The Great Wealth Transfer Encourages Collectors to Sell Their Work –

Over the next quarter century, some $73 trillion will be spent from America’s baby boomer generation to its Gen Xers and Millennials in what has been dubbed “the great wealth shift.” About half of this figure will go to the wealthiest 1.5% of households, i.e. the American collector class.

This has made Sarah McDaniel’s job very complicated lately.

As head of the art resources team at Morgan Stanley, McDaniel helps wealthy clients manage their art collections, but aging collectors are reassessing their plans for who will inherit their art in a growing art market. rapidly changing and the differing tastes of the next generation.

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“What we have discovered is that with the great transfer of wealth and the economy of taste in the art market, many children of collectors do not have the same taste in art as their parents,” McDaniel said. ART news in a recent interview. “In the past, collecting categories and those who collected them tended to last longer, so there was potentially less disconnect when a collector died or disposed of their collection.”

McDaniel estimates that for his ultra-high net worth clients, whose net worth is $30 million or more, five to ten percent of their balance sheet is in art and collectibles, meaning that trillions of art is expected to change hands in the decades to come. . Or so real estate planners like McDaniel thought.

But when heirs don’t want their parents’ collections, the two best options for collectors are to either give the works away in exchange for a significant tax break, or sell the art while the collector is still alive. McDaniel said. This doesn’t just mean selling work as end-of-life planning, but simply selling work more often throughout life.

“The potential to realize additional value through relationships [collectors have in the market] and the relevance of the art they collect might be better than waiting decades later to sell artwork that is no longer as desirable as it was when the collector bought it,” said said McDaniel.

The increasingly rapid evolution of tastes in art and the resulting instability in the art market may seem worrying, but McDaniel points out that there are many positive reasons that have contributed to this cycle of increasingly volatile trend.

“There is a new generation of collectors who are interested in acquiring art from their peers,” McDaniel said. “Collectors tend to be more female and more diverse globally, there are a lot more Asian collectors now.”

These new collectors often want to buy from young living artists from more diverse backgrounds, according to McDaniel, on whom auction houses like Sotheby’s have already capitalized. In November 2021, Sotheby’s organized its first evening sale dedicated to living artists. “The Now” sale was a resounding success, especially for female artists like Simone Leigh, Anna Weyant and Jennifer Packer who each made record prices that night. The sale generated $283.4 million overall.

“Traditionally, it takes a while for living artists to have a secondary market. We have now seen an acceleration or compression of the primary and secondary market for some of the living artists,” McDaniel said. “They could actually be selling on both channels simultaneously.”

This fast-moving market has already suffered from great volatility for young artists, who often peak quickly and fade even faster, with little to show fthe success of the work on the secondary market.

So how do McDaniel’s customers react to the idea that the collections they’ve accumulated over decades might be junk? It depends on the type of collector.

“Most collectors I’ve worked with buy the work because they like it and have a genuine interest in the artist, his career and his influence. There are other people who love art, but they also see it as an investment,” McDaniel said.

“For collectors who see it as an investment, and they can come from finance, real estate, technology, so it’s in their DNA, they can look at art as an asset class, as well as an asset of passion. They come with the hope that art will retain its value or appreciate. But they know that, like any other investment, art can lose value. For people who buy art because they love it, changing markets are less of a challenge for them because they live with the art they love, it is their value.”

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