This content is from: Wealth Management

How Many Wealth Managers Received PPP Loans? No One Knows For Sure.

At least 1,436 investment advisory firms applied for and accepted money, according to the SBA. Evidence suggests that number could be off base.

Hundreds of wealth management firms applied for and accepted loans tied to a program within the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a relief plan intended to help workers and businesses endangered by the Covid-19 pandemic.

Out of the more than 660,000 companies that received a Payroll Protection Program (PPP) loan larger than $150,000, a small number of them were private wealth managers. Still, there were 1,436 recipients labeled with a North American Industry Classification System code for “investment advice” firms, according to data released Monday by the Small Business Administration, which ran the loan program.

Companies that use the NAICS “investment advice” code are defined as ones that provide “customized investment advice to clients on a fee basis” and whose primary activities are “providing financial planning advice and investment counseling to meet the goals and needs of specific clients.”

It is likely that more advisory firms than the 1,436 previously mentioned also received loans, since wealth managers can choose different codes to define their business. Other types of companies within the wealth management industry would also likely choose different codes. Out of more than 160 recipients with names that included “wealth management,” there were at least 14 different codes used, according to an analysis by RIA Intel.

Some companies have questioned the accuracy of the SBA data or said it is inaccurate. Electric scooter company Bird said on Twitter that it was “erroneously” listed as a loan recipient by the SBA. The company said it neither applied for nor received a PPP loan. Others in asset management told Institutional Investor something similar

In April, many RIAs seemed eager to explore the Payroll Protection Program, a $349 billion forgivable loan program to help small businesses with fewer than 500 employees. Most RIAs qualified for the program, which began April 3 and closed June 30.

SkyView Partners, a Minneapolis-based company that matches broker-dealers and RIAs with a network of banks willing to give them traditional loans, said 700 people tuned into a webinar about the CARES Act this spring. But, at the time, not one listener had reached out to SkyView about help applying for a PPP loan — advisors were primarily interested in learning about the program on behalf of clients who were business owners. 

Profit margins at RIAs are generally 25% to 30% and well-run firms are capable of weathering market downturns, even the historic one in March. Few RIAs were likely in need of cash so badly that they are considering the new program, which appears to be reflected in SBA’s data released Monday.

At least one advisory firm, Ritholtz Wealth Management, which manages nearly $1.3 billion, applied and received a PPP loan then paid back the funds after criticism by industry peers

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