Much of the news coverage has centered on large businesses (including large RIA firms) that were recipients of PPP loans. Even prior to this week’s data release, large firms with a significant amount of assets under management (AUM) who disclosed they’d received a loan faced some criticism as to whether RIA firms, particularly those or their size, should be pursuing such funds in the first place, in contrast with other industries (though many found these critiques misguided).
According to MarketCounsel CEO Brian Hamburger, the preponderance of small firms is a reminder that the PPP loan program could be extremely beneficial to an industry largely populated by small businesses.
“Because wealth managers by their name and definition work with wealthy individuals, I think people often assume they are universally wealthy,” he said. “I reject the arguments made by a very loud minority of folks out there who suggest that wealth management firms shouldn’t have been eligible for PPP loans.”
While the Treasury Department data included business names and addresses of those companies that received a PPP loan of $150,000 or greater, names and addresses were not disclosed for firms receiving loans that were less. However, an exact loan amount was disclosed for companies with a loan below $150,000 (unlike the higher loan amounts, which only included ranges of loan amounts).
While CNBC reported that 87% of the loans were for less than $150,000, nearly 75% of the total dollar amount went to businesses with loans that were higher (and were thus named in the data), according to NPR. But $150,000 or less can still go a long way, Hamburger said.
“For some firms that have two, three or four employees, that’s a big deal,” he said.
WealthManagement.com constructed a full list of unnamed companies from the 50 states, District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands and Northern Mariana Islands that were labeled as being in the “investment advice” category according to their six-digit North American Industry Classification System (NAICS) code.
Some significant caveats apply. It is likely that this list includes companies that should not be considered investment advisors, and does not include investment advisory firms with improperly-labeled NAICS codes. This was also an issue with the higher loan amounts, but the $150,000+ loans included names of businesses which enabled us to investigate (and excise) obvious errors; for smaller loans, the lack of names makes that impossible to do. Nevertheless, the data as given offers a partial picture of the number of investment advice businesses that received loans, as well as how much those businesses received.
In all, 21,492 businesses with the NAICS code for investment advice received PPP loans under $150,000, for a cumulative total of $677,836,878. The average amount of dollars received was $31,539, with a median of $20,800.
The state with the most loan recipients was California, with 2,459 businesses, followed by Florida with 1,616 recipients. New York and Texas followed, at 1,387 and 1,385 loans, respectively. Barring Guam, the U.S. Virgin Islands and the Northern Mariana Islands, which had recipient totals in the single digits, the District of Columbia had the fewest number of companies, at 19. Washington, D.C. was followed by Alaska and Wyoming (28), Puerto Rico (35) and Vermont (42).
The PPP loans were originally included in the CARES Act, which Congress passed in late March, and it is currently still accepting new applications. Originally, the program was set to expire last week, but there is still approximately $130 billion in allocated funds. Therefore, the Small Business Association will be accepting applications through Aug. 3.
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