Tag Archives: assets

A New Way of Thinking on Assets

“When it comes to assets, a growing number of people are increasingly satisfied with having access to these assets, rather than owning them.” — Transpay.com

There is no doubt that the hot topic for 2017 and beyond will be the growth of the so-called sharing economy.

The reason for this growth is simple: Instead of owning assets, people are increasingly electing to access them.

But that’s not the end of the story.

Exacerbating this access over ownership mentality is the rapid growth in mobile technology. This allows online platforms, like WeGoLook, to use powerful mobile apps to facilitate the new emphasis on access.

The idea of owning assets, popularized by the consumption habits of baby boomers, is now slowly losing its appeal.

The assets you do own can now work for you, and ultimately earn you supplemental income.

And people are comfortable with this. A recent PwC study found that 60 percent or people believe the statement that “access is the new ownership.”

What implications does this have for insurers?

Great question. But first, let’s discuss the idea behind the sharing economy.

See also: Breakthroughs in Managing (and Insuring) Tangible Assets  

Access to Assets?

The concept of access over ownership, also known as collaborative consumption or the access economy, is simply the idea of sharing resources.

Due to advances in mobile technology, sharing assets (homes, cars, labor, consumer items) is structured through the use of online platforms and mobile apps (Uber, Airbnb, WeGoLook, etc.).

The sharing economy allows consumers, and businesses, the opportunity to use assets on an as-needed basis instead of purchasing and managing them.

Is Sharing Better Than Owning?

It’s certainly becoming more popular.

A recent survey found that 72 percent of adults are expected to participate in the sharing economy over the next two years.

Further, PwC estimates that by 2025, the sharing economy will be a $300 billion dollar industry.

So why are people choosing to access rather than own?

The Downsides of Ownership

While owning assets may portray some degree of success, prestige, and affluence, it also means depreciation, maintenance, and storage.

Depending on the asset — boat, fancy car, vacation property, etc. — you have to use that asset frequently to make it worth its value.

And so often, this isn’t the case. Consider that both cars and boats sit unused 95 percent of the time.

That’s massive underused capacity and waste!

Think of something expensive you bought years ago that you’ve used a fraction of the time?

Yea, we are all guilty of this!

But fortunately, people are changing their ways.

A study by Frost & Sullivan estimates that the number of participants in car-sharing ventures in North America will rise to 9 million by 2020.

Considering that almost any asset can be shared, the possibilities are endless.

Can the Insurance Industry Jump On Board?

Many have argued that the insurance industry needs to innovative its old business practices.

Whether or not they’re right, there is some truth to the idea that all industries need to adapt to the sharing economy phenomenon.

Insurance carriers have already experienced the massive shift to mobile tech with the insurtech revolution. Now, the consumption emphasis on access is gaining momentum.

Here’s a statistic to blow your socks off: 90% of millennials don’t have insurance.

This should be a siren song to insurance industry insiders. There is a huge gap that needs to be filled!

See also: What Millennials Demand as Customers  

Many insurtech companies like Lemonade, Friendsurance, and MetroMile, are offering access to shared insurance pools or time-limited policies.

These companies are embracing access, and are killing it!

Insurtech as a whole has attracted more than $5 billion in investment since 2011.

On the policy side of the equation, similar rethinking needs to occur.

Since consumers are increasingly electing to share their assets instead of owning them, traditional insurance packages don’t apply.

Indeed, many insurers have developed niche specific policies for ride-sharing, car-sharing, and home-sharing. But, many have not.

Rising to the Challenge

The truth is, the sharing economy and its emphasis on access can no longer be an afterthought.

The sharing economy demands a fresh look at the traditional way risk management and insurance packages are offered to consumers.

As more consumers access goods and services online, an exciting challenge and opportunity are presented to insurance companies.

How will you react?

100 Ideas That Changed Insurance

Recently, I bought a copy of Time magazine’s publication, TIME 100 Ideas That Changed the World: History’s Greatest Breakthroughs, Inventions and Theories, in an airport book store while on a business trip.

