Art & Finance Report 2019 6th edition Se me Movió el Piso © Lina Sinisterra (2014) Collect on your Collection YOUR PARTNER IN ART FINANCING westendartbank.com RZ_WAB_Deloitte_print.indd 1 23.07.19 12:26 Power on your peace of mind D.KYC — Operational compliance delivered in managed services to the art and finance industry D.KYC (Deloitte Know Your Customer) is an integrated managed service that combines numerous KYC/AML/CTF* services, expertise, and workflow management. The service is supported by a multi-channel web-based platform and allows you to delegate the execution of predefined KYC/AML/CTF activities to Deloitte (Deloitte Solutions SàRL PSF, ISO27001 certified). www2.deloitte.com/lu/dkyc * KYC: Know Your Customer - AML/CTF: Anti-Money Laundering and Counter-Terrorism Financing Empower your art activities Deloitte’s services within the Art & Finance ecosystem Deloitte Art & Finance assists financial institutions, art businesses, collectors and cultural stakeholders with their art-related activities. The Deloitte Art & Finance team has a passion for art and brings expertise in consulting, tax, audit and business intelligence to the global art market. www.deloitte-artandfinance.com © 2019 Deloitte Tax & Consulting dlawmember of the Deloitte Legal network The Art of Law DLaw – a law firm for the Art and Finance Industry At DLaw, a dedicated team of lawyers supports art collectors, dealers, auctioneers, museums, private banks and art investment funds at each stage of their project. www.dlaw.lu © 2019 dlaw Art & Finance Report 2019 | Table of contents Table of contents Foreword 14 Introduction 16 Methodology and limitations 17 External contributions 18 Deloitte CIS 21 Key report findings 2019 27 Priorities 31 The big picture: Art & Finance is an emerging industry 36 The role of Art & Finance within the cultural and creative sectors 40 Section 1. Wealth and the Global Art Market 45 Highlights 46 Art and collectible wealth 48 Global art market review 50 Auction guarantees 56 Regional trends 60 Regional profiles 62 Section 2. Art & Wealth Management 73 Highlights 74 Collectors & Art Professionals – Survey findings 2019 78 Wealth Managers – Survey findings 2019 84 Art & Estate Planning – Survey findings 2019 98 12 Art & Finance Report 2019 | Table of contents Section 3. Art-Secured Lending 107 Highlights 108 Survey findings 2019 110 Size and structure of the art lending market 114 Art-secured lending trends 2019 116 Section 4. Art & Investment 125 Highlights 126 Performance: Art as an asset class 129 Fractional ownership – The new age of art investment? 146 Social investment models in art and culture 154 Section 5. Art & Technology 167 Highlights 168 Survey findings 2019 170 ArtTech trends and case studies 176 Blockchain versus user experience: Deloitte Luxembourg 190 Snapshot from the Hiscox Online Art Trade Report 2019 194 Digital Art and its market 196 Section 6. Risk Management & Regulation 201 Highlights 202 Survey findings 2019 206 Regulation: A focus on anti-money laundering efforts 212 13 Art & Finance Report 2019 | Foreword Foreword Since launching the initiative in 2011, we We are have seen the global art market ebb and flow: from the aftermath of the financial crisis to the peak of the market in 2016. delighted to In parallel, we have also monitored how the wealth management sector is present the increasingly responding to competitive pressures in its own industry, and the role art and collectible wealth are playing sixth edition in the transition to a more holistic wealth of the Deloitte management model. Since our last report in 2017, external factors such as increasing political and Art & Finance economic uncertainty, rapid technological progress, climate change, and social Report. inequality have dominated the headlines on a daily basis. We live in a changing world, fraught with uncertainty. This is the context in which we should view the global art and Adriano Picinati di Torcello finance industry—the crucial intersection Director - Global Art & Finance between culture and wealth. Coordinator Deloitte Luxembourg With the advent of the millennial collector and an immense transfer of wealth on the Anders Petterson horizon, new ideas and models in the art Managing Director and finance industry are required. This ArtTactic year we have covered trends in social London impact investing, and taken a closer look at how these models are currently working within the art and cultural sectors. We have focused on the opportunities these models offer and how they could be adapted to a broader wealth management strategy. We have also explored the strong interdependencies that exist between the art and finance ecosystem and the cultural and creative industries. Finally, we have examined the fifth EU anti-money 14 laundering directive and its implications for asset class. We are honoured to feature the the art market. We are proud to see that This suggests that the art and