Over the past 15 years or so, the art market has developed a system of risk sharing that has had a profound impact on buyers. Many professionals in the industry, for instance, point to the now-pervasive use of third-party guarantees. “The catalogues come out,” one former auction house person told me, “and everyone knows everything about the deals.” The very process of securing third-party guarantees has, in part, undermined the value they create in the sales process.

These days, when an auction house is offered an estate or a single lot for which they’ll need to lay off risk, they’re forced to speak to a number of potential guarantors, sometimes before they’ve even closed the deal on the property. Those who can afford to back works of art at auction are a relatively small group, and dealers and collectors thrive on personal relationships and the attendant information trading. It’s a clubby world, and word travels fast among everyone who was not a party to a deal. In other words, the whisper network is fully in effect well before the lot hits the block, with naysayers often confidentially talking down the guarantee or even perhaps the work itself. And that just kills the vibe at auction—or reduces the upside by dampening the interest of potential bidders. “The element of discretion is impacted by the need to lay off risk,” the former dealmaker said. “Things are talked about that should not be talked about.”

Another person who is in a unique position to assess all of this explained to me, frankly, his ambivalence about guarantees. “A volatile climate creates the need for control over the final outcome,” this dealmaker conceded about the preference for transacting in private. But the guarantee structure also allowed some sellers to eat their cake and have it too by making a private sale in a public forum.

And this dynamic, this person suggested, has effectively created a few dangerous derivative effects: Offering any one buyer the right of first refusal, which a third-party guarantee effectively does, angers clients who were not offered the same deal. (This is another reason more collectors are using art advisors, who have higher deal flow and can make guarantees on behalf of clients who normally wouldn’t be able to grab the pole position.) Second, new collectors get distracted by the financialization. Once the guarantee is in place, the question of the right price moves to the forefront: Did the guarantor get the optimal price? Will I be a fool to bid more? Etcetera. Finally, the armature of guarantees “kills the magic of auction,” as he put it.

He’s not just being a romantic, here. The point of an auction is price discovery, making visible the depth of demand for any given unique object: You don’t find out until the end just how many potential buyers there were for a work, and what any one of them was willing to pay. Systemically preselling objects probably restrains that discovery mechanism, and thereby, the overall market. By managing downside risk, the practice naturally limits the upside—and it’s probably a loss for the broader system, which becomes less a barometer predicting the weather than a ledger recording negotiated prices after the fact.

This isn’t an indictment of guarantees. Despite the many complaints that guarantees obscure or distort the true market, they seem to have a positive overall effect. According to ARTDAI data covering the last five years of guarantee activity at Phillips, Sotheby’s, and Christie’s, 51 percent of lots sold for prices at or above the low estimate. A full 36 percent of the lots sold for a 1.2 hammer ratio (or better), which is very solid, even bullish. Almost 48 percent of the guaranteed lots were sold for prices below the estimate, or not sold at all. A tiny fraction of the lots, but probably a large part of the total value, were sold for estimates upon request, and therefore could not be easily tracked in ARTDAI’s data.

Financialization has always been a part of the art market. The slowdown that impacted Blum is largely due to a combination of other factors—a rapidly reorienting marketplace, where new buyers are less interested in many galleries’ intellectual and historical pitches; and the high sunk costs for many collectors gives them no reason to sell. But there’s likely more to come. Markets often need washout moments, where everything seems cheap, to regenerate. For all of the talk of this being a buyer’s market, we are a very long way from being there.