524: Buying Art and Nice Stuff as an Investment

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When we think about investing, our minds usually go straight to stocks, bonds, and real estate. But some of the best opportunities come when you stop thinking of investing as something separate from your everyday life.

What do I mean by this? A lot of the things we buy are treated as expenses when they could be investments. You might wear a watch or jewelry simply because you like them, but you avoid spending too much because it feels frivolous. 

Yet what’s better—paying $250 for a decent watch that will be worthless in 10 years, or $5,000 for a Rolex that could be worth twice as much over the same period?

The same idea applies to cars and even furniture. I have a good friend who lives by this philosophy. For decades, he’s chosen to invest in the finer things rather than the ordinary, and it has become a cornerstone of his personal investment strategy.

It’s about thinking differently—turning what most people see as expenses into assets.

Art falls into that same category. I’m not a huge art guy myself. Sometimes I’ll buy a piece off the street because I’ve never thought of art as an investment. Yet for centuries, people have purchased art for its beauty, cultural value, and emotional impact—and often made a financial killing in the process.

Today, art is recognized as a legitimate asset class—something that not only enriches your life on the wall but also diversifies and strengthens your portfolio.

This week on Wealth Formula Podcast, we’re going to explore how fine art has evolved into an investment category in its own right, and how you might think about incorporating it into your wealth strategy.

Learn more about Philip Hoffman and The Fine Art Group:

www.fineartgroup.com

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

 If you donate a hundred million dollars of art, you can probably get a tax rebate for the full amount of the donation.

Welcome, everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Uh, today before we begin, I wanna remind you again, there’s, um, a website called wealth formula.com that you should check out. Um, one of the things on there is, uh, the ability to sign up for our accredited investor club now really do, um, suggest you check it out if you are an accredit investor and potentially get onboarded, uh, with our team.

Uh, because as we enter into this fourth quarter here, we have a number of, uh, potentially interesting opportunities, um, that involve significant tax, uh, tax mitigating type investments. Usually using depreciation, whether that’s, uh, related to, you know, apartment buildings, sometimes in commercial aircraft, things like that.

But if you are an accredit investor, I think you should at least get onboarded so that you can check out the opportunities that are out there that are coming your way. This is, of course, a private group, so that. Um, you will not get access to these, uh, opportunities unless you are part of investor clubs.

So go to wealth formula.com and sign up for our credit investor club if you, uh, if you are one. Uh, let’s talk today a little bit about a shift, uh, in thinking. Uh, you know, we, when we think about investing, you know, of course we’re usually going straight to. Whatever it is that we’re typically thinking about, whether that’s real estate, stocks, bonds, whatever.

But some of the best opportunities come when you stop thinking about investing as something separate from your everyday life and you start thinking about the things that are in your everyday life. So what do I mean by all of this? Well, a lot of things, uh, we buy, um, are treated as expenses. When if you kind of shift your mindset a little bit, they could be thought of as investments rather than expenses.

So here’s an example that’s kind of obvious, right? Many of you wear watches, many of you wear jewelry because you liked them, but you might also say to yourself, well, I like them, but I’m not gonna spend that much on it. Otherwise, it’d be frivolous. So. You, maybe you buy a, a nice watch for 250 bucks. Um, but here’s the thing, what happens, uh, with a watch that’s probably 250 bucks that you bought in the mall.

It’s probably gonna be worthless in about 10 years. Now, what if you actually paid like five grand for, you know, a Rolex? I might pay a little bit more than that, but let’s say you paid $5,000 for a Rolex or some other brand that has notoriously increased in value, that’s really hard to get your hands on.

Um, well, in 10 years, that $5,000 Rolex or that $10,000 Rolex or whatever, it, it’s probably gonna be worth more than when you bought it. At some point it will, if you look at the historical numbers on watches, for example, and various types of jewelry. That’s just what happens when you buy the really nice stuff.

The same idea applies to cars. Of course, you know, those of you who are car buffs, you know, that, um, you know, uh, you may, you may not, uh, you may not be looking for the most, uh, reliable whatever car you may be looking for something that you really want to drive that’s, uh, kind of a classic car that you know is gonna go up in value.

