Personal finance

Wealth management firms among those that have taken PPP loans during coronavirus pandemic

Natasha Alipour Faridani | DigitalVision | Getty Images

The government’s release of data on businesses that have participated in the Paycheck Protection Program confirms what many in the financial advice industry already knew: Wealth management firms were among those to have taken the government loans.

The data released by the Small Business Administration and Treasury Department on Monday included loans of more than $150,000 that were made through the PPP.

The loan program was created under the $2 trillion-plus CARES Act passed by Congress in March. A list of the borrowers had not been revealed until Monday. The government did not disclose the names of businesses that took less than $150,000, in an effort to protect small businesses.

The average loan size was $107,000, according to the SBA. Loans of less than $150,000 represented 86.5% of the loans granted.

More from FA Playbook:
Op-ed: All types of investors can improve their financial fortunes
Advisors guide clients through Covid-19 crisis
Op-ed: CARES Act lets you tap your 401(k). What to know first

The list of bigger borrowers that was released includes wealth management firms across the country. Those firms also disclose their borrowing activity in their own public filings.

The move to take that money sparked debate within the industry. Wealth management executives cited their need to protect their businesses, and therefore their clients, by shoring up their financial reserves in the face of a crisis.

Others argued financial advice firms are not facing the same dire circumstances as businesses in sectors that have been forced to shut down due to the pandemic.

“I admire the firms that didn’t do it, but I also don’t look down on the firms that did,” said Philip Palaveev, CEO of The Ensemble Practice, which provides practice management programs and consulting services to financial advice firms.

For many firms, the urge to tap those government funds was probably driven by the Great Recession, when as much as a quarter to a third of the industry went through layoffs, Palaveev said.

“In March and April, when the industry was looking at what was happening, I think many firms were thinking that this was going to be another version of 2008-2009,” Palaveev said. “So they did anything and everything that they could.”

Another reason advisory firms were attracted to the loans: the attractive terms they offered.

“There are many, many ways of financing,” Pavaleev said. “But in the sequence of decision making, nothing beats forgivable loans.

“There is no form of financing that is as favorable or as desirable as forgivable loans.”

This is a developing story. Please check back for updates.

Products You May Like

Articles You May Like

Someone hit the $731.1 million Powerball jackpot. Here are mistakes for the winner to avoid
Covid-19 vaccines will end pandemic in U.S. by early summer, Federated Hermes’ chief equity market strategist predicts
Kohl’s CEO on proposed third stimulus check under Biden: ‘Anything that puts money into the pockets of our consumers is a good thing’
Macy’s Misery: Morass At Malls and A Muddled Agenda
United Airlines CEO wants to make Covid vaccines mandatory for employees — and encourages other companies to do the same

Leave a Reply

Your email address will not be published. Required fields are marked *