It was certainly a compact and interesting read, highlighting amazing innovations that we now accept as the norm of human existence on Planet Earth, from the discovery of germs to the foundation of a seven-day week to the building of the World Wide Web. I was amazed as I read through it and was reminded of how human existence since the beginning of recorded history has been truly shaped through ideas turned into game changing innovation results.

The purpose of this blog is not to get philosophical about our evolution as humans but, rather, to relate it to the world we live in every day: insurance. So of course, after I paged through the Time book, my wheels started spinning around the 100 ideas that have changed insurance – and I started to reflect on how we as an industry got to where we are today.

The history of innovation in insurance has largely been shaped by advances made in technology external to the industry. As markets, businesses and consumers start to access better ways of doing business, insurance companies adjust to meet those demands. The same can be said for many other industries. But insurance is unique because its very core concept is to protect our customers’ assets from loss and mitigate risks. So, inherently, the insurance industry will always adapt in some form to technology changes to assist the customer. That is what we do every day – we adapt – though some days we don’t necessarily remind ourselves of the core mission.

I started to ask myself, if we had to make a list, what would be the 100 ideas that changed insurance? I think it would be too hard to classify, in terms of the entire evolution of our ecosystem, because the last 100 years have changed so much. So let’s just focus on the last 40 years from a technology perspective: mainframes … client servers … personal computers … development of core systems and automated business processes … data processing to information systems … typewriters to the fax machine, copiers, printers, scanners and even email … our world on the World Wide Web … mobile phones … web applications … smart phones … big data … telematics and even some of the emerging technologies like Internet of Things, wearable devices, artificial intelligence, semantic technologies and even drones and aerial imagery. The list of maturing and emerging technologies does just go on and on. It might be hard to pare it down to just 100 ideas, even by looking at just technology.

The point is, when we talk of ideation and innovation, sometimes we forget to reflect on where we have been. Forty years ago, if someone described writing a blog for you that you could read on your mobile device, you may have seriously questioned their sanity. Today, it is commonplace.

As we move rapidly through 2015 – look at plans; take the time to reflect on successes; take the time to reflect on where we truly have been. Sometimes these reflections are the seeds of new ideas, new ways of doing business and new ways to gain an edge. Just think, for every great solution out there, there is a better one possible. Innovation should be inspiring our work, and I am excited to see where it leads us.

Old-School Maps May Be the Killer App!

Whenever we’re faced with a challenge or an opportunity, we tend to respond with thoughts about what should we do and how should we do it. We seldom think to ask the who questions. Who is likely to be an ally, an obstacle or an unknown? In my decades of studying strategic relationships for return on impact, it’s rare to find executives investing time in truly understanding the flow of influence in their own or target organizations they seek to work with.

The result of overlooking this strategic step can be costly. Let me give you an example.

A few years ago, I flew to Chicago for a meeting with a group of executives. We had done our preparation, in light of the importance of this multiyear, multimillion-dollar project. Reviewing the attendee list, I saw one name I didn’t recognize-who was this individual? When the meeting began, everybody introduced themselves with a briefing on their goals. One person chose not to sit at the conference table, but in one of the chairs against the wall. While everybody else talked, he quietly, very diligently, took notes. I became more and more curious. At the end of the meeting, the obligatory exchange of business cards took place. Everyone else had titles on their cards, VP and EVP and so forth. This one person’s business card was the only one without a title. By that time, I just about couldn’t contain my curiosity. I asked around and learned he was the “special adviser to the chairman of the board.”

Apparently, the project we were working on was not only a priority for the executives at the table, but of interest to the board, as well. The chairman had sent this fellow to the meeting to report back directly to him. Three months later, a number of the people who had been around that conference table were no longer with the firm.

Mr. Special Adviser could be found nowhere on that organization’s org chart, but his political clout is self-evident. The moral of this little story is that you ignore influence in an organization at your peril.

If I’m putting a $10 million project in front of a decision-maker, the last thing I want is someone I don’t know, someone I haven’t even known existed, influencing that project. I’ve learned from experience that, as bizarre as it sounds, too often the greatest political power or influence in an enterprise has nothing to do with the titles on its org chart.

Map the political influence structure

Sample social network analysis (SNA) map – Often is overkill for simply understanding who you need, who you know and how to connect the dots!

