Damien Hirst – a business model for the wealth industry?

Damien Hirst, enfant terrible of the British art scene, beat the wider financial markets recently, raking in some £111m (E130m) from the sale of his latest collection at auction house Sotheby’s in London. Given this latest financial success, perhaps Mr Hirst would make an interesting case study for the wealth management industry. Not only does he share the same client-base as many in the wealth market, he has also effectively segmented his product offering to different clients. Furthermore, Mr Hirst is a luxury brand that has performed consistently in the high-net worth (HNW) arena for some time and he has now moved to significantly shift his distribution network. Brand and distribution are, of course, two key elements to the delivery of a successful wealth management market platform. On segmentation, Mr Hirst has been radical for an artist but the alignment to the wealth market is clear. Bespoke art, done by the man himself, is aligned to the ‘ultra’ HNW community for those seeking something signature. Indeed, Golden Calf sold for £9.2m at Sotheby’s, a record price for Mr Hirst. However, these headline-works masque a substantial volume of product that sold for £20,000 – £100,000. Mr Hirst also has a relationship with Levi Strauss, the US clothing firm, to design luxury jeans. As CEO of an institution that employs over 180 people in the UK, some products are scaled to meet demand. For example, one team’s entire function is to pickle animals in formaldehyde; a signature Hirst concept. The key element binding the two ends of the spectrum is the artist’s brand. Mr Hirst has invested significantly in his brand. Indeed clients can effectively choose to buy a Hirst idea (executed by his team) or one made by Mr Hirst’s own hands. Whether this renders the art worthless is hotly debated. However, buyers do not seem to care, based on the sums raised at Sotheby’s. In a similar debate, the wealth management industry has keenly debated the use of models against bespoke creation in portfolio management. Based on the artist’s precedent, clients are willing to buy a replicate, if the brand behind it is strong enough. On distribution, the choice of Sotheby’s marked a significant turn in Mr Hirst’s sales strategy. Traditionally Mr Hirst has used two dealers (Jay Jopling and Larry Gagosian) for the sale of new work. Unsurprisingly, both opposed the move to direct-sale as “confusing the market”. However, proving the new strategy right, the open-exhibition at Sotheby’s attracted 21,000 visitors over two weeks and 700 buyers to the auction itself. Breaking the control of dealers on distribution allowed Mr Hirst to leverage his infamous brand and reach a wide audience, ultimately generating 20 per cent more sales revenue than expected. So, the question is, what can the wealth management market learn from Mr Hirst and his latest sales venture? First, products can be segmented to match client needs and wants and that scalability is possible, even in a traditionally individualist industry. Second, brand is a crucial driver of pricing and sales. Therefore, for wealth management, perhaps the winners will be those assigning capital to their front-office and marketing budgets and that challenge the established thoughts on distribution? Indeed, if conceptual art can be delivered direct-to-clients, why can’t banks apply similar mechanics to their own product propositions? Perhaps private banking will be Mr Hirst’s next foray. With some £200m in liquid wealth, and a depressed financial market, he could certainly buy or build. Graham Harvey is a senior associate at wealth management strategy think-tank Scorpio Partnership