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When we think about investing, our minds usually go straight to stocks, bonds, and real estate. But some of the best opportunities come when you stop thinking of investing as something separate from your everyday life. What do I mean by this? A lot of the things we buy are treated as expenses when they could be investments. You might wear a watch or jewelry simply because you like them, but you avoid spending too much because it feels frivolous. Yet what’s better—paying $250 for a decent watch that will be worthless in 10 years, or $5,000 for a Rolex that could be worth twice as much over the same period? The same idea applies to cars and even furniture. I have a good friend who lives by this philosophy. For decades, he’s chosen to invest in the finer things rather than the ordinary, and it has become a cornerstone of his personal investment strategy. It’s about thinking differently—turning what most people see as expenses into assets. Art falls into that same category. I’m not a huge art guy myself. Sometimes I’ll buy a piece off the street because I’ve never thought of art as an investment. Yet for centuries, people have purchased art for its beauty, cultural value, and emotional impact—and often made a financial killing in the process. Today, art is recognized as a legitimate asset class—something that not only enriches your life on the wall but also diversifies and strengthens your portfolio. This week on Wealth Formula Podcast, we’re going to explore how fine art has evolved into an investment category in its own right, and how you might think about incorporating it into your wealth strategy. Learn more about Philip Hoffman and The Fine Art Group: www.fineartgroup.com Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com. If you donate a hundred million dollars of art, you can probably get a tax rebate for the full amount of the donation. Welcome, everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Uh, today before we begin, I wanna remind you again, there’s, um, a website called wealth formula.com that you should check out. Um, one of the things on there is, uh, the ability to sign up for our accredited investor club now really do, um, suggest you check it out if you are an accredit investor and potentially get onboarded, uh, with our team. Uh, because as we enter into this fourth quarter here, we have a number of, uh, potentially interesting opportunities, um, that involve significant tax, uh, tax mitigating type investments. Usually using depreciation, whether that’s, uh, related to, you know, apartment buildings, sometimes in commercial aircraft, things like that. But if you are an accredit investor, I think you should at least get onboarded so that you can check out the opportunities that are out there that are coming your way. This is, of course, a private group, so that. Um, you will not get access to these, uh, opportunities unless you are part of investor clubs. So go to wealth formula.com and sign up for our credit investor club if you, uh, if you are one. Uh, let’s talk today a little bit about a shift, uh, in thinking. Uh, you know, we, when we think about investing, you know, of course we’re usually going straight to. Whatever it is that we’re typically thinking about, whether that’s real estate, stocks, bonds, whatever. But some of the best opportunities come when you stop thinking about investing as something separate from your everyday life and you start thinking about the things that are in your everyday life. So what do I mean by all of this? Well, a lot of things, uh, we buy, um, are treated as expenses. When if you kind of shift your mindset a little bit, they could be thought of as investments rather than expenses. So here’s an example that’s kind of obvious, right? Many of you wear watches, many of you wear jewelry because you liked them, but you might also say to yourself, well, I like them, but I’m not gonna spend that much on it. Otherwise, it’d be frivolous. So. You, maybe you buy a, a nice watch for 250 bucks. Um, but here’s the thing, what happens, uh, with a watch that’s probably 250 bucks that you bought in the mall. It’s probably gonna be worthless in about 10 years. Now, what if you actually paid like five grand for, you know, a Rolex? I might pay a little bit more than that, but let’s say you paid $5,000 for a Rolex or some other brand that has notoriously increased in value, that’s really hard to get your hands on. Um, well, in 10 years, that $5,000 Rolex or that $10,000 Rolex or whatever, it, it’s probably gonna be worth more than when you bought it. At some point it will, if you look at the historical numbers on watches, for example, and various types of jewelry. That’s just what happens when you buy the really nice stuff. The same idea applies to cars. Of course, you know, those of you who are car buffs, you know, that, um, you know, uh, you may, you may not, uh, you may not be looking for the most, uh, reliable whatever car you may be looking for something