 

I’ve developed tools to help me avoid surprises from unacknowledged flows of influence, and I suggest you do, too. Create for yourself, for each organization or initiative in which you invest your relationship capital, a political road map.

Here is the shocker! It’s not an app, it won’t run on your smartphone or tablet, and it doesn’t use a satellite orbiting the planet. In our hyperconnected digital world, we’re losing sight of the fundamentals. Think of this recommendation as learning how to write cursive when everyone else is working with Siri! (By the way, I’ve also researched a dozen or so called “enterprise relationship management” technologies – most are myopic at best, moronic at minimum. They’re so busy trying to give you fancy graphics that their assumptions are flawed, for instance about the quality of a relationship.

Here is what you will need for this exercise: three colored markers, a straightedge, a whiteboard, some index cards and tape. Start by drawing sources of information flow. (For each individual, draw a rectangle the size of your index cards: You will add information here in the next step, using cards to keep your roadmap flexible.) Do not map the explicit power structure, but what you’ve observed about the influence structure so far.

Next, use your colored markers to color-code each relationship on your chart:

  • Green: This person is an ally who has been visibly supportive in the past and “gets” what you are trying to do;
  • Yellow: This person is neutral to your initiatives or is an unknown. Is he on the fence? Could she be swayed? Try to capture some aspect of his or her position from observable behavior;
  • Red: For whatever reason, this person opposes what you are trying to accomplish. I’m also curious here whether he can be neutralized or eliminated to minimize my risk profile with the specific initiative or project.

Use your index cards to write comments and impressions about the individuals you have just color-coded. Note your questions as well as your observations. If something they’ve said gave you these impressions, write their words as accurately as you can recall them.

When done with this step, tape the cards to the whiteboard next to individuals’ names.

At this point, your influence chart should begin to generate insights. Step back and listen to what it is telling you. Who do you need on your side? Who can you ignore? Who is already an advocate who puts wind in your sails? Add index cards with your observations.

This is the time to apply a process I referred to as strategic relationship triangulation in my book, Relationship Economics. For any piece of information critical to your political success with these relationships, you must find three independent sources to verify, validate or void the critical assumptions you are making about each person or piece of information. It’s homework time. Use your relationship network and other “biz-intel” sources to triangulate the assumptions on your influence road map. Rework the position of individuals in relation to each other as new insights emerge or old ones are voided.

Relationship triangulation can help you understand the most influential sources within a team, a department, an organization or an entire industry. Who are the real decision-makers, and who works most closely with them? Knowing this enables you to much more effectively customize how you develop relationships and add value for each individual.

Does this process take a lot of effort? Yes. Is it necessary? It would be naive to think you don’t need to build a political road map based on solid research. Could your time and effort be better spent focusing on outcomes? Only once you have a solid understanding of the relationships you need to help you achieve those outcomes. Don’t treat this task as a “one and done.” The chart need will frequent updates as the situation evolves.

This political roadmap allows you to quickly visualize your relationships and, specifically, your relationship assets and liabilities. Further, it helps you see whether you have enough support to accomplish your goals, or where you need to invest time and effort to build that support. When you can see who is an ally and who is an enemy, you can plan your next steps. “What can I negotiate? What can I exchange? Do I have something of value that they want?” It’s called “politics” for a reason—this kind of “horse-trading” is what our elected officials do.

Any kind of organizational sea change—a merger or acquisition, a large-scale restructure, any new line of business, any succession planning any geographic expansion requires a political road map at this level of detail. These are all highly disruptive events to most businesses.

Frankly, I see too many people blindsided by disruption because they simply failed to maintain an accurate road map of the political terrain they are trying to navigate.

By the way, if you’re looking for the science behind these ideas, Google “social network analysis.” You may be surprised to learn that it has nothing to do with Facebook, Twitter or YouTube!

Nour Takeaways:

  1. Because influence doesn’t show up on org charts, you need to invest the time and effort to visualize that information for yourself.
  2. You are welcome to use my system of color-coding and notes, or develop a system that works for you that shows the flow of influence we call “office politics.”
  3. Rigorous triangulation allows you to trust your insights-which are invaluable when dealing with disruption.

