Part of our continued growth plans for KHT is expansion into new global jurisdictions in order to offer a wider range of structures and solutions for our clients. Much of our business comes from referrals from our loyal and valued intermediaries, and it was through such a contact that one of our Directors, Patrick McCarrick, was invited to attend and speak at the 2018 Art Lujiazui Seminar in Shanghai at the end of last year. Such was the success of this trip that the business has further plans to explore this region, and Patrick will be returning in April for further meetings while also attending a variety of industry networking events. But in this first encounter, below, he shares his thoughts and experiences on his initial foray into building business relations within this region and the opportunities that exist.
Knox House Trust was invited to travel to Shanghai in response to an invite to attend a leading seminar focused on Art & Finance. The aim of us attending was to participate in a panel discussion in order for the predominantly Chinese audience of 500 delegates and press to obtain a UK perspective on the management of Family Office/Trust/Companies and non-monetary assets (including art) in the UK. Keen to develop relations within this very new region – we were naturally delighted to accept.
Attendees
The headline speakers/panellists were also predominately Chinese and included some very high profile Chinese Art professors and financiers/investors. Notable attendees from the UK included the Deputy Lord Mayor of Liverpool, Gary Millar, who was in attendance due to a longstanding business and trade link between China and Liverpool. Plus there were a number of other attendees from Liverpool, including the curators of both the Liverpool Maritime Museum, and the Museum of Liverpool. These attendees were there to discuss the art and cultural aspects of Liverpool, which is internationally known for its Music, Art and Culture.
My remit was to discuss finance alongside a range of speakers from AXA, Deloitte, UBS, XMA Capital and Dr. Alessia Zorloni, who is a Co-Director of the Executive Master in Art Market Management at IULM University of Milan while also acting as Adjunct Professor of Advanced Economics and Management of Arts at Catholic University, Milan, Italy.
Key Takeaways
One of the key points I noted and discussed during my attendance was the clear divide that currently exists in China between the Art and Finance Sectors. A startling example of this, as highlighted by a speaker from Deloitte in China, was that some 91% of art /artefacts held by private individuals, Art Galleries or by Trusts in China are not adequately insured, whilst other high value assets such as Jewellery/Cars/Property/Investment Portfolios are all carefully managed and insured in the same way that they would be if they were held in the UK.
It was clear from the panel discussion that, whilst art/artefacts in China have monetary value and in some cases significant value, the culture in China doesn’t seem to focus too much on the monetary value of art and artefacts. Instead they appear to deem the cultural and/or aesthetic/emotional value of such assets as more important than the monetary value. Naturally, there was lively and interesting discussion and debate around the purchase of Art/Artefacts as an investment (alongside more traditional investments such as Retail/Residential Property and Investment Portfolio’s). But from what I observed, there are clearly a number of challenges in relation to the valuation of artwork, in terms of significant price fluctuations depending upon personal tastes and current trends. It seems that it can be difficult and time consuming for owners to sell unique artwork/artefacts, particularly where a piece is owned by more than one individual, or there is a reserve price.) This can result in short term liquidity issues for the selling party.
Opportunities
With the rising appeal of the Family Office in this region, the panel discussions and networking events that followed enabled further discussions regarding the benefits of Family Office Services. In particular, how wealthy individuals and families (which may include artists wishing to preserve, grow and/or manage their own private collections) could benefit from the use of a Family Office, including the use of Trusts, Companies and Foundation services such as those offered by KHT. In addition, our access to the wider Knox group of companies’ services, including lending and financing solutions, further demonstrated to me the opportunities that exist there.
Within this region, the building of trust is particularly important. It was therefore vital during these conversations to highlight that Trust and Company services have been a regulated activity since 2002 on the Isle of Man, and that our own business is regulated and licensed. As such, we have a legal and fiduciary duty to ensure all assets held in Trust are properly insured, particularly when they are on loan, on display in public, or in transit. Failure to do this would constitute a regulatory breach which would greatly increase the risk of financial loss and claims of negligence in the event of loss/theft of damage to the assets held in trust.
Networking in this region
The Chinese are renowned for their hospitality, and given their work ethic and way of conducting business, they made sure that there was sufficient time to get to know each of their delegates on a personal level. In my case, this enabled a number of informal discussions regarding a number of potential business opportunities before flying home.
In terms of doing business and networking in this region, the use of technology and social platforms is no surprise. Understanding the culture and business etiquette is a must, but embracing the technology driven contactless cards and use of apps such as ‘WeChat’ are equally important here. WeChat can be used as both a method of payment and as a networking tool.
Next Steps
Plans are well underway to return to Shanghai in April to continue to build on initial introductions made and to develop them further and gaining greater knowledge and insight into this region. If you have any shared experiences or colleagues in this region who would be interested in hearing from us in April, then please feel free to get in touch.