A Guide to Making a Brilliant Jewelry Purchase

When it comes to a gift that represents everlasting love, jewelry is often the first thing that comes to mind.

Jewelry not only commemorates weddings and anniversaries, it’s often given for certain holidays, like Valentine’s Day, and other rites of passage, such as birthdays, graduations, religious promotions, retirement and more. We associate the words that describe jewelry with the person who wears it — fine, precious, brilliant, timeless, rare, dazzling, beautiful.

Valuable is another adjective — and seemingly the most tangible — but value can be hard to quantify. You can spend any amount you want on a nice piece of jewelry. So how do you make sure your money is well spent when buying high-end bling?

We talked to a few experts who offered some tips when it comes to buying and protecting luxury jewelry.

A long-term investment?

It’s easy to think of jewelry as an investment. With precious metals, rare stones and limited designs, it might seem a safe store of money.

Really though, the materials that make up a piece of jewelry can be volatile, and over the long-term, you could have probably earned a better return elsewhere.

Still, some people enjoy investing in jewelry collections and can make a decent return when done smartly. Sohail Khan, a luxury watch broker and proprietor of Watch Club Dubai, assists his clients with buying watches for investments. He says most people focus on well-known, luxury designers, such as Rolex and Patek Philippe, for collections. Limited edition pieces are particularly sought after for investment as the increase in value can be “phenomenal,” he said. However, watches purchased as investments are often not worn because it can greatly decrease the resale value.

Aspiriant client Patrick Balzan of Balzan Gem Laboratory, a fine jewelry appraisal and consulting company in San Francisco, says he doesn’t advise buying jewelry as an investment. But if you’re looking for something you might sell in the future, he agrees prestige brands such as Tiffany & Co. and Cartier hold their value well. And insurance companies will usually replace a piece with the same brand. “But it costs so much on the front end, is it worth it on the back end?” he asks.

Deciding to purchase jewelry as an investment may involve other factors. Angie Grainger, director in wealth management for Aspiriant’s Exclusive Family Office team, likens it to buying a collectible automobile; you’ll want to know how the money used for this purchase affects your overall portfolio, as well as the expectations for the future value.

“If you spend $500,000 on a collectible automobile, but intend to drive it to work every day, it really results in an increase in your spending and a decrease to your investible portfolio. However, if you spend the same amount and select a car that you will garage and show, this may be considered a portfolio allocation, rather than a spend,” she explains.

“In this light, you can step back and make a jewelry decision in conjunction will all your luxury items to determine if you want to draw down your portfolio or reallocate assets in your portfolio.”

So before buying, think carefully about whether you want to buy jewelry as an investment or as something you would enjoy wearing.

Making the purchase

The decision to spend thousands of dollars on a fine jewel is a hard one and can easily be overswept by emotion. Despite its dazzling beauty, is it worth the cost? How can you be sure the brand and materials are authentic?

When it comes to buying diamonds, we’ve all heard about the four Cs: cut, clarity, color and carats. Of the four, clarity tends to be the characteristic where you can stretch your money farthest, says Patrick.

“I tell people to buy diamonds by how they look to the naked eye, not just the grade on the paper,” he says. “A flawless diamond could look the same as a lower grade.”

Unless you’re looking to buy the piece as an investment, he recommends spending the money on a larger stone or different color. And never buy without seeing the gem in person.

You always want to get all documentation and certified records for collector pieces. For precious stones, be sure to get reports from laboratories, such as the Gemological Institute of America (GIA) or American Gemological Laboratories (AGL).

Sohail says make sure watches encrusted with diamonds are “factory diamonds.” Factory diamonds are put on the watches at the brand factory, not by third-party jewelers. Also, most new luxury watches will be registered on the block chain, so they’re easy to authenticate, he says.

If choosing between a new piece or antique jewelry, it’s all about style. Sometimes, antiques can be cheaper than expected because older diamond cuts were not as sparkly and may have more flaws. Round diamonds tend to hold their value better. Items with lab reports or proof of provenance will also be worth more.

Where you buy matters too. Patrick says you can get good deals at an auction house, but you’ve got to know what you’re doing. Prices can escalate quickly, and in the end, it’s worth whatever you want to pay for it.

Retail stores have a high mark-up, so you could probably negotiate a discount. But they are probably not the best place to buy a high-quality piece, unless you go to a prestige name-brand store.