finance dazzling works of visual artist the art and finance topic is slowly but surely industry needs to do more to raise Lina Sinisterra in this edition gaining traction within the broader Deloitte awareness and educate its stakeholders of The Art & Finance Report. network and we welcome contributions to about key developments and broader An award-winning artist from the report from more and more Deloitte issues in relation to art-related wealth and Colombia, she has enchanted offices. We thank Deloitte Russia, Japan, how they will shape the future trajectory of fellow artists, collectors, and Netherlands, Germany, Monaco, China, the sector. gallery curators from all over the Hong Kong, Italy, Canada, United States of America, Belgium, France, United Kingdom, We hope that this report will help to raise world. and Switzerland for their input in this awareness of the developments and edition. initiatives that have emerged within the The vibrancy and colour of her art and finance industry over the past pieces mirror the dedication This report identifies the need for more couple of years. Transparency, regulation, and passion for what we at education and stresses that more and technology trends will play an Deloitte create on the canvas information and research are required if important role in the future of the art and of our industry. In light of this we are to make the case for change. This finance industry. However, a collaborative collaboration, we would like to year’s findings show that fewer collectors approach between all stakeholders (art thank Sinisterra for providing the and art professionals feel they are aware professionals, collectors (young and old), ideal palette to our survey. of developments in relation to art as an and wealth managers) is essential if we asset class this year compared with 2017. are to address the pressing issues and The wealth managers surveyed said the challenges we face, particularly as regards same, with just under half (54 percent) increasing trust in the art market today and describing themselves as “aware” or “very in the years to come. aware” of what is happening compared with 57 percent who said the same in 2017. This could reflect that there have been fewer developments in the areas of art Above: Big Bang - Excéntrica © Lina Sinisterra (2014) investment (such as art investment funds) Below: and art-secured lending (fewer operators Comer del Arte Quiero © Lina Sinisterra (2010) and more consolidation). Conversely, however, we have seen rapid progress in technology (blockchain and AI) and art- related regulations (such as anti-money laundering legislation). These new trends are fundamental to the future well-being of the art and finance industry and the evolution of art as an 15 Art & Finance Report 2019 | Introduction Introduction The recent results from the major auction change in the art market and how many of Since the last houses show that auction sales slowed by the new ArtTech start ups aim to enhance 20 percent in the first six months of 2019 transparency and trust, whether through edition of the (based on results from Sotheby’s, Christie’s the use of blockchain technology or by and Phillips). This could signal that the art looking at ways to improve transparency market is heading for a period of weaker through more data, better data analytics, Deloitte Art & growth, as both the uncertainty surrounding and artificial intelligence. The other major Brexit and the US trade war with China take development that will compel the art their toll on the global art market. market to become more transparent is Finance Report regulation, which we cover extensively in Growth trends in the art market in recent section 6. The main focus of this section is in 2017, the years are also a cause for concern because the implications of the fifth EU anti-money they have failed to keep pace with the laundering directive, which will enter art market has growth in global wealth (see p.48 for into force in January 2020 and is likely analysis). Why are we not seeing a higher to have a significant impact on the art experienced correlation between wealth generation market and how it does business. Despite and the size and growth of the art market?1 the challenges that this regulation will What is holding wealthy individuals back present, findings from other sectors and 18 months of from investing more of their wealth in art as industries that have gone through similar an asset class? transition periods (the diamond industry positive growth. is discussed on p.241) suggest that the We will attempt to explore and answer reputational benefits of a more transparent these questions in this report, but one and professionally compliant environment critical challenge when it comes to ultimately create more trust and favor the broadening the appeal of the art market is expansion of the market beyond its current a lack of transparency. In this year’s report, boundaries.