Great Wealth Transfer Is Encouraging Collectors To Sell Works –

Over the next quarter century, roughly $73 trillion will be transferred from America’s boomer generation to its Gen X and millennial children in what has been dubbed “The Great Wealth Transfer.” About half of that number will go to the top 1.5% of households, aka, America’s wealthiest class.

This has made Sarah McDaniel’s job very complicated as of late.

As head of Morgan Stanley’s art resources team, McDaniel helps high-net-worth clients manage their art collections, but aging collectors are reevaluating their plans for who will own their art amid a rapidly evolving art market and one another’s differing tastes. generation

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“What we found is that with the great wealth transfer and the economics of taste in the art market, many of the kids who are collectors don’t have the same taste in art as their parents,” McDaniel said. ART News In a recent interview. “In the past the categories of collecting and who was collecting them tended to last longer so there was less potential for disruption when a collector died or disposed of their collection.”

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

But when heirs don’t want their parents’ collections, the two best options for collectors are to either gift the works in exchange for a large tax break or sell the art while the collector is alive, McDaniel said. This means not just selling work as an end-of-life plan, but often selling work throughout life.

“The potential to realize additional value through relationships [collectors have in the market] And the relevance of the art they collect may be better than waiting decades later to sell works of art that weren’t as desirable when the collector bought them,” McDaniel said.

The increasingly rapid changes in art tastes and the subsequent volatility of the art market can feel jarring, but McDaniel points out that there are many positive factors contributing to this increasingly volatile trend cycle.

“There’s a new generation of collectors who are interested in acquiring the art of their peers,” McDaniel said. “Collectors are more female and more globally diverse, there are more Asian collectors.”

These new collectors often want to buy from younger, living artists from more diverse backgrounds, according to McDaniel, which auction houses like Sotheby’s have already capitalized on. In November of 2021, Sotheby’s held its first evening sale dedicated to living artists. “The Now” sales were a huge success, especially for female artists such as Simone Leigh, Anna Weyant and Jennifer Packer, who each earned 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’ve seen an acceleration or compression of the primary and secondary markets for some living artists now,” McDaniel said. “They can actually sell in both channels simultaneously.”

This fast-moving market already faces great volatility for young artists, who often rise quickly and disappear even more quickly, with little to show for the success of work on the secondary market.

So how are McDaniel’s customers responding to the knowledge that the collections they’ve spent decades with may be unwanted? It depends on the type of collector.

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

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

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