The Theory of Valuation by Peter Buckie (from notes taken at the meeting by Lawrence Hudson) A valuation must correspond to a particular function, eg insurance. Other possible purposes and functions are probate, family division, and cash liquidation. A valuation can be regarded as a legal document in court. A valuation is a de facto claim of expertise by the valuer. Peter focussed on valuation for insurance.
	Peter Buckie
	(click to enlarge)

Valuation has 3 parts:

1. description (can be subjective)
2. factual details:
   • identification of components such as gems and other materials
   • grading assessments
   • measurements
   • hallmarks
3. value. Expect 10% ± deviation versus other valuers

The Five Levels of Value:

1. NRV - New Replacement Value (replacement by something similar of equivalent quality)
2. SRV - Secondhand Replacement Value (replacement by something similar of equivalent quality and in like condition. Usually applicable to items initially manufactured 1902-1951.)
3. ARV - Antique Replacement Value (replacement by something similar of equivalent quality and in like condition. Usually applicable to items initially manufactured pre 1901.)
4. NFOV - New for Old Value (insurance company has the right to replace with new item)
5. FV - facsimile value (replacement by an exact replica)

Price and Value are not necessarily the same. The price paid merely represents good, fair, or poor value.

Two approaches to ascribing the two different levels of value:

1. determine the component costs of the item -- usual for NRV, NFOV & FV.
2. measure comparables (use market data) -- usual for SRV & ARV

To establish value, the statistical MODE is usually adopted (MODE is the most often occurring transaction price of a series of prices.) By contrast, MEAN is the average of a sample, and can be badly distorted by a few high prices. MEDIAN is the point in the sample where half the observations lie above and half lie below.]

Worksheets (see handouts) serve as aides to memory because of the long time lags in valuation process. Peter's practice is to record research on the back of the worksheet. It is crucial to understand the objectives of the client. Peter uses "Take-in Receipt" to define the condition of item to protect valuer in case it is lost. Recording image with a Xerox copier is easy and helpful.

Why ask "Client's Estimated Value"? In case the item is stolen while in the valuer's possession, also to clear up gross misunderstandings up front. If client refuses, default liability limited to £500.

A good reference library is very important. It should contain "oodles" of auction catalogs. The Buckie library contains hundreds of books. Use pricing guides such as Rapaport, The Guide, Palmieri's Market Monitor, Registered Valuer, Diamond Express, but don't rely solely on guides.

In 1987, the NAG Registered Valuer Scheme dramatically raised professional standards. Standard valuations now run to 5 pages.

Use the term "assess" to cover limitations of examination of diamonds and gemstones in mounts. In a mount Peter can distinguish HIJ from DEF, but cannot make finer judgements.

Digital images are suspect because they can be altered.

It takes 5-10 yrs of study to become a valuer. Peter recommends starting with an auction house, or a prestigious jewellery store, preferably one with a valuation department. Peter doesn't take apprentices but he does teach gratis to "keen" students. NAG course leads to RJ Dip (a distance learning course). Peter recommends earning GG first for commercial aspects, then FGA for scientific aspects.

Brian Dunn (current head of NAG Valuations Committee) in audience confirmed that there are at present 476 registered valuers (and declining) in the UK. 50 are independents and that number is rising.

There are important differences between US and UK markets:

• old cut diamonds are not prized in the US
• emerald prices are lower in the US than in the UK as a result of the Fred Ward emerald affair

Recommended equipment:

• A full complement of standard gemmological testing equipment, which must definitely include a microscope.
• Master Diamond Grading Set > 30pt K-D
• Digital Camera & Light Box (Peter uses Image Dome with Nikon Camera which costs approximately £4500 -- probably the best stable environment for jewellery photography.)

Peter does not personally find valuation software useful.

He believes a valuer must register under the Data Protection Act.

A career in jewellery valuation is not "financially very rewarding."

Peter's fees are not contingent upon values ascribed and are time based incorporating a Standard Charge of £95, which includes the first half hour of work, plus an hourly rate of £75. His hourly trade rates depend entirely upon the volume of work received. He considers percentage of value fees to be totally unethical.

In litigation Valuers frequently charge up to £125 per hour for their Expert Witness work.

The result of years of experience is an intuitive approach to valuation.

Peter then collected jewellery from the audience to demonstrate how poorly people describe even jewellery they are familiar with and therefore how difficult it would be to replace lost jewellery without proper records. He recommends updating valuation every 5 years.

During the question and answer period, Peter confirmed that the publication "Auction Monitor" includes descriptions in realized prices. He asserted that hallmarking does not add to value.