But you can even get that in things like furniture. I have a, I have a friend who lives by this philosophy and he’s. You know, for decades, he’s chosen to invest in the finer things, uh, rather than the ordinary, and has become, um, really a cornerstone of his personal investment strategy in some, you know, so it’s really about thinking differently, turning what most people see as expenses into assets.

So, you know, this particular interview we’re gonna do today is about art. Art falls into that same category, you know, especially for those of you who love art. I’m not a huge art guy myself. Okay. Sometimes I’ll buy a piece off the street because I’ve never, um, because I like it, you know? But I’ve never really thought of as an investment, and maybe this is not an area that I love enough to make part of my investments, right?

But some of, some of you will. Um, you know, I mean, for centuries people have purchased art for beauty, cultural value and emotional impact, and then. As a side effect of that, they’ve often made, uh, they’ve made financial killings in the process. So, you know, today, um, art is recognized as a legitimate asset class, something that.

Not only can enrich your life on the wall, but also diversifies and strengthens your portfolio. So that’s what we’re gonna talk about on this week’s, uh, wealth Formula podcast. We’re gonna explore how fine art has evolved into an investment category in its own right and how you might, uh, think about incorporating it into your personal wealth strategy.

We’ll have that interview right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate.

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Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today my guest on Well, formula Podcast is Philip Hoffman. He’s the founder and chairman of the Fine Art Group, a global leader in art investment advisory and finance. Philip spent years as an executive at Christie’s before pioneering the first art investment fund, effectively creating a new asset class for investors.

And today the fine art group oversees more than 20 billion in, um, advised assets across 28 countries. Philip, welcome to program. Lovely to be here. Welcome from Sunny Lee, the Alps. Very nice. It’s, uh, very appropriate, I guess, for the art world to be coming from some nice places like that. Um, well, let’s, let’s get right into it.

Uh, you know, you, you started, uh, uh, at Christie’s, uh, and, uh. Then ended up, um, getting this situation in place where high income professionals can start thinking about, uh, art as an investment. What, tell us the story. What, how, how did that happen? So, I got into the art world completely by accident. I trained at KPM.

And as a CPA and then by accident, got asked to be CFO of Christie’s when I was 27. I was the youngest board director by about 20 years. Uh, I had no interest in joining Christie’s ’cause I thought he was a antiquated company selling, uh, with, with old fashioned people selling Rembrandts a little did I know that there was one and a half thousand staff involved that, um, they were trying to sell Basquiat and.

Picassos and Renoirs and, and, and everything from colored Damons to vintage motorcars. So it was a fascinating business to join when you are 27. And, uh, but I didn’t wanna be CFO, I wanted to actually get my hands dirty and find out what the business is all about. And that was my first exploit, was to meet a client who had bought two pictures, one a can leto for about 50,000 pounds and a.

Monet for around the same amount in 1976, and we went to the warehouse to look at it with my experts, and we recognized both were genuine and both, uh uh, what is it, 30 years later were worth. Between one and a half and 3 million each. So I suddenly tried to work out the maths and worked out, Hey, is this a good investment?

And, uh, it looked like a staggering investment and better than real estate. And then I asked a few more questions of that particular client and he said, oh, I bought a prince by a very famous artist called Domie for about, um, 10 cents a print. And I said, what are they now worth? And this was, uh. 30 years later, 35 years later, worth a thousand dollars a print.

So that’s a good multiple. And I suddenly had the idea that art was more than just fun, that it was investible. Um, the challenge is understanding what is good art, what is bad art, what is risky art? Outed by the art, uh, and I’ll give you some insights as we go. Yeah. Um, I mean, and in those, those, uh, those anecdotes are, are obviously very encouraging for people who are, uh, interested in, in, in investing in stocks.

But when you look at the big picture of art, and I don’t know exactly how you, you come up with these indices per se, but how has art performed historically compared to stocks or real estate? So I would say that art has probably underperformed in general against the s and p 500. So in broad outline, uh, you would be better off buying the s and p 500 as a, as an investment than buying art.

But art has the added plus. That there are in the US significant tax advantages over stocks. So if you look at most of the major families, they have donated their art collections to major museums. And of course there’s a huge tax benefit when you, if you donate a hundred million dollars of art. You can probably get a tax rebate for the full amount of the donation.

