Mr Gábor B. Szabó, Managing Partner of Primus Wealth, was keynote speaker at the Asset Management and Inheritance panel of the first International Art Law Conference in Budapest. You can read his full presentation here.
As a practising lawyer, wealth manager, and passionate art collector, I am delighted to have been invited as the keynote speaker for this panel. The peculiarities of managing art and other private collections have always intrigued me. I emphasize the word “private” because I believe that the management of public collections occurs in a fundamentally different legal and economic environment.
While the principles of wealth management are largely consistent across all types of assets, private collections carry a unique trait, one that fosters a particular approach to stewardship: the aesthetic and emotional connection to the collection itself. Of course, with a hint of cynicism, one might argue that a deep emotional attachment could exist towards any other form of property, and that the extent of this attachment shows a significant correlation with the value of the asset in question. Let’s not deny that such an objection is not without solid foundation. However, my focus is not on the value of the collection but rather the additional elements it embodies: the aesthetic and emotional joy that it provides to the collector daily. It is this added dimension that can, in many cases, override rational decision-making and introduce hesitation or delays in making decisions, potentially leading to economic detriment. Simply put, a collector in love with their collection may struggle to make the appropriate wealth management decisions.
This challenge however, like so many others, can be learned and mastered. In fact, I find this collector’s mindset much more appealing than that of someone who views an art collection merely as a potentially appreciating asset, eager for a swift return on investment. This is the other extreme, barely distinguishable from speculative stock market transactions, and one that keeps aesthetic considerations far removed from asset management decisions.
As with many other aspects of life, the key lies in finding the “golden mean.” If we acknowledge that we are dealing with unique assets, which possess not only aesthetic but also significant financial value, we quickly realise that these two perspectives are far from irreconcilable. We simply need to approach them with a particular mindset.
In Hungary, the majority of wealth management decisions related to collections are still made by the collectors themselves, without significant input from external experts. However, we are beginning to see the emergence of wealth management structures that incorporate collections. Although their numbers remain modest, they offer encouraging examples for the future. As such, we must be aware of the typical collector’s attitudes.
Many collectors experience an initial “childhood illness” — a tendency to purchase anything that appeals to them. It can take time before they realise that they cannot acquire every piece they admire, leading them to establish a thematic focus. For example, they may concentrate on a particular era, art movement, artist, or school, dedicating their limited resources accordingly.
Once they have found their direction, several paths remain open. Many collectors adhere to a “buy only” strategy, while others (though fewer in number) prefer a continuous process of portfolio refinement, selling and acquiring new pieces. The former strategy often hits physical limits — “Good heavens, I’ve run out of wall space!” — forcing the collector to decide how to proceed. Some, placing investment considerations above aesthetic ones, opt to store their works in rented vaults, increasing the already substantial costs of collecting. Over time, this can lead to the necessity of selling or, worse, a forced sale.
Another potential route for these “vault collectors” is to transform their collection into a public one. While there are numerous examples of this in the Western world, Hungary has yet to move beyond a few failed attempts. This suggests that there is still no real crossover between private and public collections here, with a few notable exceptions, such as occasional private exhibitions sponsored by galleries or the loaning of pieces for larger public exhibitions.
Given the current climate, I believe that for the foreseeable future, the skills of the wealth management industry in Hungary should focus on collectors who build well-defined and, thus, easily communicable and presentable collections, while continually refining and increasing the value of their portfolio.
While managing a collection undoubtedly has its specific elements, the process, as with other areas of wealth management, begins with a thorough assessment and inventory. This inventory should be as detailed as possible, including not only the artist’s name, the title, technique, and date of the work but also its literary references and provenance, with the most comprehensive documentation available. The most critical document is the certificate of authenticity or, as we often simply call, “Attest”, which, in the case of contemporary artists, should ideally be obtained directly from the artist, or failing that, from the gallery or auction house. The former practically eliminates any future disputes over authenticity, while the latter significantly reduces the risk, though there are cases where even this assumption has been successfully challenged.
Since a wealth manager is not typically a trained art historian or forensic art expert, they must rely on the certificates provided by others. However, they should always strive to obtain these documents. At the same time, I would like to point out that a service provider involved in the asset management of collections, such as a family office, must, over time, develop these professional skills as well. A noteworthy example is that it is no longer uncommon for such organisations to encourage their legal or tax advisory staff to obtain psychological qualifications to manage internal family tensions more effectively.
Once we have the inventory, we must work with the collector to develop a bespoke wealth management strategy, addressing, among other things, the following key areas:
- The conditions for storing, securing, and insuring individual pieces, including deposit policies at the collector’s residence or with third parties, such as banks, corporations, or private hospitals. Although the potential here is significant, this practice is not yet as widespread as it could be.
- A policy for lending and exhibiting works. (I would like to highlight the untapped potential in collaborating with office building developers. For example, in our own office building, we have arranged for sculptures by a contemporary artist to be displayed on each floor, with the option to purchase them and information on the price included.)
- A policy for the sale and acquisition of pieces.
Beyond these, of course, the wealth manager must apply the established principles of legal, accounting, tax, and investment advice that are relevant to other asset classes.
The particular nature of collections requires not only specialised knowledge in wealth management but also presents challenges for estate planning professionals. As a wealth manager however, I believe that the more we encourage the incorporation of collections into wealth management structures during the collector’s lifetime, the less room there will be for time-consuming, costly, and contentious probate processes and disputes. At the same time, I have some doubts as to whether my esteemed fellow panellist, Peter Kun, an outstanding expert in cross-border inheritance matters, would agree with me on this point.
I sincerely hope that these introductory thoughts will provide a fruitful framework for our panel discussion.
Thank you for your kind attention.