A number of RIA companies with assets under management between $ 1 billion and $ 2 billion have applied for and received Paycheck Protection Program (PPP) loans to help them maintain their payrolls during the COVID crisis -19, according to updated ADV forms submitted to the SEC this week. The recipients include Ritholtz Wealth Management, a $ 1.3 billion company led by CEO and CNBC contributor Josh Brown.
According to the company’s updated ADV, the loan has no ‘material impact’ on the advisory relationship with clients and will be used to pay the salaries of employees ‘responsible for performing advisory functions’ (language that reflects guidelines issued by the SEC on PPP Loan Disclosure Last Month).
In an interview with WealthManagement.com, Brown said the company sued the loan at the end of March, when the most pessimistic estimates of deaths from COVID-19 ran into the millions. To date, he estimated that 90% of the loan had been spent on salary expenses and that the company had no intention of asking for a loan forgiveness, although Brown said he used the money in such a way. to qualify.
“If we can get through this period without laying off any employees and we can pay back our loan, I will take that as a badge of honor,” he said. “The outpouring of customer support has been incredible. They were business owners and they understood it.
Other companies receiving PPP loans included Sequoia investments, a Newton, Massachusetts-based company with approximately $ 1.9 billion in assets under management, and Ulrich Investment Advisors, an RIA in Albuquerque, New Mexico, with approximately $ 1.6 billion in assets under management. Additionally, Larson Financial Group, a RIA with approximately $ 1.5 billion in assets under management based in Chesterfield, Missouri, will benefit from a PPP loan underwritten by its parent company, Larson Financial Holdings.
Representatives of the three companies did not respond to requests for comment.
The PPP program is part of the CARES Act, which the U.S. Congress passed in late March to help businesses maintain employee numbers during the spread of COVID-19. The loans, which are eligible for businesses with fewer than 500 employees, can be used for payroll, as well as certain other expenses, including mortgage interest, rent, and utilities. The loan can be canceled if the company taking out the loan uses 75% of it for the payroll during the first eight weeks after its dispersion, provided that the employees do not suffer a 25% pay cut and the the number of employees of the company is the same as of June 30.
Redwood’s loan was for $ 359,500 and was received on April 20, according to the company’s Form ADV. Like Ritholtz, Redwood has pledged to use the loan to pay the salaries of employees performing advisory functions, as well as those providing support.
“Failure to comply with loan cancellation requirements and conditions may result in Redwood being required to repay the loan, which could result in unfavorable financial conditions for the business,” the form states. To mitigate this risk, the company has adopted the following measures: a loan necessity analysis, a verification of the loan against the current Redwood operating agreement, and a plan to track the expenditure of the proceeds of the loan. loan to support any loan cancellation request. “
Ulrich’s loan was $ 201,200, while loan amounts for Ritholtz Wealth Management and Larson Financial Holdings were not disclosed in their ADV forms.
Brown, which has more than 1.1 million followers on Twitter, also noted that RIAs are one of the few industries currently mandated to disclose that they have received a PPP loan, and asked how the acceptance of PPP loans was viewed by some in a critical light.
“I don’t understand why this is considered a scarlet letter,” he said. “These are business owners doing what they need to do to survive. And if they don’t keep employees, the loan is non-repayable. “