Don't Judge RIAs Who Took PPP Loans... Not Yet Anyway

Every day this week, I’ve seen headlines that read something like, “Multi-Billion Dollar Wealth Management Firm has taken a PPP loan.” I don’t think these headlines help clients. 

My partners and I applied for the Paycheck Protection Program. We were approved for a sizable loan. But because we are very fortunate to have a fixed fee revenue model, we came to believe that we did not need the loan and withdrew our application. That’s what we felt was right. But not every wealth management company is in that position. Many are hurting. 

A few reminders:

A headline of a “multi-billion dollar” RIA taking a government loan is provocative, but remember, those billions belong to clients, not the company. I know several “multi-billion dollar” RIAs that had razor-thin margins before this crisis, who have been impacted in a very negative way. 

Many financial advisors provide incredibly valuable services to their clients. They talk to their clients about the most important aspects of their lives. They are part of a team of valued service providers like lawyers, doctors, and accountants that clients depend on to live their best lives. 

Yes, there are some well known and flashy advisors out there who, personally, I don’t think of as needing a government loan. But there are many times more people working at wealth management companies who are hardworking, salaried employees, seeking to take care of their families, in addition to those of their clients. And if a “multi-billion dollar” RIA takes a PPP loan, and that means those hard working salaried people can keep their jobs, I’m good with that, even if it means that a private jet-flying CEO benefits too.  

The PPP is really two parts. First, you apply for the loan, and if approved, the loan is granted. The second part is applying for loan forgiveness based on when and how the money is spent. It will be interesting to see, but I would expect several firms who were granted loans to repay some or all of the loan and not seek complete forgiveness. 

As the government provides more information regarding forgiveness, it seems clear that these loans were intended to help companies survive. The government released guidance that basically said you need to be in a state of economic uncertainty, and the loan is necessary to support the ongoing operations of the company. They also said you basically cannot have any other means of liquidity. While many of the RIAs originally applied prior to this clarification, now that the guidelines have been updated, it’s reasonable to assume some firms will repay the loan, plus interest, instead of seeking forgiveness.

My advice is to assume the positive intent of every firm taking a loan until or unless there is reason to believe otherwise. These are unprecedented times, and facts and circumstances are changing rapidly. Small businesses, including many wealth management firms, employ a ton of people doing good work for society. They deserve better than judgmental headlines.