Breakthroughs in Managing (and Insuring) Tangible Assets

In recent years, high-net-worth families have increasingly turned to tangible assets for more than their aesthetic values. A 2012 Barclays report found that high-net-worth individuals in the U.S. hold an average of 9% of their wealth in tangible assets. A 2011 ACE Private Risk Services study of high-net-worth households found that 74% of respondents, all with more than $5 million in investable assets, cited investment value as a reason to purchase rare art or wine, valuable jewelry, sports memorabilia or classic cars. Two-thirds said the potential for appreciation in value was important in their purchase decision.

As values of many categories of tangible assets have escalated, these assets increasingly serve to diversify investment portfolios during periods of volatile market gyrations. In the ACE study, more than half of the respondents reported that the investment diversification value of their tangible assets has become more important to them since 2008.

“Investors are increasingly looking to hard assets, such as valuable art, antiques or fine watches and wine collections, because of the perceived ability of these assets to hold value during market fluctuations,” says Tom Livergood, chief executive officer and founder of The Family Wealth Alliance, a Chicago-based family wealth research and consulting firm. “Across the industry, we’ve seen investors rush to safety and stay there.”

Blind spot

Even as tangible assets gain recognition as a new asset class, high-net-worth individuals rarely bring to their passions for art, wine or jewels the same rigor they have when making financial investments or business decisions. In ACE’s 2011 study, despite the growing number of households reporting greater importance of tangible assets to their investment portfolios, nearly 40% of those surveyed did not have all of their precious items insured against property loss with a valuables policy. Additionally, one in three reported that they were not updating the market value of these assets at least once every three years, and a full 15% of respondents had no formal documentation of their non-financial assets.

“It’s amazing how often some advisers, especially those with sophisticated knowledge of financial markets, suddenly turn unsophisticated when it comes to non-financial assets, notably art,” says Ronald Varney, owner and president of New York-based Ronald Varney Fine Art Advisors.

To Evan Jehle, a New York-based principal at Rothstein Kass, a professional services firm with a significant family practice, wealthy families typically pay 
far less attention to their personal property than to their business affairs. “Our clients would never let something fall through the cracks in their professional lives, but many families have never thought of their tangible assets in this way before.”

Thomas Handler, partner and chairman of the Family Office Practice Group at Handler Thayer, a Chicago-based law firm recognized as a leader in serving family offices, private businesses and high-net-worth individuals, says his office often advises clients who don't have a business plan for their tangible assets. “It is incredibly important for wealthy households to understand how to hold, report, title and insure their non-financial assets in estate planning.”

Challenges of managing tangible assets

Today’s investors have the opportunity 
to reap significant benefits – financially
 and aesthetically – by investing in
tangible assets, but these investments 
pose risks and challenges different from investment
 in traditional assets. Wealthy households and their advisers may cheer the rebounding market for art and other valuables, take comfort that they have diversified their investments and look forward to potential price appreciation in the future. However, those cheers could be premature if owners of non-financial assets fail to understand and properly address the critical issues facing these assets. Those issues include: value and authenticity, documentation, estate and tax planning 
as well as insurance; additionally, owners of tangible assets should embrace the new technology tools that dramatically improve the management of tangible wealth.

Value and Authenticity

The market value of tangible assets can change, sometimes rapidly. In July 2013, a 1954 Mercedes-Benz sold for $30 million, the highest price ever paid for a car at an auction, shattering the previous record of $16.4 million set in 2011. Global sales of wine, diamonds and precious gems have also been increasing, often to record levels. In December 2012, Sotheby’s recorded its highest one-day jewelry sales in the Americas, selling $64.8 million of high-carat diamonds and precious gems. The Live-ex Fine Wine 50 Index reached 106 in April 2013, up 5.3% in the first half of 2013. Over a 10-year period, prices for gold more than quadrupled, only to retreat more recently.

The market for fine art is especially robust. In 2012, Christie’s auction sales totaled more than $6 billion, a 10% increase from 2011. In May 2013, Christie’s reported $640 million of sales in its Post War and Contemporary department in one week, setting an auction record for any individual category.

