This publication caught up with the founding partners of Cadell + Co, a new portfolio advisor for art held in trust, which it calls the “sleeping giant in the industry”.

The first FCA regulated art advisory firm has launched to target trustees, banks and family offices in the UK.

Cadell + Co, which says it is the first independent FCA-regulated advisor for art held in trust, seeks to help wealth managers and trustees preserve and boost the value of art portfolios through a database, management and reporting service. It will also provide quarterly portfolio management reports for trustee/beneficiary review.

The accreditation from the UK's financial watchdog, the Financial Conduct Authority, marks a turning point in the art advisory space, which up until now has been completely unregulated. And it seems to be a timely occurence. Last month, one of Mayfair's most high-profile art dealers, Timothy Sammons, found himself accused of a multi-million pound swindle over missing payments. The sheer scale of price escalation and divergence today has fuelled such risks and this firm aims to help trustees drive the right processes through the right channels, in a world of people wanting to match buyers with sellers. 

“Any auction house or dealer that brokers art represents a conflict of interest to trustees – you know when they walk in that they’re looking for what’s best to sell their clients,” Luke Dugdale, who will oversee Cadell’s advisory and strategic services as head of wealth management, told WealthBriefing yesterday, coinciding with the formal launch of the business.

“In an opaque world, being FCA regulated means we are committed to complete transparency and not being conflicted. In other words, we only work for one side, and will publish our dealings to the clients. Having operated for many years in a regulated environment, I really want to be able to bring this to the trustees who I feel a strong affinity with,” he said.

Dugdale, who previously set up Art in Wealth Management at Royal Bank of Canada, said he identified the need for some sort of management system to monitor the significant portion of trusts that were art-related and required the same level of portfolio management as traditional investments. Having on average 15 per cent in art administration represents a significant challenge to trustees’ fiduciary responsibilities, he said. 

Richard Bagnall-Smith is Cadell’s head of client management and sales. He previously served as global chief marketing officer and head of business development at Christie’s, where he became familiar with the "casino" side of the art market. 

“The noise in the art industry comes from the auction side, which at the top is driven by speculation, while trusts have a longer term and more professional approach. They really are the sleeping giant in the industry," Bagnall-Smith told WealthBriefing.

“All trusts have gone through a major shake-up of how they look at property and art is next on the agenda,” he said. 

Art collecting is nothing new but much of the nouveau riche coming on board are buying a lot of it and putting it in trusts whereas historically they wouldn’t have. A 76 per cent majority of art collectors buy for passion with an investment perspective, up from 53 per cent in 2012, according to a recent report by Deloitte.

Indeed, art, alongside other “investments of passion” like classic cars, has over recent decades come into its own as an asset class, commanding the attention of wealth managers who recognise the role such collectibles can play as a diversification tool and as part of a client-centric value proposition. There are at least 400,000 art collectors in the high net worth and ultra-high net worth segment, with an estimated $1.5 trillion of wealth in art assets, according to the Deloitte report. 

Richard Camber is the third founding partner of Cadell & Co, responsible for sourcing expertise. Before Cadell, he was president of ArtBanc International, and formerly senior director of the works of art division at Sotheby’s. 

“Many trustees have concerns about the current value of the art collections they’re responsible for. Works of art held in trust have often been in the owner’s possession for decades, and in that time, the value of individual pieces may have fluctuated dramatically; some may not have been valued at all,” he said.

“Our role will be to guide trustees and wealth managers in staying informed on the current and future valuation of their collections, to ensure they make the best decisions for clients.”