Uh, so suddenly not only do you get the return on the art, but you get the tax, uh, refund effectively on your other income as an offset. There are not many countries that offer that attractive term other than the us They’re probably half a dozen countries like that. But, but so in, in the US it’s particularly attractive.

And then if you are clever and you have the right advisors, yes. There are times when you can double your money. You can make, you know, my, my view is you can make 10% per year return if you are clever and well-advised. If you are badly advised or dunno what you’re doing, you could probably lose 10% per year on your investment.

So that’s why, uh. I, I think that art is a particularly niche investment and it’s gotta be well understood and well advised. And the fine group who’ve been in this space for nearly uh, 30 years, and I’ve been in the business 35 years, have advised probably for 50 of the Forbes 500 and, uh, work with some of the top investment banks in the us and that’s because we’ve.

Seen how to do it, and we’ve seen how not to do it. I’ll give you an example. So one of my friends, he rang me up. I was doing a presentation with one of the biggest family offices in America. They said, look, let’s get you on a, on a video with our top family friends. And one of the friends was watching my podcast and I went through the 20 do’s and don’ts of buying art, and he was listening to it and he rang me a couple of weeks later and he said, Philip, your talk resonated with me.

And I said, why is that? He said. I bought a painting by an artist called PORs and I bought it in Los Angeles, um, over in California from a great dealer. And I got it shipped to my house in Georgia, uh, and it had a cost of $250,000. And he said when UPS delivered it, uh, it arrived on my front lawn. I was away for a week’s holiday, so it was left on the front lawn, it rained the rain d um, completely destroyed the crate and destroyed the artwork inside it.

When I rang the gallery and said, Hey, um, once the insurance on this and am I gonna get my money back? They said. You didn’t insure with us, you insured through UPS rang UPS, and they said you only insured the crate and the packaging, so we can reverse you $250, not $250,000. So that client said, Philip, next time round, I need the fine art group to help me get it right.

And. And I, I give you one other story of how to mess it up. Uh, one of my, one of my friends had a a a $1,000,005 Damien Hurst Meds sink Cabinets. It’s a sort of meter and a half long meds sink cabinet with lots of bottles in it, all displayed in random rows. And Damien Hurst that auction for about 1.5 million, about 10 years ago.

And he hung it. He hung it behind his desk in his office and uh, he moved offices and he said to a shipping company, can you get it moved for me? Uh, and they said, yeah, that’ll be $4,000 to move it. And he said, I’m not paying $4,000 to move this 200 yards from my old office to my new office. He said, I’m gonna get Burt, my driver to do it for me.

Of course Bert said, look, I’ll get it done now. And he said, no, no, no. It’s a valuable item. Do it carefully, do it slowly. And, and, and, you know, take your time. He came back from lunch and Bert was standing at the front entrance of the new offices in the Gerkin in London, and he said, uh, governor, the uh. The Damien Hurst medicine cabinet looks better than ever.

And he said, well, it looked pretty amazing in my office before. What do you mean it looked better? He said, come and have a look. And he went up and bur the driver, not only, uh, reorganized every single bottle into sending order, but got rid of the empties, threw them away. So this was not. Damien Hurst medicine cabinet, but bur the driver’s medicine cabinet went from worth one and a half million dollars to about $5.

Uh, luckily they had a photo and they kept it. So the do’s and don’ts of buying and investing are, are, are hundreds of stories of what not to do, and probably 10 lessons of what to do. So, uh, we’ve been talking about some, you know, very expensive art and for, you know. High net worth individuals we’re not necessarily ultra high net worth individuals.

They may be thinking, well, gosh, I’m not gonna, I’m not gonna put a million dollars, um, in one piece of art. And what kind of, you know, that kind of risk. So what are some of the ways that, you know, if you’ve got money, but you don’t have millions to spend on art, what are, what are some of the main ways to invest, uh, uh, without buying, uh, you know, a Picasso outright?

So you can, there are, there are options to buy, uh, but like a horse, you buy a syndicate in pictures and there are one or two vehicles that offer that in the United States. And I warned clients, um, on that front to look at the, uh, the, the critical factor, which is fees, fees and fees. Um, and when you’re buying a stock and you spend, you buy a million dollars of stock or a hundred thousand dollars of stock, the fees are maybe a hundred dollars, $200, $500 when you’re buying art.

