Most advisers who have taken loans under the Paycheck Protection Program say they do not necessarily need the cash immediately, instead saying it could be necessary in the future.
About 20% of 181 financial advisers who responded to an InvestmentNews Research survey between May 20 and 27 said that they have been approved for PPP loans. Meanwhile, 74% said they have not applied for such assistance, and 5% said they were unsure whether their firms had applied. One percent of respondents said they had applied but either had not received a response or had been denied.
Among those that did apply, 26% said the government assistance was necessary because of immediate financial challenges. But a much greater number, 61%, said they applied for the loans because they anticipated financial challenges in the future.
Since the federal government passed its $2.2 trillion COVID-19 stimulus program under the CARES Act in March, advisers have struggled with the idea of applying for PPP loans for a variety of reasons.
Initially, it appeared that companies that sought to borrow less than $2 million would face higher regulatory scrutiny, having to certify that they were taking such loans because of legitimate financial need. Treasury Secretary Steven Mnuchin pointed to possible criminal charges for people who broke the program’s rules, which caused many businesses to think twice about applying and led some to return the money. However, the U.S. Treasury and Small Business Administration later clarified that borrowers of less than $2 million would essentially be given the benefit of the doubt.
Among firms that did not apply for assistance, 5% said they avoided doing so because of regulatory scrutiny, and another 8% said they were unsure about their eligibility.
There have also been ethical concerns, particularly for fee-based advisers.
“If you’re not affected by this at all, is it right to go for that loan? That’s a question you are going to have to wrestle with,” Robert Keebler, partner at Keebler & Associates, said during a panel May 14 hosted by The American College of Financial Services. However, “there is so much uncertainty” due to the COVID-19 crisis, that some advisers have been applying for loans in anticipation of financial distress, he said.
Further, the amount of stimulus money is “not an unlimited supply,” and advisers would have to consider whether they truly need the assistance, said Buckingham Wealth Partners' director of advanced planning, Jeffrey Levine, during the panel. PPP loans, which could be forgiven for some borrowers, have been intended to help a variety of businesses, especially small employers that have had to close their doors during the pandemic.
Advisers have also had to consider the perception associated with taking PPP loans. Because borrowers can be identified through public-records requests, advisers should disclose the loans on their Form ADVs with the Securities and Exchange Commission, Levine said.
The SEC has outlined several reasons why advisers would need to disclose PPP loans, such as if the money is necessary to pay staff members, though the regulator's guidance has left some firms uncertain about when, and for how long, they are required to make disclosures.
From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.
Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.
“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.
Sellers shift focus: It's not about succession anymore.
Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
