Paycheck Protection Program Considerations for Advisers

Like any clients that have taken advantage of the Paycheck Protection Program (PPP), advisory practices must be careful about the provisions the Small Business Administration has set forth to make any payments forgivable.

Art by Philip Lindeman

Just like other small businesses that have been negatively impacted by the effects of the coronavirus pandemic on the markets and their profits, retirement plan advisory practices have been hit hard, and some have applied to the Small Business Administration (SBA) for grants from the Paycheck Protection Program (PPP).

Bimal Shah, chief executive officer of Rajparth Achievers, has not only helped clients apply for PPP grants, but he has obtained a $40,000 loan for his own practice. “We have been affected by the virus and needed the help,” he says.

Julia Carlson, founder and chief executive officer of Financial Freedom Wealth Management Group, says her practice also has been affected as its fees are based on assets under management (AUM).

“With the markets dropping 35% in March, literally freefalling, it led to sheer panic not only among our staff but among our clients,” Carlson says. “When we realized our income could potentially drop by 35%, we applied for a PPP loan and obtained $211,000. I applied because I wanted to act in good faith and be a steward over my staff.”

The purpose of the loan is to keep the business solid and help remove some of the uncertainty, Carlson continues.

“The PPP loans have brought confidence to my business and the small businesses that we serve,” she says.

Like Carlson, Robert Skloff, portfolio manager with Silver Pine Capital, says his firm’s revenue is dependent on assets under management and, therefore, dependent on how the capital markets perform.

“The Dow dropped as much as 37.1% at its worst in March,” Skloff says.

At the same time, he warns other advisory practices that take out a PPP loan to be careful about the provisions the SBA has set forth to make any payment a forgivable grant, rather than a loan.

“There isn’t much information readily available,” Skloff says. That led him to create a website,, which includes a PPP forgiveness and optimization tool that can handle companies with up to 25 employees and is available for $59.99. If a firm uses the optimizer, the biggest portion of PPP payments, or 75%, will be directed toward payroll costs, Skloff notes.

“The importance of knowing how you are tracking against both what you included in your PPP application and the amount of your loan is essential,” he says. “The allocations and limitations are confusing. If you do not actively track this, you could end up with a surprise at the end of the forgiveness period.”

Skloff’s website emphasizes that PPP loan recipients were given an eight-week forgiveness period.

“That time frame may not be calculated in the same manner as a monthly or weekly payroll,” he warns. “The PPP forgiveness and optimization tool gives you the ability to automate the payroll allocation and tracking process and allows you to view your weekly progress toward forgiveness.”

The tool also helps users track non-payroll costs and monitor reductions.

Another resource for advisers was published by the Division of Investment Management of the Securities and Exchange Commission (SEC). The division posted a question and answer guide tailored specifically to investment advisers applying for PPP loans.

According to the division, an investment adviser has a fiduciary responsibility to disclose to clients that it applied for a PPP loan, even if the application was denied.

The division says, “If the circumstances leading you to seek a PPP loan or other type of financial assistance constitute material facts relating to your advisory relationship with clients, it is the staff’s view that your firm should provide disclosure of, for example, the nature, amounts and effects of such assistance. If, for instance, you require such assistance to pay the salaries of your employees who are primarily responsible for performing advisory functions for your clients, it is the staff’s view that you would need to disclose this fact. In addition, if your firm is experiencing conditions that are reasonably likely to impair its ability to meet contractual commitments to its clients, you may be required to disclose this financial condition.”