Some of these products charge somewhere between, uh. For every a hundred thousand, they’re charging somewhere between 20 and $40,000 in fees over a 10 year period. So stay clear of those, those funds and products that charge huge fees. ’cause you’ll never recover that 20 to 40% cost uplift. Um, now. My recommendation is there are certain artists I think, that are super interesting to buy in the secondary market.

So what I mean by that is buying at auction bought or buying privately artists that are well known that have perhaps come down in price quite considerably. And I could name you 10 or 20 artists. Super interesting right now that were maybe a hundred thousand dollars, $200,000 now down to $60,000 and. I would say those are gonna, we’re gonna see those coming back with a vengeance over the next three to five years.

But there are other artists, so going into a gallery and just sort of picking an artist you like and somebody saying, look, I’ll get you a 20% discount. That’s a meaningless, meaningless thing. I mean, uh, so the key is. Is there art to buy at $10,000 that you can make a big profit on? Probably not. Is there art to buy at a hundred thousand dollars to $200,000?

Definitely, yes. So my, my entry point would be somewhere in the 60 to a hundred thousand dollars level, maybe a bit lower, but not at the $10,000 level, and I would put. If you’ve got good advisors, like the Fine Art Group, they’re probably, they’re probably 10 in 10 or 15 in the world. Remember, there are about 4,000 people who call themselves ARS Advisors.

And, and probably most of those have done about a year, about as much education as you have done. Um, but they just put the label on the back of their envelope saying Art Advisor, because they walked into Sotheby’s and spent a, did a three month course there, or Christie’s or something. But you know what?

What, what somebody like the fine art group brings is a hundred people with average of 20 to 30 years of expertise each. And that type of information is critical in understanding before you buy. So critical in buying art is understanding the fees, understanding the margins. Um, buying an auction is not always the best thing to do because the cost of buying an auction is typically 20 to 30%.

And unless you are buying something that’s deeply discounted where there’s a real opportunity and we think the artist is gonna get much stronger over the next five years, you’re better to buy privately where no one knows what you paid for it. Because everything that’s sold at auction is then publicly available knowledge.

And if I wanna buy, if you buy a. Um, a Picasso work on paper for $50,000 and I see it. You bought it at Christie’s. Uh, everybody will know that you bought it at Christie’s. Everybody know you bought it for $50,000. So anyone who’s buying it off, you would say, Hey, you bought that for $50,000. Why should I pay you $250,000 for it?

You’re joking, I’ll pay you 55,000. Whereas if they dunno what you pay for it privately, uh, they dunno where to stock. Yeah. Um. You know, you mentioned how there’s some art right now that is, um, at a discount. I’m cur, I’m curious how art moves. Does it, does it typically. So moving independently based on what’s in vogue or you know, how do you, how do you determine that something is undervalued and that it will have greater value later?

So there are certain artists that will. Stick around for the next, uh, 150, 200 years. There are certain artists who will stick around for the next 30 years. There are certain artists who will stick around for the next three years, and there are a lot of artists who will stick around for the next three months.

So it’s differentiating. There are probably a million artists that will stick around for three months and there are probably. 2000 artists that will stick around for the next, uh, a hundred years. And then of those 200, of those thousand or 2000 artists, um, there are some on the periphery, but you’ve really gotta focus in and avoid.

Uh, avoid an awful lot of the art world. And then if you look at the long term trend, you’re not gonna make money in general in one year. You, this art is not the market where you buy something for $50,000 and sell it a month later for $65,000. It’s typically you buy it for 50,000, you hold onto it for three, four years, and if you know what you’re doing and you’ve got the right team, you might be selling it for 75 and maybe even a hundred thousand dollars.

You’re never gonna get is really, really rare. It is one in one in 10,000 times you’re gonna get five times your money or 10 times your money. So this sort of theory that you bought something for $10,000, you’re gonna sell it for $150,000. It is extremely rare and very few professionals even then get it right.

So, um, many families have put a sort of 5% of their wealth into art. A, because they enjoy it. B, because they’re well advised, and trust me, lots of people say, well, I bought this, I bought that. There’s always a very smart advisor behind all these big families who said. Who do all the homework and give you the risks, the rewards, the upside, the downside, I, when we do a due Dili for every work of art that we buy for our clients, we do like a 20 page due diligence document.

