What to Say When Clients Want to Know if Art is a Good Investment

Not too long ago I received the following question from gallery owner Steve Harrison:

I had a visitor in my gallery yesterday and asked, “Now because this is original art it won’t depreciate will it?” How does one answer that question. I spend a lot of my time trying to figure out an answer to that question. Of course, a person should buy what they like and no one should ever bank on an “investment” whatever that might be. Still when a person is spending gallery prices for original art, the question “Will this painting retain its value” is a question that deserves an answer. How do other people answer it?

Another variation of this question is “Will this art increase in value? Is it a good investment.” I’ve certainly heard variations of these questions many times from Xanadu clients.

There have been a number of articles in the press and online lately talking about the incredible premiums collectors are making when selling work at auction through Sotheby’s or Christie’s. These articles have added to some art buyer’s perception that art is an investment.

These can seem like difficult questions to answer because the perception is that if we tell the client that the piece isn’t guaranteed to be a good investment, we may lose the sale.

My approach to handling this issue is simple and direct. While it’s certainly possible that the artists I’m working with are going to become wildly successful and have the value of their work skyrocket, I don’t want my clients to purchase worked based on potential investment value. I would certainly never use an artwork’s potential value as a selling point.

In responding to a client who is asking about investment potential, or, as Steve asked, about a work’s likelihood of retaining its value, I take a soft, generic approach. I typically answer by saying something like”

“I encourage collectors to buy art because they love it. If you buy a piece that you love, it will pay dividends to you every day for the rest of your life!”

If pressed further, I’ll add that there is no guarantee of the future value of any piece of artwork. The value can go up, but it’s also possible it might go down.

A client’s ability to reap the rewards of an increase in an artwork’s value will depend on his ability to resell the artwork. If the client tries to sell the work through a gallery, he can expect to pay the gallery a commission, likely around 50%. Auctions charge a lower commission, but are typically most interested in selling the work of blue-chip artists. In other words, buying art with the expectation of making a profit, or even of recovering the initial investment, is very risky. It may take years before a client could hope to sell the work at a price that would cover the initial purchase.

I suppose the prospect of a piece of artwork not being a good investment might dissuade some buyers, but I’ve found that it isn’t a factor for the vast majority of my clients. I would never want to put myself in the position of having a client return to the gallery some years after their purchase to discover that the value of the work hasn’t increased dramatically, and then have them blame me for misleading them.

Art can enrich collector’s lives in so many ways – it brings beauty into their homes and finding and acquiring art can be a great adventure. I’m in the business of providing a venue where people can be exposed to exciting artwork and I strive to create a great buying experience. If a client is looking for an investment, I recommend they talk to their stockbroker!

How do you Answer the Art as an Investment Question?

How have you responded when clients have asked if your art is a good investment or if it will retain its value? Has this been a factor in past sales? Share your thoughts and experiences in the comments below.

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About the Author: Jason Horejs

Jason Horejs is the Owner of Xanadu Gallery, author of Dad was an Artist | A Survivor's Story and best selling books "Starving" to Successful & How to Sell Art , publisher of reddotblog.com, and founder of ARTsala. Jason has helped thousands of artists prepare themselves to more effectively market their work, build relationships with galleries and collectors, and turn their artistic passion into a viable business. Connect with Jason on Facebook

25 Comments

  1. This was a great article, Jason! I’ve not had to have this conversation yet, but my knee-jerk reaction was that a person is buying art for all the wrong reasons if they ask that question. I don’t know whether I expected you to take that angle, but you did, diplomatically. I guess what I would say re: value is “you may be approached by someone who loves your painting even more than you do, and that will determine the value.” Hopefully the buyer’s protective nature will kick in and they will want to take home the art and defend it!

  2. I think that art buyers ought to be aware of the HUGE difference in buying any of the “Blue Chip” artist’s work from Auctions or High End New York Galleries as apposed to buying from their “local” gallery. It is a whole different expensive world that few can afford.

  3. I think I’ve only once been asked this question in person. I also pointed out it is most appropriate to make and investment of the heart, and if I get famous and you end up putting the grandkids through college on it, that’s a bonus!

  4. Great subject. I like your approach, Jason. If we compare artwork with almost any other investment such as stocks or real estate, I think its clear to the buyer that there are no guaranteed returns and there is the potential for loss. In fact, the sellers of many investments are required by law to state that there is no promise of appreciation in value. Interestingly, those investments that guarantee an increase (like bonds and CD’s) usually pay the least return in exchange for that safety. A wise salesman I once knew said that people often make buying choices by emotion and then look for some logic to justify their emotional choices. I think buyers who ask this question are probably feeling emotionally drawn to the art and are looking for some “concrete” or “logical” reason to justify the purchase. Perhaps the true value of art lies in the improvement of the atmosphere it lends to the home or business where it hangs or stands. This may translate into a dollar value but is essentially an intangible.

