THOUGHT LEADERSHIP

Protecting Passion Investments

 


Over the years, you may have acquired an impressive collection of valuable possessions — from jewelry, watches, and art to heirlooms or antiques, and fine wine collections. In addition to the traditional types of collections, many individuals have added collector vehicles, aircraft, or a yacht to their inventory lists.

Perhaps you have taken an intentional approach to what you passionately collect that goes beyond aesthetics or sentiment and instead focuses on financial return. The term “passion investments” has gained currency within the wealth management arena to describe high-end collectibles and other luxury possessions that hold emotional as well as financial value for their owners.

Passion Investments: The New Asset Class

Many passion investors, and sometimes even their wealth advisors, underestimate the importance of their passion investments within their overall financial portfolio.

As a result, some passion investors minimize the importance of protecting their collections adequately with appropriate safeguards, including specialized insurance policies.  And, since passion investments, unlike traditional financial investments, are vulnerable to physical damage or loss, owners leave themselves open to significant financial harm on top of the understandable emotional distress should an item be damaged or stolen.

In the past, wealth advisors often simply ignored a client’s passion investments when providing guidance on an overall wealth management strategy. They may have viewed their client’s collection of vintage cars, rare wines, or first-edition Victorian novels as little more than a personal hobby — just one of the perks of financial success.

But this misconception underestimates the fact that the overall value of your “passion portfolio” may represent a significant portion of your net worth. This is true today more than ever, according to Ron Fiamma, vice president and global head of Private Collections for AIG’s Private Client Group, which specializes in insurance solutions for the high net worth individuals. “That’s because we’ve seen dramatic valuation increases in these asset classes over the past 10 years — in many cases outperforming an index like the S&P 500 by more than 2 to 1,” Fiamma says.

The bottom line is: Passion investments represent an asset class that deserves to be treated as part of your overall investment portfolio. And because passion investments — unlike traditional financial investments — are vulnerable to physical damage or loss, they require appropriate insurance solutions that take into account their special nuances, including rarity and challenges in valuation.  Read more about passion investment trends, insurance implications, and risk management best practices in our white paper.