UBS posts guide to fine art investing, courting UHNW clients

Fine art is often a favorite asset class for the ultrarich and those aspiring to their ranks, but understanding how to invest in it sustainably is often mystifying. 

Swiss wirehouse UBS claims it can help clear that fog for wealthy would-be collectors — and in doing so, fill a valuable industry niche that other firms can learn from. 

In the middle of this year’s art fair season, the megabank published Thursday a 90-page paper titled “Your Collection, Your Legacy: Building a Lasting Art Collection” that serves doubly as a guide for rich clients to engage with the art world, and as a “thought leadership” marketing tool in its campaign to reach more of those clients. 

“The art world is famously opaque, famously unregulated,” which can be “daunting” for the uninitiated, said Matthew Newton, director and art advisory specialist in the family office solutions team at UBS, in a media panel on Wednesday previewing the paper. He was joined in the panel by David Leibell, senior wealth strategist of advanced planning at UBS, and Julie Binder, senior strategist of family advisory and philanthropy services at UBS. 

The news comes as UBS has said that one of its top priorities is growing market share in the wealth business among the ultrahigh net worth households in the U.S. One card it plays in this regard is the bank’s brand association — as a European “old-world” historic institution in the eyes of insecure American new money — with many gatekeepers of Western art: the gallery, museum and auction world. Doing business with UBS, the bank hopes to convey, means entrée for such clients into not only the ranks of the ultrawealthy but also the cultural elites. 

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Owners of high-value art in the global $70 billion art market get to participate in “a keystone activity among successful individuals and families across the globe for centuries,” wrote the authors of the bank’s paper, which abounds with flattering language casting wealthy collectors as “exceptional” individuals who preserve the cultural treasures of humanity for future generations and who can become respected art experts and influencers. 

Additionally, “You have the very basic benefit of living with great objects. You can create potentially a store of value, financially and culturally … [and] a lasting legacy,” Newton said of collectors. 

In addition to the bank’s own corporate collection of over 30,000 artworks managed by a team of curators, UBS has sponsored the premier industry art fair, Art Basel, for many years, and boasts extensive connections in the art market. 

“I’ve been the last couple of weeks at multiple dinners for galleries and various auction houses,” Newton said. Newton himself is a recent hire from the art world who joined UBS last summer from the Michael Rosenfeld Gallery in New York and now frequently educates the firm’s wealthiest clients on different aspects of art collecting. He said the art advisory service had “existed out of our Zurich office for many years at this point, but we wanted to have someone who could focus on our U.S.-based clients.” 

READ MORE: UBS picks up $1.7B private wealth team from AllianceBernstein 

The U.S. has for a long time been the top art market in the world by sales, followed by either China or the U.K., according to the UBS paper — and many M&A deals during the strong American bull market of most of the past decade have fueled the rise of more ultrarich households and family offices. Those new money entrants into the fine art world can be easily misled starting out, Newton said. 

“Many families are getting patchwork type of advice” from biased players in the art world who had an interest in influencing their buying decisions, he added, citing clients of UBS’s private wealth division who reported dissatisfactory prior experiences. 

At the same time, Newton said, expensive art is getting more expensive, which raises the stakes for getting purchases right. 

UBS, in this context, seeks to position itself as an independent advisor to those clients in the art market, Newton said. “I’m not trying to sell anything, I’m not tied to lending products. We don’t charge a commission or a fee. … The firm really understands that wealthy clients love collecting art, and we want to show genuine interest in that, too. I would say that distinguishes us in some ways from some of the other wealth management firms.” Although art advisory services in banks have existed for decades, Newton said, he believes that hiring more fiduciary-style art world experts to provide in-house guidance on collecting might become more prevalent, given the clear demand. “I wouldn’t be surprised if that does catch on as a trend.” 

The paper, reflecting UBS’s related art services, also offers advice to clients in creating foundations and loans with their artworks and incorporating those assets into estate plans. 

“Just as business owners do a business succession plan, I would like to suggest that art collectors need an art succession plan,” Leibell said. Without a well-defined plan for handling what will happen to art after its owner passes away, drama can arise among surviving heirs. “Litigation over tangible personal property that is not valuable, is extraordinary. People fight over the littlest thing because it’s connected to some kind of emotion or love from a parent over a particular item.”