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.