Dramatic shifts in the market present challenges as well 
as opportunities for investors in tangible assets. “Today’s market is both global and complex,” Varney says. “Modern and contemporary art have made all the headlines, for that is where the greatest demand is today; but by next year the market could be turned upside-down, as happened in the fall of 2008 amid the global financial crisis.

Alan Fausel, vice president and director of the Fine Art Department in the New York office of Bonhams, a London-based auction house, cites the rapidly changing market as a serious issue for investors. “There is a huge risk and reward in today’s market because so many investors are entering uncharted territory. Today’s contemporary market has seen so much volatility and so much uncertainty with newly famous artists, that investors are especially challenged to understand the true value of the works they own.”

Protecting investments in art, jewelry, antiques or wine begins with an appraisal. Smart investors should perform their due diligence to select appraisers with specific expertise in the genre of their assets. “An accurate appraisal is the foundation for every decision 
an investor will make regarding his or her tangible assets,” says Anita Heriot, Philadelphia-based president of Pall Mall Advisors, a U.S. and U.K. art appraisal firm. Before donating, selling, insuring or placing valuable items in a succession plan, investors must know how much everything is worth. “Wealthy individuals must understand that the values of their tangible assets have changed, and these values will continue to change over time,” Heriot says. “Without understanding the value of their property, people cannot even begin to make correct decisions.”

Heriot observes that wealthy individuals sometimes drastically undervalue their tangible assets. She recalls one family that was tracking assets based on appraisals from 1983, with nearly 30 years between consultations. The collection was originally valued at about $2 million, but, after an updated appraisal, the
 fair market value was nearly $100 million. “There were paintings of incredible value hanging on only one nail, including a Rothko with an insurance value of at least $70 million. Had this family known what their property was worth, they certainly would have taken better care
 of it.” An appraisal from a qualified professional can
 also minimize other risks, as well as provide guidance regarding potential fakes and forgeries. In addition, an appraisal can identify other issues that could affect the value of the item or the right to ownership. These include the sale of items made from protected species, protected antiquities or stolen works.

Documentation

All too often, high-net-worth individuals and families find the process of documenting, tracking and managing
the contents of their home, including fine furniture and other valuable items, to be onerous. Proper documentation of personal property typically involves photo or video records, storage of purchase receipts and, in the case of highly valuable items, expert appraisals, proofs of title and provenance and records of any restoration work. Moreover, values need to be regularly updated, sometimes on both a depreciated-value and replacement-cost basis.

“Families rarely keep accurate records of their tangible assets because, quite frankly, it can be a lot of work,” says Jarrett Bostwick, wealth transfer and estate planning specialist at Handler Thayer, the Chicago law firm.

“If someone buys two pieces of art, a piece of jewelry, two watches and a diamond pendant for his wife, then they have to sit down and put a schedule together, contact the insurance company and have them come in and have them ask you a whole bunch of questions, which is kind of a pain. Rarely do our clients partake in this kind of rigor.”

If documentation is done at all, it tends to be completed inadequately and infrequently. ACE Private Risk Services and Trōv have been collaborating on a program in which specialists have examined the contents of more than 3,000 homes of high-net-worth families. In this Home Contents Valuation program, ACE risk consultants used Trōv technology to provide the industry’s first customized estimates of the value of a home’s contents at policy inception. Nearly 50% of the homes evaluated did not have enough insurance to cover their contents, and the average amount of underinsurance exceeded $415,000 per home. Condominium homes were particularly at risk. Nearly 80% had inadequate contents coverage. Among homes warranting an increase in contents coverage, those with a structural value of $2 million to $3 million had an average shortfall of $417,000 in contents coverage; those with a structural value of $5 million to $7.5 million had an average shortfall of $852,000. Furthermore, many valuable items were only protected by general contents coverage in the homeowner policy, when they should have been listed as scheduled items in a valuables policy.

