Over the next quarter century, an estimated $73 trillion will pass from America’s Boomer generation to Gen X and Millennials in what has been called the “Great Wealth Transfer.” About half of that figure will go to just the top 1.5% of households, otherwise known as America’s amassing class.

This has made Sarah McDaniel’s job very complicated lately.

As head of the Art Resources Team at Morgan Stanley, McDaniel helps high-net-worth clients manage their art collections, but older collectors are reevaluating their plans for who will inherit their art amid an art market that is evolving rapidly and different flavors of the future. generation.

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“What we’ve found is that with the Great Transfer of Wealth and the economy of taste in the art market, many children of collectors don’t have the same taste in art as their parents,” McDaniel said. ARTnews in a recent interview. “In the past, the categories of collecting and who collected them tended to last longer, so there was less of a disconnect when a collector was passing away or disposing of their collection.”

McDaniel estimates that, for her ultra-high-net-worth clients whose fortunes reach $30 million or more, five to ten percent of their balance is in art and collectibles, meaning that art with worth trillions is expected to change hands in the coming decades. Or so estate planners like McDaniel thought.

But when heirs don’t want their parents’ collections, the two best options for collectors are to either donate the works in exchange for a significant tax break or sell the art while the collector is still alive, McDaniel said. This doesn’t just mean selling work as end-of-life planning, but simply selling work more often throughout life.

“The potential to realize additional value through relationships [collectors have in the market] and the importance of the art they collect may be better than waiting decades later to sell artwork that is no longer as desirable as when the collector bought it,” McDaniel said.

The ever-rapidly changing tastes in art and the subsequent volatility of the art market can feel worrisome, but McDaniel points out that there are many positive reasons that have contributed to this increasingly volatile trend cycle.

“There is a new generation of collectors who are interested in acquiring the art of their peers,” McDaniel said. “Collectors tend to be more female and more diverse globally, there are a lot more Asian collectors now.”

These new collectors often want to buy from young, living artists from more diverse backgrounds, according to McDaniel, which auction houses like Sotheby’s have already capitalized on. In November 2021, Sotheby’s held its first evening sale dedicated to living artists. The Now sale was a huge success, especially for women artists like Simone Leigh, Anna Weyant and Jennifer Packer, who each made record prices that night. The sale generated $283.4 million in total.

“Traditionally it takes a while for living artists to have a secondary market. Now we’ve seen an acceleration or compression of the primary and secondary market for some of the living artists,” McDaniel said. “They can be selling on both channels simultaneously.”

This fast-paced market has already seen a lot of volatility for young artists, who often peak quickly and disappear even faster, with little to show for the work’s success on the secondary market.

So how are McDaniel’s customers reacting to the knowledge that the collectibles they’ve spent decades amassing may be unwanted? It depends on the type of collector.

“Most collectors I’ve worked with buy art because they love it and really care about the artist, their career and their influence. There are other people who absolutely love art, but also see it as an investment,” McDaniel said.

“For collectors who think of it as an investment, and they can come from finance, real estate, technology, so it’s in their DNA, they can see art as an asset class as well as a passion asset. . They come with the hope that the art will retain value or appreciate. But they know how any other investment art can lose value. For people who buy art because they love it, changing markets are less of a challenge for them because they live with the art they love, that is their value. “

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