    1. Almost anyone I’ve known who buys original art thinks of it as at least a potential investment. I think you hit the nail on the head with ” I think buyers who ask this question are probably feeling emotionally drawn to the art and are looking for some “concrete” or “logical” reason to justify the purchase.”

  5. Here are two articles of possible interest on this subject: https://www.artspace.com/magazine/news_events/art_market/impressionist-and-modern-art-is-losing-value-at-auctioncould-this-be-a-good-thing-55502 https://www.nytimes.com/2011/05/31/arts/design/not-all-art-market-prices-are-soaring.html . It seems that art is an “investment” or asset market like any other, such as real estate, gold, stocks, or diamonds: it fluctuates on a range of factors, from the global economy to cultural and political changes Forecasting is always imperfect due to uncertainty and the vast psychological factors in market movements.

  6. Jason, I do collect art myself. As well as being an artist, I love having unique pieces that add to my home. Is art an investment? Yes! I have enquired into the value of one piece I purchased and it did increase in price. I have a list of artwork that I purchased, along with artist name, and put it in the papers with my will. There’s no way I will part with any of it until I am cold and dead.

    1. Good answer Claudia Stewart. I hope my collectors pass the information, including the prices, about the artwork they purchase on to their kids and grandkids, so those same kids and grandkids, who don’t have the same emotional attachment to the work their predecessors did, won’t put $3 on it at the garage sale.

  7. As the art seller/dealer, you do need to be honest and upfront with the client. Misleading them to believe that a work of art is an investment opportunity is an unwise path. Regardless of that, I do encounter people who will inquire about the potential investment potential of a particular artist. My initial response is to tell them that there is only one real reason to purchase a work of art, and that is because you connect with it, and that it is something you want to live with, and enjoy for years to come. I do have certain artists whom I have represented who’s work has steadily increased in price, and flipped at auction. I may point that out, however never tell them that it is an investment opportunity. Instead…I stress that it is a buying opportunity, because (looking at sales history) it is more than likely going to go up in price.

  8. As the art seller/dealer, you do need to be honest and upfront with the client. Misleading them to believe that a work of art is an investment opportunity is an unwise path. Regardless of that, I do encounter people who will inquire about the potential investment potential of a particular artist. My initial response is to tell them that there is only one real reason to purchase a work of art, and that is because you connect with it, and that it is something you want to live with, and enjoy for years to come. I do have certain artists whom I have represented who’s work has steadily increased in price, and flipped at auction. I may point that out, however never tell them that it is an investment opportunity. Instead…I stress that it is a buying opportunity, because (looking at sales history) it is more than likely going to go up in price.

  9. I love this, Claudia, and I need to do it for the works I have, over the years, acquired. I have traded my own pieces for those of other artists along the way and each has a special meaning. I should probably write something about each one so at least our daughter will have a connection to this personal value. We also have many of my father’s works (he was a California Scene Painter). The value of those is easier to determine and has fluctuated since his death, if we were to sell them, so I know how it works. As you say, the true value is the work’s relevance to you and selling it while you are alive is probably not going to happen. Thank you, Jason, for this great discussion. (In a related question though, I sold work through galleries in the 80s and 90s, but left LA and now have a body of work in a market of lowered prices. Should I sell the paintings for less or burn them–I’m serious.

  10. If the purchase is for an investment, everyone involved is being gamed including the gallery owner. That’s my take on this. The stock broker is the best advisor here. “Past performance is no guarantee of future success.”
    If one thing is true, especially where art is concerned it seems to be this. Every piece of art created is new and untested. I would go a bit further, every piece of art is new all the time and is untested. Even the Mona Lisa is new experience and in a new context for the viewer every time someone leaves the queue or joins the queue. What does this have to do with “value”? Jason said it, “Own the work because you love it and enjoy the emotional dividends.”
    But the question will continue to be asked I’m sure. People looking to make a buck for every buck may need to be introduced to some of the other currencies out there e.g. emotion, pleasure, tranquility, social well-being, etc.

  11. Investing in anything whether it be art, antiques, stock, rare metal, or etc. is always a gamble. It may increase in value for a few years or decrease in value for a few years than go exactly the opposite direction. The value of anything is simply based on what someone is willing to pay for it. It used to be a joke that if you want to sell a piece at a show, then put a sold sign on it. Then everybody wants to buy that piece because it now has a perceived value. I have actually told people at shows that they should not expect my work to increase in value over time, although they have, I just tell them the truth, buy it because it speaks to you. Then I tell them that my work is usually found in museum exhibits not in art galleries. sometimes that helps the sell and sometimes it does not.

