While there has been a good deal of shaming of large registered investment advisor (RIA) firms that took Paycheck Protection Protection loans during the Covid-19 crisis, Ritholtz Wealth Management CEO Josh Brown defended his firm’s loan as a prudent move to help maintain continuity for clients and staff.

The New York City-based firm, which has $1.3 billion in assets, is among a number of billion-dollar RIAs that are now disclosing their PPP loans on updated Form ADV. The form must be filed with the Securities and Exchange Commission and disclosed to investors.

“We have a loan from our bank. We have to pay it back,” Brown told Financial Advisor magazine. “It’s not a forgiven loan. We haven’t applied for forgiveness. Nobody has. You need eight weeks to go by to apply for forgiveness. We have not and we don’t intend to. We just have a low interest-rate loan from our bank. There’s no government bailout, no taxpayer money involved. We owe money to our bank. It’s not very complex,” the CNBC commentator said.

He argued the PPP loan was no different than a regular bank loan. "It’s nobody’s business how a firm choses to finance itself," he said. "Why is this different than Blackstone telling their firms to draw down lines of credit or an RIA going to the bank for a loan?"

Brown co-founded Ritholtz Wealth Management with wealth manager and financial columnist Barry Ritholtz.

Brown said taking the loan was a prudent move in mid-March, when business owners didn't know how bad the stock market or economy would get and predictions from health agencies and the White House estimated millions would die from the coronavirus.

Brown, who declined to specify the firm’s loan amount, said the firm is using 90% of the money right now to pay benefits and payroll to employees and the other 10% for rent.

“Yes, assets took a hit. They did in the first quarter, but that’s not the reason we took the loan. The reason we went to the bank is you don’t know how long the lockdown is going to go on for and how bad the recessions will get. The world looks very different in June than in March. States are reopening and their economies seems to be bouncing back, but 4.5 million businesses took loans,” Brown said.

Criticism of large RIAs that took PPP loans centered on the fact that, unlike small retailers, restaurants and even private-pay physicians’ offices, which are dependent on daily cash flows that completely dried up when they were shuttered during the pandemic’s height, RIAs’ assets and the fees they charge clients remained relatively steady. Some have argued that, as financial professionals, big RIAs should be sophisticated enough to prepare for inevitable bear markets.

Daniel Wiener, chairman and co-founder of Adviser Investments, a $5.5 billion RIA and a critic of RIAs that take PPP loans, called such firms “weak business managers or simply immoral” in trade press reports.

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