We have written about asset location as well as allocation – and that applies as much to fine as it does to mainstream liquid equities, private markets, bonds and more.

(An earlier version of this news story appeared in Family Wealth Report, a sister news service to this one.)

Diversification is not just smart investing advice when it applies to regular areas such as stocks, bonds or private companies. It also applies to the type of fine art an HNW individual has and, just as importantly, where the works are displayed or held.

With natural and human-caused disasters such as Southern California’s fires and North Carolina’s floods still painful memories, they are a reminder that it makes sense to spread assets around. HNW individuals should take a hard look at the dangers of their environment and consider how to mitigate them. They also need to note that sudden changes to tariffs and cross-border trade rules can affect the fine art market.

These are some of the topics that engage Oliver Pursche, SVP and advisor at Wealthspire Advisors in the US. He works with HNW individuals and family offices on the area of art and collectables and has been in the financial services sector for more than 30 years. Wealthspire is an RIA, serving HNW and ultra-HNW clients. Charging a flat fee (not as a share of assets under management) it functions rather like an outsourced chief investment office. It has about $29.4 billion in AuM as at the end of March this year.

One safety matter is that collectors are looking for more variation in where to put their assets, Pursche told Family Wealth Report in a recent call, referring to the danger of artwork being damaged by natural disasters, theft, and other forces. As with other assets, such as equities, collectors today have a deeper understanding that fine art is an asset class.

“UHNW families like to diversify jurisdictionally…and not just by asset class. The art market is no different,” he said. 

“I encourage clients to get accurate annual valuations on anything that they own. Investors and collectors should know about what their collection is worth,” Pursche said. 

The idea of spreading artwork around has echoes of the idea that today, with tax and policy changes, for example, asset location is as important as the allocation side. 

Although the art market is languishing at present – given the uncertain macroeconomic climate – the market is so large that it’s easy to see why art wealth advisory is a busy area. The latest UBS/Art Basel annual report on the fine art market said despite a 12 per cent decline in global art market sales to $57.5 billion in 2024, compared with the previous year, transaction volume grew by 3 per cent, showing resilience in lower-priced segments. 

Beyond the interest in the quirks of the art market, the sector also gives bankers and wealth managers useful intelligence on the sort of spending and investment passions that their clients have. As such, it is a barometer of wealth more generally. 

Pursche is an example of the kind of wealth management professional who can also carve out an important area of expertise – in this case, the fine art investment field.

Before coming to Wealthspire, Pursche worked at Bruderman Asset Management, where he served most recently as the interim chief market strategist and vice chairman, and previously as CEO. While concluding his tenure at Bruderman, he simultaneously served as chief investment officer and chief market strategist at EsteV LLC. 

Originally from Germany, Pursche has also held leadership positions at Gary Goldberg Financial Services, Trust Company of America, and Neuberger Berman.

What’s in the frame
Pursche's areas of expertise include paintings, sculptures, sketches, and statues. Some clients who are collectors/investors in these items will also be collectors of classic cars and jewellery. 

The motivations of those who are involved in these areas fall into the following broad categories: Fine art lovers but also searching for works they can sell at a profit; and those who aren’t emotionally attached to the art and will transact in it when the time appears propitious. 

“People used to say they want to hold it [art] for a long time…but more of a trading mentality has come into it,” he said. 

“Blue-chip [artwork] prices will continue to do well,” Pursche said. 

“There has been an explosion of up-and-coming artists in the past decade,” he said. To illustrate, Pursche gave the case of Caroline Chandler and Ian Cheng, who are artists in the New York City area that are gaining recognition for their work. Modern digital forums are becoming more popular with some artists and are now part of well-respected art collectives and promoters like Dminti, which seeks to bridge the gap between art and technology.

Complexity
The complexity of art collections has increased. However, modern valuation tools – enabled by tech – have helped, Pursche said. Web-connected tools such as Collectrium or Collector Systems help inventory, track and can tie into various auction sites for better valuations. Neverthekess, as with any system, there are limitations, so having good data inputs is paramount to ensuring the most accurate results possible. The systems will also seek “similar” pieces by the same artist that have recently sold, providing a better benchmark for valuation. 

“This is helpful but does not reflect private sales nor should it be relied on as a substitute for a professional valuation,” Pursche said.  

Who’s buying?
Middle East (Gulf) buyers “continue to be big buyers,” Pursche said. 

There are worries. Foreign buyers have been made uncomfortable by the volatile policy direction on tariffs and the potential impact on ownership/transactions in fine art, he said. Chinese owners might fear that their US-sourced fine art could be confiscated, he said. “There is a fear that because of politics, the art could be frozen,” he said.

There are limits on how much HNW collectors can pick and choose which jurisdictions to consider for tax and regulatory reasons, because some auctions will always be in a particular location, Pursche said.

Age gap
Younger generations of HNW families will differ from their elders about the value they have for a particular type of art, or the idea of fine art investment at all. This can create difficulties over succession planning where fine art assets are involved, Pursche said. Certain solutions might include putting a collection into an LLC and giving a beneficial ownership stake on a pro-rata basis to each child, for example.

FWR asked Pursche about the art-based lending market – the subject of a recent report here. Loan-to-value ratio can go up to about 65 per cent and tends to be a relatively expensive way of borrowing, he said.

There are estate planning matters to consider about owning art.

It is not always easy to dispose of art quickly; even granting it to a philanthropic cause, or to a charity/gallery can be complicated. Advanced planning several years ahead of a death etc is therefore important. 

“Many families aren’t having conversations about what to think about it,” he said.

It is important to think about fine art as an integral part of a family’s balance sheet so that one does not have to “sell it at the worst time possible.” “The last thing we want to do is for inheritors to have to sell,” Pursche said.

Tax implications
Finally, FWR asked Pursche about the tax landscape in the US. For example, 1031 tax rules on exchanges no longer apply to art and collectables. 

Prior to the changes in tax law, a collector could sell an appreciated piece of art and purchase another piece without having to recognise a taxable gain at the time of sale (the capital gains were being deferred, not eliminated). This provided for a great deal of flexibility from an estate planning perspective. “As this is no longer an option, a collector who sells a piece must now pay any capital gains taxes owed as a result of the sale, thereby reducing the amount of proceeds available to reinvest,” he concluded.