  12. I was really caught up short about a year ago when I was contacted on my website by someone who had purchased a watercolor from me 30 years ago and wanted to know how much to price it at since she was now downsizing and I assume she thought to sell it I thought later perhaps I should have offered to trade her something smaller but I was just floored by the inquiry and hoped she had not purchased it thinking it was a monetary investment. My response was that I hoped she had enjoyed the work but did she know anyone to whom she could make a gift of the work— who might also enjoy it. I did not get a response on this and really still am pretty much of a loss on what a better response on my part might have been.

  13. I enjoy all your articles. I wonder how much would be the same in Canada. This is often my wonder. I am referring to more on the business side of things not on how to talk to people. Do you have any insight into getting into Canadian galleries or International?

  14. I say “Statistically speaking over a period of time, as an investment fine art outperforms the stock market, and has been for decades. You can even Google it” I don’t say my art will perform the same way, but I do mention some of the art I’ve bought that has dramatically increased in value since I bought it. I was actually an art collector before I started to paint myself lol I like to look for emerging artists that work their butts off, are active on social media, do art full time, and have a unique style.

    1. I just read an article on this very subject a few days ago. While it’s true that investing in blue-chip artists has been a strong play over the last several decades, the wisdom of investing in the broader art market is questionable. The likelihood that any one up-and-coming artist is going to break through and see a dramatic increase in value is pretty long. I would say that bet is more like playing the lottery than the stock market. Even if I believe an artist has a great future ahead of her/him, I would be very careful about pushing the work as a potential investment. The last thing I want is for a buyer to come back in ten years looking for a tenfold increase on their “investment” and finding that the actual return was much lower.

  15. I wanted to add something, I can’t remember who said it. To paraphrase: It isn’t an investment if you aren’t willing to sell it.
    Most people do buy art because they connect with it. And if they die owning it, even if it has increased in value, they will have not made a profit.
    People buying from a gallery and selling to a different gallery will probably lose money because they are paying retail and selling wholesale. Not just for art, but jewelry, etc.
    The only way I see art as an investment is if a well known person buys the work, then sells it for more because they have owned it, but they would be the “added value” (a celebrity) or validation (respected collector).

    1. Rebecca Skelton… Very nice reasoning and well stated although perhaps that one part might more correctly read, ‘if they die while still owning it they have not made a [monetary] profit.’ I (and no doubt you yourself) would contend they did profit in much more meaningful ways [quality of life enhancements] throughout their life as owners of the art.

      Also I think you are very correct in saying that often the perceived reputation of the first or previous buyer contributes much to the next buyer’s perceived value of the piece. After all, “appreciation” in the “value” of the art inevitably must follow the individual’s (or society’s) heart appreciation of the art. (And there are a wide variety of factors, pure or profane that can influence that heart appreciation. )

  16. Art creates an atmosphere of home and shows the personality of the one who chooses it.
    You can buy new kitchen cabinets, and really enjoy them- even though the next person to own the home has different taste and chooses to replace them- you want your home to reflect your personal taste; YOU live there.
    You can pay the same money for clothes, and not ask if they will increase in value; you enjoy wearing them, and gain confidence over how you look.
    There are many reasons we seek to enhance our lives that involve buying things; once you are through enjoying them- consider it a bonus if they have some value you can cash in on to put forward to evolving tastes.

  17. I did custom picture framing for 10 years and heard variations on this conversation all the time. One way of responding is to simply say “If you are buying art for investment purposes then it is no different than buying stocks in the stock market – it’s a speculators market. It may go up, it may go down. The popularity of a style or artist is constantly in flux – the increase or decrease in art resale value has more tto do with what is fashionable at any given time. That’s why it is important to buy art that you love and adds non-monetary value to your life, because even if you can’t gain more money by reselling this piece at any given point in the future, you will still love it – so you can’t loose either way”.

  18. You want to buy an investment, bid on a Picasso.
    You want to buy something that speaks to you, buy it for that reason. Hang it on your wall because you love it.
    I had someone connect several years ago because he’d inherited one of my paintings. He asked me what it was presently worth. I said: “Whatever the market will bear.” I doubt this made him happy but I’m not Picasso.

  19. Great article. Thank you. I’ve only been asked this question twice so far, and both times before a long specific canvas of mine was being discussed. Both times, I explained that a year/year and a half ago/whatever, a painting this size fetched X dollars, and now a similar painting is going for X dollars. This demonstrated an increase of about 300% in a short period of time, and was a true figure.That’s all that needed to be said, and then we got into what it was about a particular canvas that really moved them…

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