more wealth and typically are more receptive to advisors’ traditional investment-oriented appeals than millennials.
Why? Many millennials entered the workforce around the 2008 financial crash. As a result, they’re skeptical about the value of traditional investing, resulting in less than 30% of millennial wealth being invested in stocks and financial assets. Because millennials prefer cash and physical assets, advisors may be underestimating the total wealth of their younger clients and missing an opportunity to provide advice on the full range of millennials’ holdings.
Which physical assets are wealthy millennials acquiring? Art, with many favoring contemporary and emerging artists. As the latter can often be unusual — one popular emerging artist uses his own blood and others have incorporated taxidermy and food products — the resulting works often require expert care and preservation, not to mention attention to more traditional fire risks stemming from the use of combustible liquids like formaldehyde.
For advisors, this shift represents an opportunity to provide holistic advice, which younger investors prefer. Inquiring about your younger clients’ art preferences and collections and helping them connect with experienced professionals can help deepen your relationships and demonstrate value.
For clients with significant art investment, financial advisors need not become art or insurance experts. Rather, they should develop a basic knowledge and seek out expert guidance to assist in developing a plan for care, maintenance and preservation.
Clients who buy artwork made with novel materials, for example, often face unique care considerations. Pre-purchase, art conservators can help identify whether a piece contains unstable materials or has inherent structural issues. Conservators also can consult on ideal display conditions.
In addition, art handlers can advise on the most appropriate installation hardware based on a work’s size and characteristics. They also can be called in on a regular basis to determine whether hanging devices have weakened over time, potentially putting works at risk.
Unusual art also may require special lighting and climate controls. In addition, it may be subject to “inherent vice,” which is an aspect of the work’s construction that contributes to its natural deterioration and could exclude the piece from an insured’s coverage.
Instead of displaying their art at home, some investment-minded collectors may store their acquisitions or lend them to museums to raise the pieces’ profile. In either case, moving art exposes it to possible damage and your clients to shipping losses.
Add value by helping your clients investigate whether their insurance offers corresponding protections, including whether a borrower or consignee’s policy provides “wall-to-wall” coverage worldwide for most causes of loss. Further, help them work with their insurance carrier to review security and protection protocols.
Today, not only is expensive art bought online, but collectors are using Twitter, Instagram and Artsy to gain access to expertise and take curated online tours of art fairs they can’t attend in person. But purchasing art sight unseen carries unique risks. Advisors should encourage online buyers to request a condition and provenance report before making a purchase, as well as inquire about packing and shipping practices.
Understanding how millennials differ from other investors in their art tastes and buying habits can provide an entry point for you to help them protect and preserve their non-financial wealth. Being perceived as an advisor who provides such assistance will serve you well for years to come.
If you have any questions about this topic, please email me at AskFran@Chubb.com.