‘Know your client’ (KYC) guidelines aim to identify risks before entering business relationships. “Why should the same prudence not be practiced when buying, holding or selling art?” asks art advisor Willem-Joost de Gier. Discover his ‘Know Your Art’ framework here – and learn what pitfalls to avoid.
His favourite sport? “Watching one of our art experts exchange views with a well-informed collector.” His personal taste when it comes to collecting? “Champagne taste and a Perrier budget.” His personal mission? “Redefining art advisory.”
Born in the Netherlands and resident in London since 1979, Willem-Joost de Gier entered the art world by working on an MBA assignment. What started off as a change management project turned into a ten-year long career at Christie’s, the famous auction house. “I love diagnosing problems and then solving them. During my time at Christie’s, I ran global operations and became a global management board member. This is when I met fellow board member and Cadell co-founder Richard Bagnall-Smith.”
A multi-billion dollar industry
In 2019, Christie’s announced auction channel sales of USD 5 billion. The global art market was valued at over USD 64 billion in 2019, with the US, the UK and China accounting for 82% of global sales.
“I remember Richard spotting a report that highlighted how trillions of dollars of art are held in trusts and foundations. While digging deeper, we discovered that trustees relied on dealers, brokers and auction houses to make decisions for which they were legally accountable. We decided to create a business devoted to solving this issue.”
Look for conflicts, check the facts and drive competition.
Know Your Art (KYA)
According to Willem, the message is simple: “Know your art,” he says with an earnest expression on his face. “Seasoned collectors are highly sceptical. Look for conflicts, check the facts independently and drive competition. I have met countless successful entrepreneurs or investors who are excellent negotiators, numbers-driven and sceptical in their daily jobs. When they enter the art world, however, they forget everything they know.” How to avoid making ill-advised decisions? Willem has a few tips:
- Check the facts: “Never rely only on the seller’s word. Begin by checking the provenance. It tells you a great deal about authenticity and title. Continue with the Art Loss Register, catalogue raisonné and order independent condition reports. Does all the information add up?
- Communicate transparently: “Never allow yourself to be pressured into a quick decision or drawn into an apparent need for secrecy.”
- Understand whether the price is justified: “Knowing about comparable transactions lies at the heart of valuation. How did the artwork do at previous auctions? For which price were similar pieces sold recently? Invest the time and work to establish what constitutes a comparable transaction. Take great care, because objects that look the same are often not worth the same. Most asking prices are far too high, typically three times the resale value.”
- Use art fairs to buy for love, not as an investment: “Art fairs are great opportunities to discover young artists. Buy them for the love of it. If this turns out to be a profitable decision, that’s wonderful. However, you are betting on the future which no one can foresee. Some artists will do extremely well, but the majority won’t. If in doubt, you will surely fall in love again.”
- Hire an art lawyer: “Don’t skimp. Art lawyers know exactly what to look out for and can ensure you have warranties concerning title and authenticity. Also request advice on tax and customs issues.”
- Make sure your art is properly looked after: “Methodical care of a collection is a very good long-term investment. Keep your valuations and insurance up-to-date. Make sure that your art is being kept in suitable conditions. Collectors want perfect pieces. An artwork’s poor condition can have a big impact on its value.”
- Keep high-quality records: “I know it takes a certain amount of commitment but it is of utmost importance to keep the paperwork in order. File everything.”
- Be mindful about sharing information on your collection: “Unscrupulous actors may be sharing information further, hoping to suddenly find a buyer for your works of art. At the same time they may be significantly harming the value of the works by over-exposing them to a market that values works which are “fresh to the market.”
- Take your time: “The entire art world is constantly trying to find works to sell. If anybody tells you to “Sell now, sell everthing, don’t call anyone else,” you should be sceptical. Do not let anybody pressure you in your decision-making.”
- Choose the appropriate sales channel based on due diligence: “The ultimate objective is to find the perfect buyer who is prepared to pay the best price. Don’t just rely on personal connections or instinct. The likelihood that you know the perfect sale channel for your particular work is low. Therefore, invest the time to research.”
- Look at performance: “The chances of success at auction are significantly determined by working with the best team. Old masters, watches, silver…You can compare the performance of teams in major auction houses. Dealers, brokers and galleries, on the other hand, are often small businesses with limited reach. Transparency and discipline can be a real problem.”
- Negotiate favourable terms by turning the sale into a contest: “Particularly when you are dealing with very valuable works of art, you should turn the process of selecting a sales into a competition. Why? You might be able to negotiate better terms, including for example guarantees (a minimum price guaranteed by the auction house, irrespective of what happens at the auction). Marketing is another key aspect. Try to get your artwork onto the front cover of the catalogue. Web presence, PR, special events…it’s all about finding that one perfect buyer.”
Case studies, media headlines, personal anecdotes…Willem could share stories from the art market’s inner core for several more hours. What is important to him, however, is to conclude with the following: “It is impossible to assign a value to your love for art. The gap between its market value and your preparedness to pay is your own decision. But if you are willing to spend more, do it knowingly.”
“And may I add one last piece of advice?” he asks. Of course he may!
About Cadell art transaction advisory
Cadell is an independent art adviser subject to the UK’s FCA standards. Cadell is a trusted partner of Julius Baer’s open product and service platform. http://www.cadellco.com/