The lack of proper documentation of a family’s tangible assets can lead to wide-ranging problems. “You have to know what you have in order to be worried about it, and to take steps to avoid losing it,” says Joy Berus, attorney at Berus Law Group in Newport Beach, Calif., a specialist in tangible asset protection. “If a family doesn’t have an updated inventory of their valuable possessions, they leave themselves vulnerable to taxes that could have been planned for and reduced, discrepancies, risk of serious financial loss and the inability to pass down their assets to the next generation with a step up in basis. Proper documentation of a household’s tangible assets is the first step in identifying a family’s tangible wealth, and can make the difference between security and paralysis.”

The magnitude of the potential issue is evident in one statistic: Over the next
 30 years, as much as $27 trillion of 
family wealth will be transferred from 
Baby Boomers to their children and grandchildren. That inheritance will include a great deal of tangible assets that will need to be documented, appraised, accounted for and protected.

Wealth managers often encounter situations in which a client dies and the family or trustee does not know where all of the valuables are. “These issues don’t usually come up until a client passes and you have to collect all of the assets and figure out what’s there,” says one wealth manager who works with high-net-worth clients. “Tangible assets aren’t addressed enough in the typical conversations between wealth managers and their clients.”

Handler, the attorney, points to a noted photographer who was living in a retirement home. 
He kept with him a large collection of negatives of images of leaders, celebrities and historical events.
The photographer suffered from dementia, and over
 the years most of the collection slowly disappeared. “Unfortunately, the family did not have a record of everything and didn’t know who took the photographs,” Handler recalls. “We found some of the items on the black market on websites. But the vast majority is never going to see the light of day.”

Berus recalls working with professional athletes and asking if their wealth advisers asked them if they possessed sports memorabilia. “Every one of them said the same thing, ‘Nobody has ever asked before.’ One retired football player talked about how he lost the majority of his lifetime collection because it had been in a fire, and it wasn’t insured. He couldn’t prove what he had and had a major loss because of it.”

Berus adds, “When people don’t know what they have, they can lose money and be taken advantage of by people who do know what they have. You don’t want to lose the value of what you own or be taken advantage of. You also don’t want to cause tax problems for yourself or pay unnecessary taxes. When you know what you have and know what it is really worth, you can make better decisions.”

Loss Prevention

By definition, tangible assets are subject to risks of physical damage, theft and the ravages of time. Yet experts say that high-net-worth families often neglect
 to take steps to protect their art, jewelry, wine and other valuables from these threats. One ACE study, for example, found that 40% of wealthy individuals surveyed failed to take advantage of the services of a risk consultant who could help them reduce the risk of damage and theft.

Collectors do not always realize the risk-prevention measures available to them to help guard against, 
and minimize, exposures, says Heather Becker,
 chief executive officer of the Conservation Center, a Chicago-based provider of conservation services for fine art, textiles, photography and sculptures. “No one wants to think a significant loss will happen to them.”

Many families display or store their precious possessions in ways that increase the risk of loss. For instance, they hang artwork above an active fireplace, where the hot, dry air and soot accelerates deterioration. They neglect to place a historical artifact, such as a letter written by a famous figure, in an archival box protected by anti-ultraviolet protective glass, exposing the artifact to dangerous rays and fumes.
 Or they store a valuable stamp collection in a closet beneath a bathroom. If the tub overflows or the toilet develops a leak, the stamps could be ruined. “So many people forget that these assets – art, wine, gems – are very fragile,” Varney says. “Valuable assets can go from $1 million in value to $0 in the blink of an eye.” Investors who fail to properly address these threats remain vulnerable to severe financial loss.

Even items made of strong, durable materials can be
ar risk. Becker recalls the story of an ancient metal sculpture, which its owner stored in a warehouse for several years while not on display. While the owner made sure the sculpture was stored in a protective crate, the crate was stored on its side, instead of standing up. “The sculpture was severely warped and sustained considerable damage,” Becker says. “There is a cumulative effect to these risks that individuals must account for.”

Insurance

Given the increasing value of rare art, precious gems and fine wine, and the array of physical threats and other financial exposures confronting these pieces, proper insurance represents a critical part of a complete wealth-protection plan. Often the best place for families and their wealth advisers to start addressing this need is with an insurance broker or independent agent who specializes in serving families with emerging or established wealth. These insurance advisers, who can be recognized by their access to specialty insurance carriers, can usually suggest and coordinate services from a variety of experts.