A bit like analyzing a company. So when you go and buy. If you go and buy a stock, if you put $500,000 into a stock, you’ve done all your homework, you’ve looked at the analyst reports, you’ve looked at the cash flows, you looked at the, uh, what the market reading is and, and, and, and what you think the balance sheet’s like, and you get advice as to help go through it.

When people buy art. 90% of the world who buy art do it in about 25 minutes, right? They go in, they spend a hundred thousand, 200,000, 25 minutes. They like the look of the picture. The dealer tells them it’s 25% discount, that it’s a great deal. Best opportunity for lifetime. The. Boom, the deal’s done. Instead of a hundred thousand, they buy for 75,000.

And then they get annoyed when we come in from the fine art group and say, oh, you could have bought that for $25,000 somewhere else. Um, so we try and do that homework for our clients, give them all the information and give them the. Terrain. So for instance, if the artist is coming up for big shows in museums, that’s a plus.

That’s gonna help the artist succeed if the artist has been bought by major collectors. The right sort of collectors, like. I don’t know. The biggest collector in, in California, the main collector in Paris, the main, the main museums in London or New York, that’s gonna massively help. So if a young artist gets picked up by the Tate in London, or by the Whitney or by the Guggenheim, that’s gonna have a big impact.

And if there’s gonna be a big show of an artist, so let’s say you own an Ed Roche, you bought Ned Rousche from Gian or one of the galleries, uh. A, a, a few years ago, and if you hear that there’s gonna be a big show at, um, the Guggenheim or in, in Abu Dhabi or wherever, that’ll have a big knock on impact on the pricing of that art upwards.

So, so, and sometimes the death of an artist has an impact. So there are about 10 or 20 things that matter. One of the most important is, is it Right? There are a lot of fakes out there. So I see, I see one fake every day. And that’s just distilled down from what my company sees. So we probably look at a few billion dollars of fakes out there.

So there are certain artists that easily faked, certain artists are not. So that’s number one. Number two, buy your art from a reputable place, just because it’s too good to be true. It probably is too good. Too good to be true. Again, it costs you nothing to get, it costs you very little or nick to nothing to get some advice.

Um, but without advice, you’re spreading dangerously. So is it genuine? Is it in original condition? So a lot of pictures have been robbed or been damaged or being in the, in the light and therefore the paint drops off or being. Or had water damage or fire damage, and suddenly the value of that impact can knock a picture from a hundred thousand dollars down to $20,000.

I mean, I saw a picture by a major major artist called Can Leto from the 1740s. It looked fantastic. When you looked at it, it should have been worth 3 million uh dollars. But when you look close up and put an ultraviolet light over it, you realize that most of it had been touched up in the last 20 years, and it was probably worth.

250,000. So 10% of what it, what, what it would be worth if it was in perfect condition. So there are, there’s a checklist of items that you’ve gotta go through. Then you, then, my recommendation is you buy for a reputable gallery or, or get a reputable advisor to help you. Don’t buy at these sort of remote auctions where they tell you this, Andy Warhol will give you a certificate with this, and it’s going at at 20% of what it would make at the big auctions in New York because one of my clients spent a million dollars on 10 works that should have been.

Worth $10 million and they’re all fake. So he bought a million dollars of fakes. So rather than getting a discount of 90%, he lost a hundred percent of his million. Um, so then he brought in the professionals to help advise it. Um, when you think about art in general and, and prices going up and prices going down, do the markets in art as, as a general rule, track other economic cycles, other markets, or do they tend to be, uh, uncorrelated?

So art. Art in general has shown a steady upward trajectory. If you bought the index of the top thousand artists, you’d probably find probably a, a circa 8% compound return. Pretty, pretty reasonable. Um, but that’s over a, you know, you’ve got hold over a 10, 20 year period and that assumes very little transaction costs.

Um, but, uh. Interest rates have a big impact on art. So high right now. Interest rates are, yeah, we’re looking at sort of, uh, the, the, the, the, the bank, the rates are 5% to 10% to borrow money, and that’s probably too high to give a boom to art. So when interest rates were close to zero and people were borrow at two.

That really kicked art off big time. And we think the, when interest rates start coming down, now, maybe that’s not gonna happen in 2025, who knows? Um, but if they start coming down from the four to 5% level down to the two, three, I think we’ll see a. 10 to 20% uplift in the price of art. But so long as interest rates stay heavy, uh, I think art will have a tough time over the next few years.

