How to Turn Luxury Watches Into Wealth | Dan Pascone with Erich Wolters | Ep #30

Erich Wolters is the founder of Timely Souls, where he calls himself the chief watch guy. He works in corporate sales and has collected alternative assets for most of his career. It started with baseball rookie cards bought with early commission checks, then moved to vintage pre-war collectibles, photography, vintage tobacco cards, and exotic cars. He says the cars led him to watches, because many people who drive them also love watches, and a watch movement can look a lot like the engine bay of a Ferrari or Lamborghini. The company name comes from another collection: sneakers.

At Timely Souls, Erich says he helps clients buy status and style, and advises them on using timepieces for asset security, wealth transfer, and tax efficiency. Dan called it an alternative to the alternatives, since we talk with clients about alternative investing more often in the context of real estate and private companies.

Erich cited a Boston Consulting Group report, published roughly 3 years before the recording, that he says looked at a basket of models from Patek Philippe, Audemars Piguet, and Rolex over about 10–15 years, including the Nautilus, Aquanaut, Royal Oak, and Daytona. He says it concluded the basket outperformed the S&P 500, and he expects Wall Street to eventually build watches into portfolios as a balance to risk. We haven’t independently verified that report, and past performance doesn’t predict future results.

Then he gave the other side. By his count, 99% of luxury watches, from brands like Breitling, Omega, IWC, Hublot, and TAG Heuer to most of the Patek Philippe, Rolex, and Audemars Piguet lineups, depreciate the minute you leave the boutique. His example is a Breitling Navitimer at about $10,000, or $11,000 with tax. Sold the next day on the secondary market, he says it might bring $5,000–$6,000, and about the same 5 years later if it’s well cared for.

The exception, he says, is a small slice: about 8% of Rolex’s lineup and smaller portions of Patek Philippe and Audemars Piguet. His example is the Rolex Daytona, which he says could turn a $16,000 boutique purchase into $32,000 on the secondary market. Dan asked why. Erich said Rolex limits supply on purpose, demand is high, and the company keeps raising prices, which lifts secondary prices. Keep in mind that a Daytona is rarely available at list price, so that example describes a narrow slice of the market, not a typical result.

Erich’s first rule is to avoid buying a brand-new luxury watch, apart from the exceptions above. Let someone else take the initial hit, and buy on the secondary market at a discount to MSRP of at least 40–50%. His example is a Hublot Big Bang with a $22,000 MSRP, bought pre-owned for $12,500, in excellent condition with the box and papers. He says that if you sold it a few weeks later, you’d expect about $12,500 back, and after 5 years maybe a little more because of inflation.

Those are his expectations, not guarantees. Condition, completeness (box and papers), authenticity, and the dealer’s margin all affect what you’d actually get, and a watch that looks like a bargain can be hard to sell at the price you expect.

When Dan asked how someone who wants to buy a new watch each year should think about it, Erich said it depends on how you plan to wear it. Dive watches, such as the Rolex Submariner, Sea-Dweller, and Omega Seamaster, suit water sports. Aviation watches, such as the Breitling Navitimer, appeal to pilots and anyone interested in flight. Speed watches, such as the Omega Speedmaster and Rolex Daytona, suit car people. Dan asked what those labels mean under the hood:

• Racing: a tachymeter scale lets you use the chronograph over a measured distance, such as 100 yards, to read your speed in an analog way.
• Diving: the Omega Seamaster has a helium escape valve to protect the watch as pressure changes on the way up. Erich believes the Rolex James Cameron is built for a dive of roughly 20,000 feet, though he says most buyers will never go deeper than a backyard pool and want the symbolism of adventure.
• Networking and art: Erich says a watch can break the ice in business settings, and more brands now treat watches as wearable art, with skeleton dials, clear casebacks, more jewels, and bolder colors.

Erich points to 2 forces. The first is demand for safety assets. In volatile markets, he says, gold prices rise, and watches made with platinum or gold have tracked spot gold, with some buyers moving money into top-tier models as a store of value. Volatility is a normal part of investing, which we discuss in our video on the art of investing, even in volatile markets. The second force is supply and cost: tariffs, more local production, higher shipping costs, and repeated MSRP increases from manufacturers, which the secondary market follows.

Erich’s tariff comments are a snapshot. At the time of the recording, he said a 32% tariff on Swiss goods had been announced, imports faced roughly a 10–11% customs fee, and that could triple without a deal. Tariff policy has kept moving since then, so treat those numbers as dated. For more recent developments, see our post on the Supreme Court tariff ruling.