While investors of tangible assets may go to great lengths to acquire the items they desire, they frequently fail to adequately protect them. In a 2012 ACE survey, fully 86% of insurance agents said the families who insure their homes and possessions with mass-market insurance companies likely carry too little insurance for their treasured items. One in three wealthy families was updating the market value of their collections every three years.

“Waiting three years or more mean their valuations will be wildly out of date,” says Fausel of Bonhams.

ACE Private Risk Services and Trōv analyzed 94 valuables schedules to compare stated replacement values with current market values. For the 48 schedules of fine art assets, comprising 1,722 objects, 665 objects were potentially underinsured. For the 46 jewelry schedules, one in four objects was potentially underinsured. Moreover, 32% of all the analyzed items had descriptions that were too vague or incomplete to allow for an accurate valuation. If a loss were to occur, this could lead to a dispute.

Emerging technology

For individuals and families with substantial tangible assets, new technology tools exist to make tracking, analyzing and sharing information about their assets significantly easier and more efficient. Pall Mall’s Heriot sees high demand for these tools: “As tangible assets become more valuable and wealthy families become more invested in their personal property, we see clients begging for a better understanding of what they own and greater knowledge of what it’s all worth.” The goal for wealth advisers and their clients should be to make tracking and analyzing information about personal property regular, everyday actions rather than infrequent behaviors.

Progress is promising. ACE Private Risk Services offers clients access to its Home Contents Valuation service, providing guidance regarding general contents coverage at policy inception–at the moment, coverage for personal property, a home’s contents, is typically assigned based on a percentage of the home’s structural value or it is a guess. Trōv has developed technology, partnerships and applications to tame the unruly mass of data about every tangible asset in its members’ lives. The core of the
 Trōv platform is a private, online digital locker where the information about property and possessions is collected and securely managed (called a Trōv, like treasure trove). Because most of Trōv users’ important personal property is located in their private spaces, Trōv is training appraisers and insurance risk managers to use its Trōv Collect application when they are in their clients’ homes. With the acquired information, a Trōv is activated – and with it a complete knowledge of what each family owns, where it’s located and what it’s worth. Acquisitions can be automatically added to a personal Trōv at retail point-of-sale, via electronic receipts and through a mobile application. The Trōv Mobile app enables members to snap a picture of any acquired item, add any support information, such as a receipt, package art, bar-code or QR-code, and send it to their Trōv in real time. As purchases are added, and as values change within the Trōv, the member can choose to have his or her advisers automatically notified to ensure the items are always accounted for and adequately protected.

Vision of the future

The future of wealth management encompasses an understanding of a client’s tangible assets as well as financial assets, completing the picture of total 
net worth. By using a continually updated inventory
 of personal property, families can manage risk on a real-time basis, applying effective loss-prevention techniques, securing the proper amounts of high-quality insurance coverage and anticipating tax and estate-planning issues. Insurance companies such as ACE will be able to recommend safety measures and introduce coverage rates that are increasingly fair, accurate and economical. Private bankers, estate planning attorneys and family offices will develop deeper relationships with their clients and referral networks. Wealth advisers will be able to expand the perspective they offer to clients and engage other appropriate professionals, such as insurance brokers, on a more timely and routine basis. Advisers who provide clients with a full-circle view of their assets will be well-positioned to gain a competitive advantage.

Cloud services, such as those provided by Trōv, will even enhance enjoyment of prized possessions. With a few simple strokes on a mobile device, an owner will be able to find like-minded collectors. Buying, selling and sharing will become a dynamic experience, and, because it will be easy to track the history of an object, every possession with have a story built into it. 

Conclusion

Demand for tangible assets of art, wine, jewelry and other collectibles is on the upswing, and auction sales across the globe continue to skyrocket. As these tangible assets are increasingly recognized as means of investment diversification, wealth advisers are challenged to provide a full-circle, comprehensive view of a client’s entire portfolio. Fortunately, new technology tools are meeting these ever-expanding demands. Mobile and cloud technology services improve the tracking, management and valuation of tangible assets, providing families and their advisers with greater awareness. Furthermore, these tools enable families to secure comprehensive insurance coverage and loss-prevention services, assess investment risk across both financial and tangible assets and more effectively anticipate tax and estate-planning issues. In today’s digital age, an analysis of any high-net-worth individual’s assets must include these tangible assets to complete the picture of total wealth management.