that you really want to drive that’s, uh, kind of a classic car that you know is gonna go up in value. But you can even get that in things like furniture. I have a, I have a friend who lives by this philosophy and he’s. You know, for decades, he’s chosen to invest in the finer things, uh, rather than the ordinary, and has become, um, really a cornerstone of his personal investment strategy in some, you know, so it’s really about thinking differently, turning what most people see as expenses into assets. So, you know, this particular interview we’re gonna do today is about art. Art falls into that same category, you know, especially for those of you who love art. I’m not a huge art guy myself. Okay. Sometimes I’ll buy a piece off the street because I’ve never, um, because I like it, you know? But I’ve never really thought of as an investment, and maybe this is not an area that I love enough to make part of my investments, right? But some of, some of you will. Um, you know, I mean, for centuries people have purchased art for beauty, cultural value and emotional impact, and then. As a side effect of that, they’ve often made, uh, they’ve made financial killings in the process. So, you know, today, um, art is recognized as a legitimate asset class, something that. Not only can enrich your life on the wall, but also diversifies and strengthens your portfolio. So that’s what we’re gonna talk about on this week’s, uh, wealth Formula podcast. We’re gonna explore how fine art has evolved into an investment category in its own right and how you might, uh, think about incorporating it into your personal wealth strategy. We’ll have that interview right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate. Much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying. You compound interest on that money even though you’ve borrowed it. Net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today my guest on Well, formula Podcast is Philip Hoffman. He’s the founder and chairman of the Fine Art Group, a global leader in art investment advisory and finance. Philip spent years as an executive at Christie’s before pioneering the first art investment fund, effectively creating a new asset class for investors. And today the fine art group oversees more than 20 billion in, um, advised assets across 28 countries. Philip, welcome to program. Lovely to be here. Welcome from Sunny Lee, the Alps. Very nice. It’s, uh, very appropriate, I guess, for the art world to be coming from some nice places like that. Um, well, let’s, let’s get right into it. Uh, you know, you, you started, uh, uh, at Christie’s, uh, and, uh. Then ended up, um, getting this situation in place where high income professionals can start thinking about, uh, art as an investment. What, tell us the story. What, how, how did that happen? So, I got into the art world completely by accident. I trained at KPM. And as a CPA and then by accident, got asked to be CFO of Christie’s when I was 27. I was the youngest board director by about 20 years. Uh, I had no interest in joining Christie’s ’cause I thought he was a antiquated company selling, uh, with, with old fashioned people selling Rembrandts a little did I know that there was one and a half thousand staff involved that, um, they were trying to sell Basquiat and. Picassos and Renoirs and, and, and everything from colored Damons to vintage motorcars. So it was a fascinating business to join when you are 27. And, uh, but I didn’t wanna be CFO, I wanted to actually get my hands dirty and find out what the business is all about. And that was my first exploit, was to meet a client who had bought two pictures, one a can leto for about 50,000 pounds and a. Monet for around the same amount in 1976, and we went to the warehouse to look at it with my experts, and we recognized both were genuine and both, uh uh, what is it, 30 years later were worth. Between one and a half and 3 million each. So I suddenly tried to work out the maths and worked out, Hey, is this a good investment? And, uh, it looked like a staggering investment and better than real estate. And then I asked a few more questions of that particular client and he said, oh, I bought a prince by a very famous artist called Domie for about, um, 10 cents a print. And I said, what are they now worth? And this was, uh. 30 years later, 35 years later, worth a thousand dollars a print. So that’s a good multiple. And I suddenly had the idea that art was more than just fun, that it was investible. Um, the challenge is understanding what is good art, what is bad art, what is risky art? Outed by the art, uh, and I’ll give you some insights as we go. Yeah. Um, I mean, and in those, those, uh, those anecdotes are, are obviously very encouraging for people who are, uh, interested in, in, in investing in stocks. But when you look at the big picture of art, and I don’t know exactly how you, you come up with these indices per se, but how has art performed historically compared to stocks or real estate? So I would say that art has