Dan asked how a high earner who already owns a nice watch could start treating it as an investment. Erich said to start with intention. He sees 3, and he says ultra high net worth buyers use watches in ways most people don’t know about:

• Asset security: moving money out of volatile markets and into select models from Patek Philippe, Audemars Piguet, or Rolex to preserve it.
• Tax efficiency: Erich says this is popular with crypto holders and business owners. He described using appreciated crypto to buy a watch, and businesses buying watches near year-end and adding them to the books. We cover why both need serious caveats in the next 2 sections.
• Borderless wealth: Erich described international business people moving value across borders in high-end watches. We’re not going to walk through that. Moving valuables across borders carries customs, declaration, and reporting requirements, and avoiding them can carry serious legal consequences.

Dan asked whether the 3 core brands make the most sense for a tax play. Erich said not necessarily. For hundreds of thousands of dollars, those brands are the ones to look at, but for smaller sums you can buy a watch on the secondary market after it has already depreciated and hold it as a store of value.

A watch is a purchase before it’s an investment. Erich’s own numbers make the point: by his count, 99% of luxury watches depreciate when you buy them. The investment case rests on a narrow set of models, a market with no exchange, and a price you only learn when you find a buyer. A watch pays no dividends or interest, and it can carry insurance, storage, and authentication costs.

The second thing people miss is taxes, because the tax ideas in this episode are where a listener could get hurt. The IRS treats digital assets as property, and in general, using crypto to buy something is a taxable disposal of that crypto. The gain is generally recognized when you spend the crypto on the watch, not when you later sell the watch. The watch then has its own cost basis, so a later sale is a second taxable event. Whether a gain or loss on a watch gets special treatment can depend on how it’s classified and whether you held it for personal use or investment. IRS Topic 409 explains how capital gains are taxed, including a higher maximum rate for some collectibles.

The third is business purchases. A purchase generally lowers taxes only when it’s an ordinary and necessary business expense. A personal luxury item bought through a company isn’t automatically one, and even a valid deduction only reduces the cost of the purchase. It doesn’t turn the purchase into a return. Spending $1 to save a fraction of a dollar of tax still leaves you behind by the difference. Your CPA decides what qualifies.

This illustration uses Erich’s numbers with the standard tax treatment. It isn’t a client and it isn’t tax advice. Say an investor bought Bitcoin for $50,000 and, more than 1 year later, it’s worth $70,000. She uses it to buy a $70,000 watch. For illustration, assume a 23.8% combined federal long-term rate (20% plus the 3.8% net investment income tax) and ignore state tax:

• At the swap: the Bitcoin is generally treated as sold for $70,000, so she realizes a $20,000 gain. At 23.8%, that’s about $4,760 of federal tax, due for the year of the purchase.
• If the watch later sells for $75,000: she has a second gain of $5,000 ($75,000 less the $70,000 basis). At the same 23.8% rate that’s about $1,190, and it could be more if a higher collectibles rate applies.
• If the watch sells for $60,000: the $10,000 loss may not be deductible if she held the watch for personal use.

So the taxable amount doesn’t shrink from $70,000 to $5,000–$10,000, as Erich describes. The $20,000 of gain was already taxable at the swap, and what remains is the watch’s own appreciation. She’s also swapped an asset she could sell in a day for one that’s harder to sell on a schedule. Our post on crypto and blockchain in a financial strategy covers how we think about crypto more broadly. The figures here ignore state tax, fees, and other factors, and real outcomes vary.

We’re a fee-only fiduciary planning firm. We don’t sell watches or advise on which models to buy, and Erich isn’t a Tailored Wealth advisor. Where we help is placing a passion asset in the plan. We start with the life you want and work backward, which is Life Driven Investing, our approach to building a portfolio backward from your life, not forward from a product.

We treat watches, cars, and art as their own sleeve, funded after essentials, reserves, and core investments are handled. Because collectibles can be hard to sell on a schedule, we wouldn’t count on them for spending needs in the nearer bands of our Four Liquidity Bands, which sort money by when you’ll need it: 0–2 years, 3–5 years, 6–10 years, and 10+ years. And we review the plan in our Quarterly Strategy Rhythm, a set quarterly review of your whole financial picture.

This conversation is for high-earning executives and business owners in their 40s and 50s with household income of $500,000 or more who collect, or are thinking about buying, watches or other passion assets. If you want to know how those purchases fit alongside equity compensation, a business, retirement, and taxes, this is the kind of situation we help with.

If you're an executive or founder weighing watches, crypto, or other passion assets alongside your equity compensation and retirement goals, we're happy to look at the whole picture with you. Book a free Wealth Strategy Call to walk through your hybrid retirement, equity, and tax situation. It's a conversation, not a sales pitch.