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    Collectible Investments for the High Net Worth Investor
    Collectible Investments for the High Net Worth Investor
    Collectible Investments for the High Net Worth Investor
    Ebook539 pages7 hours

    Collectible Investments for the High Net Worth Investor

    By Stephen Satchell

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    About this ebook

    Many high net worth individuals are interested in diversifying their portfolios and investing in collectibles. A collectible is any physical asset that appreciates in value over time because it is rare or desired by many. Stamps, coins, fine art, antiques, books, and wine are examples of collectibles. Where does the financial advisor or investment manager for these high net worth individuals go to learn about these investments? There is no comprehensive resource from the financial standpoint--until now. Dr Stephen Satchell of Trinity College, Cambridge, has developed a book in which experts in various types of collectibles analyze the financial aspects of investing in these collectibles. Chapters address issues such as: liquidity challenges, tax ramifications, appreciation timelines, the challenge of forecasting and measuring appreciation, and the psychological component of collecting and the role of emotion in collectible investing.

    Key FeaturesFeature: Contributors are experts in collectible investing from around the worldBenefit: Gives financial advisors and wealth managers handy access to expert opinions to better advise clients interested in collectible investmentsFeature: Experts discuss the pros and cons of collectibles from an investment perspective in their area of expertise Benefit: One stop shopping, all expertise brought together in one volume, creating a handy reference guideFeature: Experts discuss art, stamps, coins, antiques, wine, from around the world in one global perspectiveBenefit: Wealth managers can gain information about a wide range of collectibles and learn about investing in these types with a global perspective
    LanguageEnglish
    PublisherAcademic Press
    Release dateJul 7, 2009
    ISBN9780080923055
    Collectible Investments for the High Net Worth Investor

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      Book preview

      Collectible Investments for the High Net Worth Investor - Stephen Satchell

      One

      General Themes

      1 The Role of High Net Worth Investment Managers in Collectible Investing for Their Clients

      2 The Neuropsychology of the Collector

      3 Collecting and Behavioral Finance

      4 Collecting as Luxury Consumption: Effects on Individuals and Households

      1

      The Role of High Net Worth Investment Managers in Collectible Investing for Their Clients

      Daryl Roxburgh,      BITA Risk Solutions

      This chapter discusses the role of the investment advisor in working with high net worth investors who are interested in or are already investing in collectibles. We examine the relationship between the investor and the investment manager in terms of the service provided, the breadth of investment offering, and the suitability of investments. Then we discuss the management of investments and the tools used in the process of developing a client portfolio, the role performed by investment managers regarding collectible investments, and the positive side of investing in collectibles.

      High Net Worth Managers and Family Offices

      The terms Private Bank and Family Office have lost some of their original meaning and ability to describe the services provided as they have been hijacked by the marketing teams of the large financial institutions. At the same time, stockbrokers have become wealth managers and asset managers. However, the distinctions are important when it comes to the issue of management and advice on collectible investments, as we will discuss later.

      The family office has traditionally been an organization that looks after the interests of a family, whether investment, property, legal, or succession planning. The role has very much been ensuring the coherence and sustainability of the family and its fortune as well as managing day-to-day affairs, such as travel and staffing. In this guise, the management of art, wine, antiques, and other valuable artifacts was just one aspect of managing the family assets and ensuring that they were conserved and catalogued and, as required, that collections were rejuvenated. The expertise to work on these collections would have been partially accumulated within the family office, then augmented by external experts, and perhaps finally, as scale justified, expanded internally. Often, major collections would be left to the state as a philanthropic gesture or as an action with beneficial tax consequences to the family.

      Today the status of collecting and collections has expanded within the family office. Through the use of modern technology, different branches of the family can access the family collections through a family portal, and can, for example, book assets such as pieces of art or properties for their use. Fundamentally, the family office is geared to bringing experts to bear on the collecting needs of the family and thus sustain assets and wealth through generations. As such, this new technology is very well placed to facilitate the pursuit of collectible investments for high net worth family situations.

      High net worth managers serve a wider set of clients with the goal of generating investment return for the client. This is in line with the investment guidelines set out by the client, including their time horizon and propensity for risk. The managers will generally employ a set of investment vehicles that meet a simple set of criteria:

      • The advisor understands the investments.

      • The investments can be delivered economically to the investor.

      • The investments are acceptable to the wide investor base.

      • The investments meet the requirements of the manager’s regulator.

      These criteria are often the hurdles that prevent most high net worth managers from investing in collectibles on behalf of their clients. We further discuss this idea in the section on methods of investment.

      The type of service provided by the investment firm will be the most significant determinant of what the firm is willing to offer its clients in terms of advice on collectible investments. The conclusion could be drawn from the previous comments that such advice would come only from family offices; however, as the reader will see, this is not necessarily so.

      The Nature of Relationships between Client and Manager

      As we conducted research for this book, we spoke to many investment managers across the entire gamut of investment firms. The style of relationship differed widely among them. In this section we consider three aspects of the client/manager relationship: the service provided by the manager, how the manager determines what is suitable for the client, and where collectible investments fit in this context.

      First, we consider the relationship in terms of investment service and approach. The services provided tend to fall within a matrix that can be defined by these parameters:

      • First, the level of granularity of investment decision: stock picker through multimanager (fund selector) to asset allocator.

      • Second, the type of authority given to the manager by the client: execution only through advisory, advisory managed to discretionary including trust status.

      • Finally, the breadth of instruments used for investment: from traditional cash, bonds, and equity through to a broad asset mix.

      Unfortunately, clients have not always been well served. The industry has seen a polarization of offerings, with the large investment managers moving away from direct production to manager and product selection.

      This is sometimes in the context of a strategic asset allocation offering, with some degree of sophistication involved and that takes account of the individual clients needs. Unfortunately, often it is likely to be a model portfolio selected on the basis of a more perfunctory assessment of the client. In simple terms, this can be thought of as one size fits all.

      In contrast, a number of medium-size management firms, along with boutique firms, have sought to distinguish themselves in the marketplace through a more tailored, bespoke offering and/or a higher degree of investment expertise provided directly to the client. In some instances this is reflected as structuring an asset allocation to the specific needs of an investor. In many cases, the family might have a large holding of assets in something that it cannot sell—perhaps a family business or a block of shares held in an endowment. So the asset allocation needs to complement this position. In mathematical terms, this is akin to a portfolio construction with constrained

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