probably underperformed in general against the s and p 500. So in broad outline, uh, you would be better off buying the s and p 500 as a, as an investment than buying art. But art has the added plus. That there are in the US significant tax advantages over stocks. So if you look at most of the major families, they have donated their art collections to major museums. And of course there’s a huge tax benefit when you, if you donate a hundred million dollars of art. You can probably get a tax rebate for the full amount of the donation. Uh, so suddenly not only do you get the return on the art, but you get the tax, uh, refund effectively on your other income as an offset. There are not many countries that offer that attractive term other than the us They’re probably half a dozen countries like that. But, but so in, in the US it’s particularly attractive. And then if you are clever and you have the right advisors, yes. There are times when you can double your money. You can make, you know, my, my view is you can make 10% per year return if you are clever and well-advised. If you are badly advised or dunno what you’re doing, you could probably lose 10% per year on your investment. So that’s why, uh. I, I think that art is a particularly niche investment and it’s gotta be well understood and well advised. And the fine group who’ve been in this space for nearly uh, 30 years, and I’ve been in the business 35 years, have advised probably for 50 of the Forbes 500 and, uh, work with some of the top investment banks in the us and that’s because we’ve. Seen how to do it, and we’ve seen how not to do it. I’ll give you an example. So one of my friends, he rang me up. I was doing a presentation with one of the biggest family offices in America. They said, look, let’s get you on a, on a video with our top family friends. And one of the friends was watching my podcast and I went through the 20 do’s and don’ts of buying art, and he was listening to it and he rang me a couple of weeks later and he said, Philip, your talk resonated with me. And I said, why is that? He said. I bought a painting by an artist called PORs and I bought it in Los Angeles, um, over in California from a great dealer. And I got it shipped to my house in Georgia, uh, and it had a cost of $250,000. And he said when UPS delivered it, uh, it arrived on my front lawn. I was away for a week’s holiday, so it was left on the front lawn, it rained the rain d um, completely destroyed the crate and destroyed the artwork inside it. When I rang the gallery and said, Hey, um, once the insurance on this and am I gonna get my money back? They said. You didn’t insure with us, you insured through UPS rang UPS, and they said you only insured the crate and the packaging, so we can reverse you $250, not $250,000. So that client said, Philip, next time round, I need the fine art group to help me get it right. And. And I, I give you one other story of how to mess it up. Uh, one of my, one of my friends had a a a $1,000,005 Damien Hurst Meds sink Cabinets. It’s a sort of meter and a half long meds sink cabinet with lots of bottles in it, all displayed in random rows. And Damien Hurst that auction for about 1.5 million, about 10 years ago. And he hung it. He hung it behind his desk in his office and uh, he moved offices and he said to a shipping company, can you get it moved for me? Uh, and they said, yeah, that’ll be $4,000 to move it. And he said, I’m not paying $4,000 to move this 200 yards from my old office to my new office. He said, I’m gonna get Burt, my driver to do it for me. Of course Bert said, look, I’ll get it done now. And he said, no, no, no. It’s a valuable item. Do it carefully, do it slowly. And, and, and, you know, take your time. He came back from lunch and Bert was standing at the front entrance of the new offices in the Gerkin in London, and he said, uh, governor, the uh. The Damien Hurst medicine cabinet looks better than ever. And he said, well, it looked pretty amazing in my office before. What do you mean it looked better? He said, come and have a look. And he went up and bur the driver, not only, uh, reorganized every single bottle into sending order, but got rid of the empties, threw them away. So this was not. Damien Hurst medicine cabinet, but bur the driver’s medicine cabinet went from worth one and a half million dollars to about $5. Uh, luckily they had a photo and they kept it. So the do’s and don’ts of buying and investing are, are, are hundreds of stories of what not to do, and probably 10 lessons of what to do. So, uh, we’ve been talking about some, you know, very expensive art and for, you know. High net worth individuals we’re not necessarily ultra high net worth individuals. They may be thinking, well, gosh, I’m not gonna, I’m not gonna put a million dollars, um, in one piece of art. And what kind of, you know, that kind of risk. So what are some of the ways that, you know, if you’ve got money, but you don’t have millions to spend on art…
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