Recently released Treasury Department data on recipients of the government’s Paycheck Protection Program indicates that perhaps 80,644 jobs across the 22,849 firms designated as “investment advice” providers would be retained thanks to the financial assistance.
Those numbers are astronomically high for investment advisory firms, especially given that many loan recipients did not designate any number of jobs retained at all; in many cases the number of jobs retained was listed as “zero.”
Coupled with discrepancies in the industry codes firms used to describe the businesses, the data raises further questions about the accuracy of the information and the efficacy of the program, and suggests it may be impossible to determine exactly how many jobs the loan program saved in the investment advice space, or the extent to which the money was needed to stabilize employment in the industry in the first place.
Part of the confusion stems from the fact that the “jobs retained” number in the data release was pulled from the recipients’ applications where they were meant to list the total number of employees at their company, not the actual number of jobs that were saved because of the loan money, according to Jamie Hopkins, a director of retirement research at Carson Group. “It’s more of a number of ‘how many people worked at the company at the start date’ vs. ‘how many jobs were retained as a result of the loan,’” he said.
Nonetheless, in the data released by the Treasury Department last week, many firms in the investment advice arena indicated “zero” jobs retained (loans were originally meant to fill up to $100,000 of an employee's salary). In many cases, there was no number listed at all.
Firms in the wealth management space, in particular, have taken more heat for receiving PPP loans compared with other industries more directly affected by the pandemic.
WealthManagement.com totaled the number of jobs retained from both loan recipients with a total greater than $150,000 (whose business names and addresses were disclosed), as well as those with a total under $150,000 (who remained unnamed). Some significant caveats apply; in the data, there were numerous instances of companies that were not in the investment space included under that North American Industry Classification System code and examples of RIA firms that were not listed with that specific NAICS code.
While WealthManagement.com was able to extract some of the most egregious errors from loan recipients above $150,000, that cannot be done for those below that threshold, as the business names are not listed.
Among the 1,387 recipients with loans of more than $150,000, 126 listed “zero” jobs retained, while 104 recipients left that field blank. There were 15 separate recipients with a loan of $1 million or greater that did not have anything filled out in the “jobs retained” space. Additionally, 11 separate recipients with a reported loan of $1 million or greater had “zero” listed in the number of jobs retained, including Moors & Cabot, a Boston-based firm that received a loan between $2 and $5 million, and employs over 150, according to its Form ADV.
Jackie Freyman, a spokesperson for the firm, said that no jobs had been lost at the firm during the crisis.
“The PPP loan has provided M&C with additional capital to ensure the continuity of our support staffing and ultimately ensure employment of the men and women responsible for the high service level our clients are accustomed to in these increasingly uncertain times,” Freyman said.
Among the rest of the firms that took over $150,000, the total number of jobs retained was listed as 26,185.
For the 21,492 loan recipients with loans beneath $150,000, 2,739 recipients said “zero” jobs were retained, while 1,392 left it blank. When recipients above and below $150,000 are analyzed in total, 4,901 of the 22,879 loan recipients with the investment advice NAICS code either reported zero jobs retained or left it blank.
There are additional peculiarities that might point to errors in the data. As Bloomberg reported, some loan recipients with totals beneath $150,000 reported that 500 jobs were retained, which is unlikely considering the size of the loan.
In addition, WealthManagement.com found that the precise number of RIAs, brokerage firms and other companies in the industry that took out a loan is difficult to ascertain for certain, due to the type of data released by the Treasury Department.
The PPP loans were originally included in the CARES Act, which Congress passed in late March, and new applications are currently still being accepted. Originally, the program was set to expire last week, but there is still approximately $130 billion in allocated funds that are unused. Therefore, the Small Business Association will be accepting applications through Aug. 8.
Hopkins said that the country may have to wait for a more accurate assessment of the program's efficacy.
“Until people actually go through that forgiveness process and report, they won’t have accurate data on retained jobs,” he said.