Also avoid impulse buying while on vacation. Don’t buy the cheapest thing from the nearest store. “We see a lot of people who have unpleasant experiences when buying on cruise ships or on vacation,” because the stones aren’t worth what the store says, Patrick says. “They know it will be difficult for you to return the item.”

Patrick and Sohail recommend working with a wholesale broker who would become your personal consultant. Like a wealth manager, developing a trustworthy, long-term relationship with a dealer has its benefits. They will get to know your style, preferences and budget. And it’s great to have somebody to reach out to if you need a quick appraisal, repair or to sell your piece. A trusted broker will also help you avoid buying fake items.

Most good brokers come recommended, so talk to your family, friends or even your wealth manager. Be sure to get referrals from clients they work with. “You won’t be able to Google a broker. We all come from a pipeline network,” Sohail says.

Finally, Sohail suggests joining a club, especially if you’re new to buying luxury pieces. “By being part of a network of buyers, it’s easier for them to understand and make decisions on the type of watches or jewelry they prefer.”

Protecting your treasures

Nearly everyone has at least one piece of jewelry that is priceless — not just because it has a one-of-a-kind design or stones, but because it holds sentimental value that is irreplaceable.

Still, if you’d like a check to cover the cost or replace lost, stolen or damaged jewelry, then you should take a hard look at your insurance coverage.

Patrick says insurance is an important thing he talks about with his clients. “Most people don’t understand their insurance documents,” he says. “What happens if I lose this? What is the amount of the check?”

Alert your broker or agent when buying an expensive piece. You’re likely automatically covered for 30 days, but then you’ll need to know what the next steps should be.

Most basic homeowner’s policies will cover jewelry up to a certain amount, typically between $2,500 and $10,000. A premier home policy may cover more. But then, when you need to make a claim, you’ll have to pay your home insurance deductible, and it counts against your total home policy, which could impact your future premium.

If you have more expensive pieces, say over $25,000, you can schedule them with a rider. With a rider, the deductible is usually $0 or lower than what is listed for your home deductible (varies by carrier). Filing a claim when you have a rider on the home policy should not affect home insurance rates.

If you have a more extensive collection and want to insure to value, Kyle Cliff of ABD Insurance & Financial Services suggests considering a collections policy. Most collections policies have no deductibles and broader coverage. For example, “mysterious disappearance” and earthquakes are typically included.

You can obtain blanket coverage with a limit for a specific class, and then a per-item limit of up to $100,000. Any items worth more than $100,000 would need to be scheduled.

With blanket coverage, you don’t need an appraisal for items up to $100,000 when with a high net worth insurance carrier, such as Chubb, AIG, Pure or Cincinnati Insurance. Above that amount, you would. Appraisals or documentation are likely required for all jewelry with any standard insurance carrier.

He says the cost of a collections policy could be minimal, or it could be the most expensive policy you have. But those who have more than $1 million in jewelry usually have multiple homes, so they can spread the coverage by splitting up the collection.

Kyle says you can get a discount if you keep your most valuable jewels in a safe-deposit box or vault. But he doesn’t recommend it if you want to wear the jewelry because each time you take it out of the vault, you’ll need to notify the broker or carrier.

When appraising jewelry, get the retail value so you can be made whole. For custom jewelry, you’ll want to replace it with the same like, kind and quality. For example, the diamond grade will have to match.

Patrick recommends having your collection re-appraised every five to 10 years, not only to be sure you have enough coverage, but also to be sure you’re not paying too much. Collections policies will automatically increase the covered amount for inflation, along with the premium, each year. You’ll want to be sure your collection is worth that amount. Also, with scheduled items, a claim is finalized much faster if you have a recent appraisal.

But to hold on to those precious pieces forever and avoid making a claim altogether, follow these protection tips:

• Have your jewelry inspected regularly – Most jewelers offer free annual inspections and cleanings when you purchase the piece from them. They can make sure clasps and stones are secure to prevent loss.
• Wear it, don’t flaunt it — Don’t alert sophisticated thieves by broadcasting your expensive purchases on social media or in large public gatherings.
• Keep items secure when you’re not wearing them — Most losses are from the master bedroom, so it’s best to find a non-traditional location to store your collection.
• Bolt down your fire-proof safe — You’ll be surprised what lengths thieves will go to when they really want something!