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Does Gagosian’s New Advisory Firm Create a Conflict of Interest?

Gallerists and art advisors suspect there could be ulterior motives to the industry leader’s latest power play, but Gagosian would beg to differ.

The front of one of Gagosian’s Chelsea galleries at 555 West 24th Street (image via Wikimedia Commons)

When one of America’s most powerful art dealers makes plans for the future, people pay attention. But some critics suspect that Gagosian’s plan to enter the art advisory field will lead to a major conflict of interest between the industry powerhouse and its clients.

Last Tuesday, Kelly Crow of the Wall Street Journal broke the story that Gagosian has embarked on a series of significant restructuring and expansion projects. The commercial gallery has created a new chief operating officer position and has promoted its director, Andrew Fabricant, to the post. Longtime observers of the gallery’s movements say that the news signals a succession plan for the company’s 74-year-old founder, Larry Gagosian, who has rebuffed such assumptions, telling Crow that he remains “as engaged as ever” in his company.

Nobody was particularly shocked at Fabricant’s promotion, but what did catch some off-guard was news that his wife, Laura Paulson, would be leading a new business called Gagosian Art Advisory, LLC.

Paulson comes with decades of experience in the field, including a tenure as Christie’s global chairman of 20th-century art. (She worked at the auction house for 28 years.) The art advisory will operate under the Gagosian brand, but separately from the gallery business. Paulson will have her own office, staff, and database — even a separate entrance from the gallery. Her team will be responsible for managing, conserving, and appraising collections and estates; critically, the unit will also advise collectors.

That last piece of information has outside gallerists and art advisors crying foul.

“How do you know these people won’t be selling Gagosian stock harder than that of other galleries?” asked Roxanne Cohen during a phone call with Hyperallergic. The director of art advisory at the firm Pall Mall Art Advisors continued: “I think Gagosian wants to become a one-stop shop. They’ve conquered all ends of the market.”

With a decade of experience in the industry — including a five-year stint at Christie’s where she was familiar with Paulson — Cohen suspects an underlying motivation for the advisory firm’s creation. “Gagosian will get access to everything a client owns,” she said. “They will have a database for all that information, which they can use. If a person owns an Agnes Martin from the 1970s, for example, they will know what to sell.”

However, this is not the first time a major art dealer has woven art advisory practices into its own business model. Three years ago, Lévy Gorvy launched as an art gallery that mixed advising into its regular programming. Last year, the company opened a small four-person office in Zürich dedicated to providing “highly specialized, bespoke private advisory services,” as its website states.

Auction houses have also bitten into the business vertical. In 2016, Sotheby’s spent $85 million to acquire Art Agency, Partners (AAP), a firm founded in 2014 by a trio of art advisors, including their current chairman, Amy Cappellazzo. (The firm’s long-term success has been hard to decipher. Over the last three years, its made only $18.5 million, but that number does not include client activity in private sales or auctions.) Christie’s has also offered its own advisory and appraisal services for some time.

Installation view of Richard Serra at Gagosian’s London gallery in 2008 (via Loz Pycock/Flickr)

Why Gagosian’s announcement has rattled the art world is a matter of mandate and scale. Barbara Guggenheim of Guggenheim Asher Associates doubts that galleries operating their own art advisory firms will have a client’s best interests in mind. “Among other reasons that dealers have a conflict of interest is in doing the due diligence,” she wrote to Hyperallergic over email. “Advisors start with the premise that a painting is wrong until proven right. That condition reports have to be independently done, not by a seller who may want to soft-pedal any problems. And advisors tell their clients the right price to pay and negotiate on their behalf.”

Like Cohen, Guggenheim suspects that a conflict of interest arises when a dealer’s business — even when separated into different units — must work for seller and buyer at the same time.

“We’ve got a chessboard here in the art world and everyone is thinking about how to position themselves for a stronger position. I’ve been watching this happen for almost 40 years and we’ve gone through a lot of cycles,” gallerist Jayne Baum told Hyperallergic by phone. “Gagosian is positioning itself to have a firmer grip on the market.”

Responding to Hyperallergic’s request for comment, a spokesperson for Gagosian Art Advisory said that “there is no conflict of interest. With the track record of integrity and transparency that Ms. Paulson brings to the business, Gagosian Art Advisory will always act in the best interest of its clients.”

And perhaps this is only the latest news in a trend of blue-chip galleries branching into other areas. Hauser and Wirth now operates a 48-room hotel in Scotland. Pace’s museum-sized headquarters will include more than 75,000 square feet of space with outdoor spaces and four distinct galleries when it opens in September 2019. Gagosian has already formed relationships with restaurants, and David Zwirner has its own book publishing outfit. (In 2016, Gagosian also pledged to launch its own dedicated art-shipping company as part of a settlement of over nearly $4.3 million in New York state back taxes.)

For Baum, what separates Gagosian’s art advisory from other developments is the elite level of clientele it will inevitably engage. There is a general worry among mid- and small-sized galleries that the industry is not doing enough to cultivate young collectors who may not be in the top percent of the money bracket but create a healthy market ecosystem.

But as Gagosian grabs for a bigger chunk of the market’s wealthiest demographic, critics expect the gallery to eventually make a swipe at the bottom. “I’m interested to see how they will work with others. Maybe Gagosian will push the secondary market or private sales to clients rather than dealing with [competitors],” predicted Cohen. “And I wouldn’t be shocked if in a few years’s time they suddenly open up a Little Gagosian for younger artists. Where do you expand from where they are now?”

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