Sanctuary Wealth Group, an Indianapolis-based wealth management firm with more than $9 billion in assets under advisement, applied for and received a Paycheck Protection Program loan, according to a newly updated Form ADV submitted to the SEC by Sanctuary Advisors, a registered investment advisor that is also a wholly owned subsidiary of Sanctuary.
The language describing the circumstances under which Sanctuary applied for the loan is reminiscent of disclosures in other recent Form ADVs in which investment advisory firms described their reasoning behind taking the loan, which was included in the CARES Act passed by Congress in late March and was intended to assist businesses struggling under the economic stress of COVID-19. Sanctuary Wealth Group is described in the PPP loan disclosure as a “holding company for various operating subsidiaries” that includes Sanctuary Advisors.
“Because of the economic uncertainties surrounding the current COVID-19 pandemic, we believed it to be prudent to apply and accept the PPP loan in order to support our ongoing operations,” the form read. “Our intentions are to use the proceeds of the PPP loan to maintain headcount and compensation as well as to fund other expenses specifically permitted under the PPP.”
The size of the loan was not disclosed in Sanctuary Advisors’ Form ADV.
“We made this voluntary disclosure in the ADV and are not commenting beyond what was filed with regulators,” a spokesperson for Sanctuary Wealth said.
The PPP loans, which are eligible to companies 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 forgiven if the company taking the loan uses 75% of it toward payroll in the first eight weeks after it’s been dispersed, provided employees don’t suffer a 25% drop in pay and if the company’s employee head count is the same as of June 30.
Sanctuary Wealth was founded in 2018 with an emphasis on attracting breakaway advisors from wirehouses, covering 12 states with more than 33 partner firms throughout the country. Earlier this month, the firm announced that it would be taking full ownership of Northview Asset Management, an RIA it bought 25% of last fall. The RIA, which had about $350 million in AUA, would be renamed Advisor Solutions Group. In addition to Sanctuary Advisors, Sanctuary Wealth Group includes broker/dealer Sanctuary Securities, along with Sanctuary Asset Management, Sanctuary Insurance Solutions, Sanctuary Capital Markets and Sanctuary Global Family Office.
Greg Friedman, the CEO of Private Ocean, said his firm had not applied for a PPP. With a limited amount of funding, Friedman said, the fact was that there were industries like retail and restaurants that were decimated by the spread of COVID-19. While he understood the business decision of pursuing the “free money” available with a forgivable loan, he cautioned that the loan program was paid for by everyone, and there were industries in far more desperate need.
“The PPP is about keeping people employed,” he said. “We’re not laying people off.”
However, AUM shouldn’t be the primary determining factor on whether a firm should apply for a loan, according to Dan Bernstein, the chief regulatory counsel at MarketCounsel. He said taking the loan shouldn’t be about whether a firm was “prepared'' for the pandemic, as the point of the loan was to ensure employees stayed on payroll. Instead, each firm needed to make its own decision on how drastically the economic crisis could impact operations and employee retention.
“I can see a large firm with a lot of AUM with a high head count, and they may need (the loan) in order not to fire people,” he said. “You may have a small firm without a lot of AUM, but they don’t have a lot of mouths to feed."
However, he also said the ongoing debate illustrated a point MarketCounsel had made from the start of the PPP loan process.
"Even if you decide it shouldn't be disclosed, you need to assume it's going to come out, and there will be some public relations you'll have to deal with," he said.