So you mentioned, um, I guess for somebody who’s already diversified, um, the slice of portfolio that makes sense for art. Can you talk a little bit more about that? Yeah. I would say that if you’ve got, again, good advice. And you’ve got a big enough portfolio. So I would say, you know, really. You need a portfolio of about $5 million, and I would put probably 250 to $500,000 of that into art.

So I’d put five to 10% of your portfolio. Now, if you are richer, let’s say you’ve got a hundred million dollars, I would say you could take 10 to 15% of your portfolio and put into art because there are two. There were two or three aspects. One is. In America, you’ve got a huge tax advantage if you gift it to a museum.

Um, secondly, you’ve got a, um, huge enjoyment factor. You can hang the pictures on your wall, but beware there are, uh, state taxes. If you buy a picture, uh, ad auction, let’s say in. Uh, tax free in Switzerland or in in UK and ship it out to the us. Uh, you’re gonna have to pay, uh, sales tax when you bring it into your state, which could be, you know, six, between zero and 10% so that that has a knock on effect.

And in Europe there are taxes that can go anywhere between five and 20% when you hang it on your wall. So quite a lot of investors put. A high value art into warehouses and they don’t actually hang it on the wall, and sometimes they put a copy on their wall so that they can enjoy it and know that they own it.

Um, the, the negative side of art is that you can’t really split it up. I, if you’ve got three kids and one work of art, it’s rather unfair to say, well, that, that one work of art goes to my eldest son, or my youngest son, and the others get nothing. So quite often what happens is clients with big collections.

Maybe they have 20 pictures worth a hundred thousand dollars each, and then they have one picture worth 2 million because they bought a basia. You know, I had a client who bought a Basia. Uh, 25 years ago for 250,000 today, that’s probably worth 20 million. Um, and that’s disproportionate value to his, to his, um, rest of his art collection.

So what he wants to do is he’s gonna get us to sell that work, um, realize the 25 million, redeploy some of it into, uh, other artworks and give some of that to his kids. So, um. Uh, but my view is that I would allocate at the bottom end 5% at the top end 15%. And if you’re very wealthy, plants in the billions of dollars sometimes put 30% of their wealth into our, because their, their disposable assets are so enormous that are starts taking a major feature.

Um, but I would say don’t buy art below $50,000. And, um, don’t buy art if you are very, very rich, um, you know, stick in the, don’t go much above 10 million or if you are super rich, then there’s the, what I would call the mega game, which is the sort of 80 million, a hundred million dollars plus. So there’s a, there was a big, um.

Middle Eastern country that invested circa uh, $30 billion in art over the last 10 years. And that collection is probably worth 300 million, 300 billion now it’s probably gone up 10 times. ’cause they bought discreetly at the very, very top end of the market. The rarest that the rep. But it’s, uh, it’s not an easy, you know, it’s, it’s, it’s a complicated thing and.

You know, it’s not always about art. You could buy vintage motor colors. You could buy wine, you can buy, um, jewelry. You know, some of our clients collect Cartier jewelry. Again, if you’re gonna buy jewelry. Be careful. A, is it genuine? So you’ve really gotta have the right experts on your side. And B, if you’re gonna buy jewelry, buy signed pieces, buy the big names, car Shave Van Cleef, perhaps graph, um, and, and just avoid the unbranded jewelry.

That looks great because that’s done really badly. And the Cartier pieces from the 1920s and the 1930s and later. Have done incredibly well. So you might have bought a Cartier piece for a hundred thousand 20 years ago. It might be worth. 1 million now. Um, so there are other avenues of buying. Right now.

Wines come down by 20 to 40%. Vintage cars come down by 20 to 40%. Uh, some of them, although some of the Ferrari’s have held their value. Uh, and, um, you know, some of the, some of. Uh, Picassos or Ed Roches, Bridget Riley’s, these big name artists, they’re probably off by 20, 25%. Uh, and that’s why I think now is the best time I’ve seen in the last 25 years to buy art.

If you’ve got, if you are cash and you’ve got the right advisors. So I told. My richest clients, my less rich clients, that now is the time to research, get comfortable, allocate a portfolio, and look at buying art. Because some, even there, there’ve been some artists that were 40,000, they went up to 200,000, real speculative, sort of like penny stocks and they come back down to 40,000.

