Art

Guest Article: Establishing Sound Governance For A Family Art Collection

Randall Willette, Fine Art Wealth Management, Managing Director, 19 February 2013

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The governance issues that can arise with art investments and collections are important and a noted expert in the field, Randall Willette of Fine Art Wealth Management, examines the issues.

Editor’s note: Here is an article on the
governance issues that can arise with art investments and collections. It is
written by Randall Willette, managing director of Fine Art Wealth Management.
Among his roles, Willette is a member of the editorial advisory board at
WealthBriefing, sister website to this publication.

Family
governance is a term sometimes used to describe the management of a family’s
assets by a family office however rarely do you see it applied to the family’s
private art collection.  Just as family
governance is important to ensuring adherence to the family’s value system and
successful wealth transfer of financial assets the same holds true for a
collecting family’s art assets. 

Today,
the private collections of ultra-high net worth families can rival those of
major art institutions and private museums and foundations are being created at
an astounding rate.  Unfortunately, with
the exception of a small minority of major collectors, most families either
never address governance when it comes to their art assets or wait until they
are in the midst of a family crisis before they finally get serious about
creating and implementing a sound art governance plan.  

Applying governance

It’s
difficult to define “family governance,” because the term means different
things to different people. Sometimes, the term is used interchangeably with
“family office” - a central administrative function that manages certain
aspects of the family’s affairs such as its investments. 

In
academic circles, family governance is commonly defined as a process to help
make better, more-informed decisions.  A
sound family governance system for a collection comprises both structure and
discipline. The concept of family governance for an art collection has to be
rooted in the notion that there’s something worth governing, perpetuating and
developing. Because each family’s needs are different, there is no real
standard or template to follow.  To be
most effective, however, whatever system that is ultimately developed should
facilitate three essential functions:

-- Agreeing shared values for the
collection and what kind of legacy the family should strive for;

-- Creating a framework for
decision-making;

-- Setting expectations for the collection;

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