Types of emotional motivations

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Markets for art and other treasure assets, although tiny compared with traditional asset classes, are growing. According to Skate’s Art Investment Handbook, there are works by 300,000 artists, valued in total at USD$400 billion, available to trade at any time on the global art market; this results in a trading volume of USD$60 billion per year (although to put that into perspective, weekly trading volumes for all stocks in the Russell 1000 during April 2012 were USD$640 billion)9. Investing in art, once the preserve of a wealthy elite in Europe and North America, is now global. In 2010, China overtook the United States as the world’s largest art market for the first time10.

Social utility debate 6 of 9 Emotional versus financial motivations 4 of 9

Residents of the United States, please read this important information before proceeding

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Enjoyment is by far the most important motivation for owning treasure. Almost two-thirds of the treasure owned by respondents is held because of the pleasure that it brings them (see chart 15). “Art is one of the few tangible assets that also qualifies as a passion investment,” says Mr Thompson. “There is more enjoyment in displaying art on your wall than in displaying stock certificates.”

The enjoyment motivation comes out on top everywhere with the exception of Saudi Arabia, India and Qatar (see chart 16) — where financial motivations are more important, as discussed in the previous section. It is also particularly strong amongst older respondents.

The fact that enjoyment is such an important motivation supports a view that treasure should be regarded as part of an individual’s personal holdings rather than as a separate asset class within their investment portfolio. An individual’s personal holdings comprises all those assets that play a role in their lifestyle, such as personal property and treasure, and for which the financial characteristics are less important than the use or pleasure that they provide. “Treasure is important to people first and foremost for personal reasons, not financial ones,” says Dr Davies. “Owning these items is largely about enjoyment of life and has far less to do with financial motives or the achievement of financial goals.”

When considering an optimal investment solution, a good wealth manager will take into account treasure holdings in the context of an individual’s total wealth, because they can have an effect on the type of strategy that will be suggested, even for the purely financial assets. The wealth manager should also aim to understand the importance of an individual’s broader personal objectives, as this again can have a profound impact on financial planning and an appropriate investment portfolio.

The level of enjoyment that collectors derive from their treasure, and the extent to which they view it primarily as a financial investment, are motivations that are inversely correlated with each other. The more that collectors say they acquire treasure for financial reasons, the less enjoyment they tend to derive from it. But there is a strong link between enjoyment and other emotional motivations. Individuals who enjoy owning treasure are also likely to value it for its social or heritage benefits.
In this respect, the high degree of emotional value that investors attach to their treasure brings positive benefits.

There may also be financial benefits from ownership, but for most wealthy individuals, this is not first and foremost why they own these objects.


The social motivation

Treasure, unlike financial assets, can be shared and enjoyed collectively. Roughly one-quarter of the treasure that respondents own is held for social purposes, such as sharing with friends or showing to people (see chart 15).

Wine and cars are the categories of treasure that are most closely associated with social motivations. Just over half of respondents who own classic cars say that they like to show their collection to other people, and nearly 70% say that they like to share their wine collection with friends (see charts 17 and 18). Wine is often an anomaly compared with other types of treasure because it is meant to be shared and, unlike other treasures, consumed. Cars are also the category of treasure that is most likely to be seen as providing a source of respect from other people (see chart 19).

This social motivation is particularly strong in key emerging markets. Respondents from India say that 75% of their treasure is collected, in part, because they like to show it to people, while the figure for China is 52%. By contrast, the figures for the U.K., Ireland, Switzerland and Japan are all less than 20% (see chart 20). This suggests that, in countries where there are large quantities of newly created wealth, there may be a propensity to demonstrate status through treasure.

Status is an important aspect of the social motivation. A wealthy individual, who acquires a rare classic car or an expensive painting by a well-known artist, demonstrates to peers not only their good taste, but also their wealth and connections. “There is a signaling effect associated with scarce, valuable collectibles,” says Professor Pownall. “People like to be able to show their peers that they can afford to buy these items.”


The heritage motivation

Heritage motivations, which encompass wanting to protect treasure for descendants and valuing it as part of the family or culture, are the second most important motivations for holding treasure (see chart 15). Categories of treasure with strong associations to heritage motivations include precious jewellery, antique furniture and fine art. For example, 51% of respondents who own antique furniture agree that they want to protect it to be enjoyed by their children or grandchildren, and 54% of those who own precious jewellery say that it is part of their family or culture (see charts 21 and 22).


Collections are more likely to increase in value if they are seen by the general public because art accrues value through exposure. This is particularly important with contemporary art, where the reputations of living artists are still being consolidated. — Dr Sarah Thornton, Author of Seven Days in the Art World

This heritage motivation is particularly strong in India and the Middle East (see chart 23). These are countries where there is often a dynastic view of wealth. Personal wealth is often tightly bound up with business wealth, which may explain why treasure is so often held for heirloom purposes in countries like India.

Respondents who have a strong heritage motivation to owning their treasure tend to agree that people have a duty to share valuable possessions for the good of society and are also willing to loan their items to museums. But as Dr Sarah Thornton, Author of Seven Days in the Art World explains, the motivations for lending items in this way are not always altruistic. “There is genuine philanthropic desire to enrich the lives of others, but it’s often mixed with other motives,” she explains. “Collections are more likely to increase in value if they are seen by the general public because art accrues value through exposure. This is particularly important with contemporary art, where the reputations of these artists are still being consolidated.”

Showing treasures in public can also be a motivation in itself, because it gives the lender status and enhances their enjoyment of the item. “Although some people store treasure away, others have a completely different motivation and want to share what they own as an important expression of themselves,” says Dr Davies. “Sharing these goods does not diminish their own enjoyment of them — if anything, it enhances it.”

Yet as we explore in the next section, exhibiting treasure may not be the best way of doing good for society. Although there may be some cultural value associated with loaning works of art or sculpture to museums and exhibitions, wealthy individuals may be able to make a more positive contribution to society through more direct means.