Uh, so there’s a rollercoaster in the young contemporary, uh, some interesting, some stay away. How liquid are these markets? Obviously, if you are putting in, you know, 10% of your, uh, portfolio, um, the event that you need to get out quickly, I mean, how, how liquid are the markets? You cannot get out quickly.

Okay. So stocks, you can do a sell and get out in 20 minutes. Um, art, my guess is the fastest you could get out is probably a. A month, 30 days, and the slowest is three years. So 30 days to three years. Uh, on average. My instinct is if you buy now, um, you’ve gotta hold for three years, three to four years, and you could probably get out.

There’s a chance right now that you could double your money in a three to five year period because there’s so many great artists that have come off in price and there is an opportunity. Um, but if you have to, if you bought today and you suddenly said, no, I need the cash. I need to get out, you can. You can, there’s gonna be a, a, a discount for, for, for getting, getting out of it.

So anybody who needs that liquidity, don’t put it into art. You’ve gotta put this money aside for three to 10 years and, and, and as look at it like that and don’t look at it as a one year investment. It’s very, very rare that you turn the money around in a year, if ever. So, uh, tell us a little bit more about how your company works and you know, how people could potentially.

Reach out to you and, um, you know, so our company’s called the Fine Art Group, www.fineartgroup.com. I run it for, uh, 26 years. I’ve been in the art market 35 years. Uh, there’s close to a hundred people involved in our business worldwide. So we’ve got offices all over the US and, uh, headquartered in the Rockefeller Center in New York.

Uh, our clients do, our, our clients do five things with us. So some clients inherit collections of art and we help them. We do an audit. So it’s a bit like, uh, you know, your, your, your grandfather dies and they leave you the whole contents of the house, and some of it’s fantastic and some of it’s not very good.

We will come in and do a valuation and then we will tell you. Those 10 pictures are fantastic and the rest is not worth having. We recommend selling that and keeping those 10 and in five years time, those 10 could be worth five times it. So we give you an in insight into what we would do with a collection number one.

That’s a very, very useful service for people who inherit sort of next generation or families that have bought art over the years and, and then suddenly get thinking, what the hell do I do? I’ve gotta downsize my house, or I want to hand over the next generation. What do I do? And we help them gift it, do charity donations, philanthropy.

We do all that. Number two. We lend money against art. So you said is art liquid? Well, we make it liquid because we take, let’s say you’ve put $2 million into art, we’ll lend $1 million against that. And you can borrow that in like, uh, within like. 20 days. So you can say, Philip, I’ve got $2 million of art.

Would you lend me a million dollars in in in three weeks? And I’ll say, yes, we can. And we will. And we could, you could borrow that money for 1, 2, 3 years and that helps pay. Estate taxes, it helps take tax bills, it helps. Let’s say you wanna give some money to the kids or whatever it is. So there’s another avenue.

So our financing is a very, very interesting business, and we have investors who like to invest in that, and that gets a yield for our investors around. 10% net. So it’s a very interesting product for clients who are looking to get a sort of bond yield with a fantastic product where we’ve had no capital losses and uh, a quarterly dividend.

So clients get a two point half percent dividend every quarter and a 10% yield. So that’s quite an interesting money. So that’s something that, uh, that accredited investors can participate in as well. Indeed, indeed. And, and I would say that’s almost sexier right now than, uh, you know, if you, if you’ve got a lower risk appetite, it’s, I would say that’s a very low risk product with a very nice, steady yield.

And we’ve run a business like that for 10 years. What kind of, um, minimum investments are, are those? It, it’s, uh, unfortunately it’s a bit higher, so it’s sort of 500,000 per million dollars. Um, but it’s locked up for three years. So you, you have a three year commitment and you get out, so it’s, it’s, and it’s di you know, so million dollars is yielding about a hundred thousand dollars a year, so it’s very.

Interesting return in this current economic climate and, and we had no credit losses and no, uh, no capital losses. So I like that. Number three is we help clients who’ve got a little bit more money to set up private funds, so the. Let’s say they’re a bit wealthier and they’ve got three to $5 million to invest, we will run a private fund for them.

