Introduction

Cash, stocks, bonds and funds are just some of the traditional assets that we ordinarily have under management within a diversified private client portfolio. But increasingly within our business, especially within our high-net-worth entrepreneurial sector, we are seeing a shift away from traditional assets to those that the client has a genuine passion for. Classic cars, fine wines, artwork, jewellery, watches and antique furniture – the list is endless. Demand for passion investing has increased steadily as the income of HNWI and UHNWIs has grown in both developed and emerging economies.

Considerations

What shouldn’t be overlooked is that passion investing, which, when done directly rather than through an investment fund, has a tangibility and intimacy that no other asset can match. Passion investing is not for the faint-hearted, nor is it for an investor looking for a quick return. Passion investing does not necessarily produce an income from ownership of an asset. You would need to hold on to your investment for a long time, sometimes in excess of 10 years, to make a profit taking the cost of purchase, the cost of ownership, the cost of selling, and the effect of inflation into consideration.

The client knew he wanted to purchase a classic car to start his collection journey but had not undertaken any initial research to explore this further.  Purchasing this type of asset requires careful planning and research to ensure the asset is properly managed and protected, and therefore the client needs to consider possible import requirements, maintenance and storage arrangements in addition to basic requirements such as adequate insurance cover.

What We Did For The Client

Firstly, and perhaps most importantly, we met the client face-to-face in order to spend time learning more about his thought process and understanding what he wanted to achieve.  We were able to put forward ideas on trusted brokers and garages that we have long standing relations with in addition to specialist finance houses who potentially could offer the client a suitable financing solution.  This would then enable the liquid funds to be invested elsewhere, leaving the client in an effective ‘positive’ return position.  We also introduced the client to a few select insurance brokers who specialise in the sophisticated and unique space that is classic cars.

Client Solution

The simple part was the creation of a corporate structure designed to hold the title to the first car purchased, and thereby provide the client with the confidentiality he desired.  A ‘Deed of Use’ was put in place for the client to enable him to enjoy the use of the car as and when he required, with the trustees putting the appropriate insurance and storage agreements in place, as well as sourcing a specialist garage to carry out any necessary repairs and servicing requirements.

Having invested time at the outset to fully understand the client’s goals and ambitions, we were able to make this a seamless and hassle free process for him.   Experience from managing high value assets for a previous client enabled us to draw upon our network of established contacts.  We were able to present the client with a shortlist of available cars which matched his criteria. Subsequently, the client acquired an off market vehicle which was sourced through a trusted broker that we have worked with for a number of years.

 In addition, our analysis on the available debt prompted the client to change his mind and opt to use a financing solution instead of his available liquid funds.  Owing to the speed of completing the agreed finance, the client has commenced his search for car number two. The cash that would have been utilised has now been invested with a well-established investment house, providing a further income stream for the client.

Key Takeaways

Most passion markets are opaque; most sales are private and price discovery is difficult. Mix all of that together with the money needed to invest in a true object of desire and mistakes can easily be made. Today, there is a multitude of new and exciting ways to invest your money and that is where the benefits of a private family office arrangement come to the fore. We have the expertise and experience to ensure that any asset, no matter how bespoke or unique, can be securely held, maintained, insured and evaluated for value on an on-going basis. Over the course of a number of years we have built up a huge network of trusted advisors covering all manner of eclectic and more common place passion investments. It is with these advisors that we work most closely across a broad spectrum of asset classes.  Whether that is validating the authenticity of a piece of artwork, or reviewing the service history and build quality of a classic car, we are able to provide absolute peace of mind for our clients with the assets they have entrusted to our care and management.  We also ensure that the structuring requirements are held appropriately in terms of legal title and in a manner that is suitable for the client’s own unique individual requirements.