For the white paper on which this article was based, click here

A Technology Breakthrough for Valuing Tangible Assets

What are your clients’ tangible assets worth? If you are like most advisors, you don’t have a clear answer. Without that clarity, you are leaving yourself and your clients at risk. Tangible assets – valuables ranging from fine art and wine to classic cars and jewelry – make up an ever-increasing portion of household wealth. Yet there is little visibility into this asset class.

Why? Often, individuals find the process of documenting, tracking and managing the values of tangible assets to be tedious. Instead of producing a thorough inventory, the insured may opt for a blanket umbrella policy that covers general contents as a percentage of the home’s value. The individual may list certain items, but with inadequate documentation. Many times, both the insured and the insurer fail to keep up as the market value of collections changes.

Fortunately, technology has emerged that makes collecting and managing information about tangible assets significantly easier. Appraisers can collect detailed data and provenance on property and possessions and upload them to a personal, online digital locker, where the items are regularly valued, securely managed, and are accessible anytime. Individuals will soon be able to use their smartphones to take a picture of a valuable object and upload it directly to this locker. As items are added and values change, the owner is notified – and can choose to automatically alert his advisors, including insurers and wealth managers, to ensure the items are accounted for and adequately protected.

The continuous transparency that the locker provides into values can be eye-opening to users.  Case in point: A family in the Northeast has a large, valuable art collection. Thirty years ago, the family had the pieces insured, using estate values provided by auction houses. These values, as a rule, are much lower than retail replacement values, so the family’s collection was initially insured at about half of what it should have been. The collection had not been appraised since the early 1980s, and, when a wealth manager had it re-appraised in 2012, values had changed so substantially that a piece initially valued at several hundred thousand dollars now carries a fair market value of more than $50 million.

The consequences of this type of undervaluation are significant. Had the owner passed away before the revaluation, the estate could have suffered an immense tax bill. In the event of loss, theft, fire or water damage, the owner would have been severely underinsured and faced significant loss. In addition, had the owners known the higher value of the artwork, they could have sold or leveraged it.

The bottom line is: With more information about their valuables, individuals  – and their advisors – can make more informed decisions.

This ability to capture, securely store and provide real-time valuations is a momentous step forward in tangible wealth management, and has been made possible by several technological advancements:

1. Data About Prized Possessions
There is a massive amount of data now available on luxury items. Whether a person’s passion investment is wine, diamonds, classic automobiles or fine art, there is a database that captures the real-time value changes in the category. By using technology to process that data, individuals gain a better composite view of their wealth, a greater idea of potential liquidity options, and a more accurate way to assess risk.

2. Digital Collection — Onsite and at Retail
In the not-so-distant past, a person had to take pictures or videos and store them on a hard drive, keep receipts in a safe deposit box, and use a spreadsheet to capture information on valuables. Now that all communication and record keeping has gone digital, certified appraisers can use apps to capture all of this information on-site. Merchants can email electronic receipts. Individuals can snap a picture of any acquired item, add support information like a receipt, package art, or bar or QR-code and send it to their personal digital locker in real time. All of this information is securely accessible anytime, anywhere.

3. Cloud Storage and Connectivity
Once information is collected electronically, it can be safely and securely stored in a personal digital locker in the cloud. This eliminates the need for paper records or other media that can be lost, stolen, or destroyed.  In addition to storage, the cloud provides connectivity, creating a virtual ecosystem where individuals can privately view the value of their tangible assets and manage those assets. This new capability includes easy connections to on-line auction houses, dealers, insurers, wealth manager and the like to sell, insure, donate, or take other beneficial actions powered by information about everything a person owns.

Ultimately, data is currency, and new technology is helping individuals cash in on the data about their tangible wealth. The information about possessions has inherent value. By adopting emerging technologies to collect, value and connect the information about individuals’ personal property, individuals and their advisors can finally gain transparency into tangible assets – completing the total wealth picture.