So we will help them buy, hold, and sell. And that’s, I, I think, very neat. And they can have the art on their wall, they can have it in a warehouse. We can run it tax efficiently. We can run it in the us, we can run it out of warehouses. Uh, in, in, in. Tax free jurisdictions like Delaware, um, and you know, you can borrow the art and hang it on your wall for a time.

You could buy and sell and you can have the top advisors doing that. So that’s an option. Then we help clients, um, buy art as pure advisory. So some clients say, look, I’ve sold my company for $10 million and I bought a house for 2 million, and I wanna put $500,000 of art on the wall. We help clients do that, and that’s a really nice product where clients get advice, they know what they’re doing.

They send us a WhatsApp saying, I’ve just been into this gallery, or this auction, or I’ve been to Sotheby’s or Christie’s. I like something there. What do you think? And within. Anywhere between an hour and 24 hours, we come back to you and say, here’s all our comparables. This is why we’d buy it. This is why we wouldn’t buy it, and we give you advice.

But at the end of the day, you might say, you know what? For $50,000, I love it and I don’t really care what your advice is. I wanna buy it because I love it and it’s not about a financial investment. So that’s the next product. So, so I’ll invest and then we will. We plan to come out with investment funds where people can go.

We used to run Delaware Limited partnerships where people could invest 250,000, $500,000 into a limited partnership with a typical fee of like one and a half and 20 over six, which is like a private equity product, standard product. But most of these, um, types. They’ve, that’s a low end type of game for, from, from what there is in the retail market.

So I just emphasize to clients, there are products out there with fee loads of 20 to 40%. Don’t touch them and do your due diligence. And quite often these documents have 130 pages to read and clients can’t be bothered to read them. And in on page 90 and 120 is where they set out where their 20%, 40% fees are.

So just avoid them like the plague. They’ll come back to haunt you. Um, but so the five products we have in our business are art investing, art financing, either to borrow money or to invest in the borrowing fund. Um. Art, valuation, art, audit, and philanthropy. So helping clients review their collections, sell them so we can sell, save clients a fortune on when they sell on the fees they they pay.

So if you didn’t have our help, you might pay 30 to 40% in fees when you sell. So you might sell a picture, you might sell a collection that you inherited for a million, and you might only get 600,000 after. After transaction fees? Well, with the help of the fine art group that may be down to, uh, instead of 400,000 transaction fees, we might be able to get that down to less than half that, or even less than that.

Um, you know, it can get as low as 5% as opposed to 40%. So that’s a big help and we can help give people an idea of. The current state of the market. You know, is it good time to sell blue dins? Is it a good time to buy white dins? You know, one of the challenges in the jewelry world is these synthetic manufactured dins, and that’s had a big impact on the white dins.

And then, you know. Um, quite often you go to, you travel abroad, have a lovely holiday and you know, like I do, I say to my wife, I’d love to buy you a nice sapphire ring or something. And I, I made that mistake 25 years ago. I was in India. I saw something that looked like it should be worth three to $5,000.

They said, look for you, sir. It’s only a thousand dollars. Well, I found it was a colored stone. So even experts like me. You know, I didn’t take advice at, at that level. I knew I should have, but I took a view of it. It, it gave my wife enormous joy and I’ve never really told her that I messed, messed up. So even the professionals mess up, but it was a thousand dollars, not a million dollars.

Well, very interesting stuff. Uh, Philip, I, uh, appreciate all of your insight into this space and, uh, obviously if, uh, people are interested. They can, uh, check out the website and it sounds like there’s all sorts of different ways to participate. So, uh, thank you. Thank you again for joining us. Thank you for inviting me.

I’d loved it. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for, and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world.

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Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. Uh, you know, uh, what I try to do on the show ultimately is just try to make, make you think differently. And, um, you know, I mean, again, if we’re talking about art, like, you know, we just did, uh, in this interview, that’s one thing.

Maybe art’s not your thing, maybe, but you, maybe you like watches, maybe you like really nice furniture. I mean, all of this stuff has a niche where you start going out of the. The world of, of, uh, expense into the world of investment. And if you love stuff like that, I mean, hey, why not? Uh, think about, think about buying stuff that goes up in value and enjoying it while it does.

Uh, that’s it for me this week on Wealth Formula Podcast. Uh, this is Buck Joffrey signing off.