Advisers apply for PPP loans to cover future needs as uncertainty lingers

Most advisers who have taken loans under the Paycheck Protection Program (PPP) 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.

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.

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 SEC.

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.

Leave a comment