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 [who] 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?” or “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.

About the Author: Jason Horejs

Jason Horejs is the Owner of Xanadu Gallery, author of best selling books "Starving" to Successful & How to Sell Art , publisher of reddotblog.com, and founder of the Art Business Academy. 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.

8 Comments

  1. “Talk to your stockbroker” LOL that’s a good icebreaker.

    I would address their concerns first, there is a good book on selling called TRIGGERS that talks about directly talking about client fears BEFORE they bring them up, and that it’s no good to address their fears after they are brought up.

    I talk about the art as an investment only if I’m working my butt off and have the confidence to tell my collectors that the work is an investment.

  2. There is not a single investment vehicle available that does not include disclaimers about future performance being essentially a toss of the coin.
    For every vehicle bonds, stocks, venture capital, art- there’s criteria that one uses to maximize upward growth if that’s what one is looking for.
    Art poses the hardest problem because it’s personal and emotional from beginning to end.
    That’s all we really have. So, yes, your surest way to making a good investment in art is put the brain and greed on hold and fall in love with the art that stopped you in your tracks.

  3. I found a website the other day that declared categorically that art is an investment, that investing is a good reason to buy it, and to approach them for advice on which artists to invest in. It was really shocking to me. It made me reluctant to apply to ask there for representation, as I am uncomfortable with that sort of exhortation. There is no way to tell which art will increase in value, which artists will become well-known and their work sought after until years down the line, possibly lifetimes ahead! I suppose the best we can say is that some will, but we don’t know which yet.

  4. When I am addressed with the question of if whether a particular work of art will retain its value, or increase in value, I am upfront and honest. A few of my artists are what I consider “investment quality” while others have not acquired that status. That does not necessarily mean that one artist is better than another, it is simply the professional track of each artist.

    There are a number of factors which determine if an artist’s work is of investment quality. Some of those factors include what their collector list looks like…Most investment quality artists are in the permanent collections of notable museums and corporate collections. What sort shows have they had in museums, and awards they have won is important as well. Buyers should consider the type and degree of write up artists have received on a national, or international level. The over-riding factor of course will be their sales record, and what their work was selling at five years ago, as compared to today, and how successful their shows were. It is rather easy today with social media to go online and track an artist’s history, and what their work is flipping at auction for today. If a customer walks into a mid-tier gallery and asks the question of the price stability of an artist’s work, it is more than likely that they want to assure themselves that there is value in the artwork which they are considering. I keep graphs of sales history on certain artists to show stability of price and demand for their work. No one can promise a client that artwork will increase in value, however I like to share with them that I have never represented an artist in 37 years in the business who dropped their prices. I always finish by telling them that there is one over-riding reason to purchase a work of art, and that is because you love it, and want to live with it. That’s the sort of investment which will never disappoint you.

  5. Although I have not been asked this particular question I have been asked how did I arrive at the price and why is worth this much? I usually point out that my work is quite affordable compared to the competition, that many factors go into determining its value including what the competition is selling for, but also the size of the work, the materials and the time invested units creation. But ultimately it’s worth what the buyer determines it’s worth and that they should by it if they love it and are comfortable with the price because it will bring them greater joy and stimulation in their lives than really be measured in dollars. — I don’t know if that’s a good or a art answer, it’s just my answer. I want collectors to buy my work because it moves their souls not their bank accounts. Perhaps that naive but I know it’s honest.

  6. The high prices paid for name artist, picasso, rembrandt, deKooning etc. is generally based on two things. The first being a recognized name and brand and demand. The second is the resale value of a work by a recognized artist. When inflation is devaluing a currency, when the capital gains taxes are too high, and when you feel a need to protect your money then you buy recognized art, put it in your jet and fly it to your home in another country, or wherever. Over time the work appreciates, the currency hopefully has stabilized and your fortune is intact. It is a lot like gold but a lot lighter and easier to transport.

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