In the number-crunching world of financial services, an appreciation of art is rarely useful. This is not the case, though, in the Basle office of UBS, where it is essential in the art banking and numismatics department.
The team advises on both banking and art, and UBS has been active in it for more than 30 years. In 1997, Karl Schweizer became head of the department with a brief to restructure it.
Schweizer started out as a lawyer, writing a doctoral thesis on investment banking and capital markets. Then, at SBC, he worked in legal counsel and escrow. He later helped set up a regional brokerage for northern and central Switzerland, before starting businesses for financial planning, trusts, and retirement planning.
With that background, in 1997 he received an offer to set up an art banking operation and when SBC merged with Union Bank of Switzerland to form UBS, the new firm kept the department. "Before the merger I was offered the chance to a build a new sector in the field of art for our wealthiest private-banking clients," Schweizer recalls. "This was a new area at the time and so I had to think seriously about whether it was the right one for me to go into. I had a strong banking background and also a basic understanding of the art world but it was crucial to have a team of specialists."
His present team consists of 18 experienced specialists and two junior staff. Recruiting is not easy and Schweizer is adamant that this area of banking should apply the same standards and principles as other departments.
"First, the role requires investment banking of art assets and the knowledge and capability of an art historian," he says.
Complexity
"It is difficult to find people with both backgrounds, so we develop both of the skills. Clients expect advice to be given on a professional level, so it is vital that this is done with the complexity of banking and a broad understanding of art."
Among other things, the group advises on valuations for works of art. When the department was set up, a key policy was to not participate directly in the art market. "We wanted to enter as a consultant and not as a direct participant," says Schweizer. "We decided to have this policy as it means we are neutral and independent with any art-related questions. The main role we want to play is having no conflict of interest. There is a lack of this in the art market at the moment."
The department also introduces clients to auction houses, art dealers, galleries and insurance companies. It analyzes the authenticity of works and handles inheritance issues. It is not offered as a service in its own right, but only in addition to private banking. Services cost SFr300 ($240) per hour, or they are charged on a flat rate of up to 10% of the transaction value, depending on the type of mandate.
Advising clients on an emotional level is not part of the job description. "As for all the motives and emotions in a painting or a work of art, I can't really advise. In the end, it is an asset," says Schweizer.
"You should never buy something that you don't like – that is always my advice. You should at least get the emotional dividend out of it. If you have to sell and you don't get the price you paid, you are disappointed. It can happen that once you have bought something, you will never get your price back."
Art is certainly an unreliable investment. "Nobody buys art as an investment in the normal sense," Schweizer says. "People buy art because they want to have fun and they like art – and that's it."
Schweizer hopes to expand the service with plans afoot to open in New York. "We have a big client franchise in the US and Europe," he says. "So it makes absolute sense to open a second office in the US."