One of the essentials of being a tangible asset fiduciary as it relates to valuation is two part. One, is there a clear understanding of the value of the tangible assets? Two, is the value being applied to objects reflective of the strategies.

What is a Tangible Asset Fiduciary?

The word Fiduciary evolved out of the Latin Fidere, to trust. In order to truly act on behalf of a client’s interest trust needs to be the bedrock of the relationship. A tangible asset fiduciary has no “skin in the game”; the focus of our work is the valuable objects in a client’s collection. Our approach is independency and transparency. This essentially means that every action we take and every strategy we propose is directly in the best interest on the objects and the clients that own them. The client trusts us to represent them.


St. George’s Kermis With the Dance Around the Maypole” (1627), by Pieter Bruegel the Younger. Appraised by Sotheby’s for estate tax purposes in 2005 for $500,000; Sold at Sotheby’s in 2009 for $2.1 million.

When is an appraisal needed?

Whether it is for purchase, sale, estate planning, probate, divorce, rental lease back, fractional interest, insurance or donation, a correct appraisal is needed for any tangible asset. The methodology will directly reflect the overall goal of the valuation. Looking at one object as an example, you can track the different values depending on the purpose.


Mr. Smith has decided that he wants to acquire a Milton Avery painting from a gallery in New York City. He contacts The Fine Art Group to obtain a market analysis so that he can negotiate correctly with the gallery. The market analysis reveals that the work sold previously at auction for $200,000 in 2007. As the Milton Avery market has increased in value for the right subject matter and year, his Fine Art Group advisor recommends paying no more than $300,000 for the painting. He purchases the painting at $300,000.

Mr. Smith needs to add the painting to his insurance. As he purchased from a gallery in NYC, his insurance value will be the receipt from the gallery plus tax and shipping. The total cost with expenses was $330,000, which is the retail replacement value.

Mr. Smith decides he would like the portfolio value or estate planning value to begin strategizing with his financial advisor and accountant. The portfolio value is the fair market value. In the current auction market with premium, the Milton Avery would sell for $250,000. This is the value he can use for rental lease back, fractional interest, divorce, estate planning or donation.

Eventually Mr. Smith is interested in using the painting as collateral. The value most appropriate for collateral is marketable cash value which is the auction price minus fees. For the Milton Avery the MCV would be $200,000.

To summarize in this example:

The recommended purchase price was $300,000
The retail replacement value was $330,000
The fair market value price was $250,000
The marketable cash value was $200,000

When the values of the works of art are even more significant, this price differential can be very substantial.

Who does appraisals?

Independence is the key to accuracy.

Appraisals are done by auction houses, dealers, and appraisers. To be a tangible asset fiduciary, it is essential that the valuation should only be conducted by an appraisal firm. While a free-lance appraiser have the knowledge of the piece, frequently individual appraisers do not carry the appropriate liability insurance or insurance to cover damage to an important work of art. There is no licensing for appraisers, the only regulations we have are appraisal associations, including the Appraisers Association of America (AAA), International Society of Appraisers (ISA) and the American Society of Appraisers (ASA) as well as an exam known as Uniform Standards of Professional Appraisal Practice (USPAP). If an appraiser is not a member of at least one of these organizations and is USPAP compliant, he or she should not be conducting appraisals.

There is an inherent conflict when a valuation is conducted by the auction house that wants to sell your work or the dealer that either hopes to sell your work or substantiate a price that they used to sell you the work you purchased from them.

Auction houses often offer appraisals at discounted rates in order to gain access to material and provide additional services for clients. There are several issues with auction houses appraising, including inherent bias and their lack of knowledge on all the markets for objects. While Auction houses have a strong sense of the auction market, they often lack experience with the primary, retail market and with other values such as marketable cash value. If an auction houses wants to sell an object, or recently sold an object, they have a vetted interest in the value benefiting them. A recent court case found that Sotheby’s had valued a painting too low for estate tax in order to entice the estate to sell the painting with Sotheby’s. The painting did sell with Sotheby’s just months later at more than 3 times the estate appraisal value. “Judge Joseph H. Gale ruled instead that the expert had most likely placed a “lowball” estimate on that painting and a second work so as to “curry favor” with the owner, an estate facing a potentially large tax bill, and thus win the business of selling the works at auction.”  It should be noted that the IRS art panel strictly follows USPAP and both state that an appraiser is prohibited from appraising an item if they have been involved in the sale of the item.

Similarly, dealers and galleries lack the knowledge and independence that appraisers have, often appraising works of art for substantially higher values than what the client paid. Yearly, complimentary appraisals by the dealers that sold works the works to the owner, often inflate values in order to prove to client’s that their purchase was a good investment. We see this regularly when reviewing insurance schedules that show a yearly increase in the value of the object with appraisals directly from the place of purchase.

Appraisals are a beneficial tool for financial planning, insurance and investment. However, in order to truly be a tangible asset fiduciary, the correct values must be determined by an independent appraisal firm.