Sarah D. McDaniel never imagined she would have a career in the art world. Raised outside Philadelphia, she grew up frequenting the region’s many museums and developed a particular fondness for the Barnes Foundation, where she learned the names of artists and styles, and cemented her love of art with its encapsulated histories.
But she always assumed her interest in art would remain a hobby. As an undergrad at Dartmouth College, McDaniel was on a pre-med track with ambitions of becoming a doctor. That began to change when an academic advisor recommended McDaniel enroll in an art history class to fulfill one of her general education requirements. “When the lights turned down and the images appeared larger-than-life on the screen, the rush of excitement I felt in the Barnes came back to me,” McDaniel recalls. “I became an art history major, in addition to studying pre-med.”
It was not until McDaniel got to travel the world, seeing and studying art as part of a Semester at Sea program, that she decided to forgo medicine as a career. Instead, after graduation she went to work for Christie’s, first in New York, then in London. “It was like working in a museum whose collection turned over twice a year,” McDaniel says. “I loved it.”
McDaniel’s time at Christie’s exposed her not only to art, but to the business of art—how to buy and sell it, why and how to plan for acquiring it. Her experience in the auction house’s trust, tax, estates and appraisals department would prove invaluable in her transition to finance and wealth management, as she would learn how managing art as an asset is essential to either preserving collections and legacies or finding new homes for works in future collections.
Eventually, McDaniel enrolled in the MBA program at London Business School to study business and finance. This would eventually lead her to Morgan Stanley, where McDaniel works to help clients integrate art as an asset on their balance sheet and raise awareness around it potentially becoming an unforeseen future liability.
Over the course of her more than 30-year-career, McDaniel has seen the art market change dramatically. For one, she says, the profile of the collector has expanded. “You see more collectors, with more diverse backgrounds and experiences. This has naturally transformed the economics of taste within the art market, as different collectors bring new interests.”
The ability to ascertain the value of a collection has also become more accessible, driven in part by a range of new digital tools that have brought more price efficiency and transparency to an industry that once only ran on handshake agreements and quiet deal-making.
“I used to look up auction prices in old sale catalogues,” she says. “Now, people can query prices in online art databases. This makes it easier to find the marked-to-market value of a piece and start to think of art and collectibles as an asset class, as well as a passion asset.”
As the art market continues to evolve, so does the need for comprehensive financial planning and asset management for collectors, McDaniel says.
Unlike art advisors, who may help individual clients connect with galleries and identify individual pieces to build a collection, McDaniel and her colleagues at Morgan Stanley focus on the financial opportunities and challenges that can come with owning an art collection. Those may include the need for trust, tax and estate planning, family governance, philanthropic planning, insurance and access to financing to help manage storage and maintenance costs.
Estate planning is an area where a long-term strategy can help art collectors address unexpected complications. For example, works that appeal to the collector may not appeal to the next generation, and heirs may not know how to maintain the art. Moreover, different works may not appreciate equally, leaving some heirs with a windfall and others feeling short-changed.
For McDaniel, Morgan Stanley is an ideal place to help clients navigate such challenges, with an eye toward balancing their passion for collecting with their broader financial-planning needs.
“We can discuss possible strategies for collectors and their collections to complement their portfolios, balance sheets, risk profiles and personal circumstances,” she says. “Being able to review these questions with the many specialized teams at Morgan Stanley is very rewarding. I learn something new and interesting every day about art, finance and their interconnectivity.”