Wealthy investors have many reasons for building collections of art, antiques, automobiles and more. Profit is rarely one of them.
The latest issue of UBS Investor Watch, "For love not money," finds that a quarter of wealthy investors are collectors. They spend significant time and money building their collections, driven by a deep passion for their subject.
Yet, while most collectors consider their collections to be valuable, amounting to an estimated 10% or more of their net worth, many fail to treat their collections as a meaningful investment. For example, 51% of collectors have never sought an appraisal, and almost half have no insurance on their collection.
"There's a lot emotion tied to planning for art and collectibles, because nobody is as passionate as the collector," said Dave Leibell, Senior Wealth Strategist, UBS Advanced Planning Group.
Nevertheless, it is crucial for collectors to "take an emotional step back [and] do the proper planning" for their valuables, he added. "And they need to get quality advice." Listen to the full WMA On-Air interview.
Overwhelmingly, collectors prefer to pass on their valuables to heirs rather than sell them. Yet few have educated their heirs on managing, appraising or how to sell the collection. Moreover, heirs are rarely enthusiastic about inheriting collectibles, though duty and guilt lead many to hold onto them.
Overall, just 35% of investors who inherited a collection had any interest in it. Objects, it seems, are easier to transfer than passion.