U4 - Part 3

How To Register Your RIA: State Vs SEC Registration And When Notice Filing Is Required

October 19, 2022 07:08 am 1 Comment CATEGORY: Regulation & Compliance

In the United States, Registered Investment Advisers (RIAs) are required to register in one of 2 ways: with the Federal government (namely the SEC) or with one or more state securities regulatory agencies. While SEC-registered RIAs are governed by the Investment Advisers Act of 1940 (and its associated regulations), state-registered RIAs are subject to the individual rules of the states (which have their own securities laws and regulations) where they are registered. So RIAs not only face a different set of regulations depending on whether they are Federally or state-registered, but state-registered RIAs, in particular, can also face a widely varying set of rules depending on which state they are registered in.

In this guest post, Chris Stanley, investment management attorney and Founding Principal of Beach Street Legal, breaks down some of the key differences between Federal and state registration, including who needs to register as an RIA, when an RIA can (or must) register with the SEC versus state authorities (including notice filings and unique state circumstances for RIAs with clients in certain states), and registration requirements for RIA firms’ Investment Adviser Representatives (IARs) at the Federal and state levels.

One of the first determinations an RIA owner must make is whether they must register with the SEC or state authorities, and if the latter, which state (or states) they must register with. In general, unless they meet one of a handful of qualifications for an exception (most commonly by having over $100 million in AUM or being registered in 15 or more states), RIAs must register at the state level. State-registered RIAs usually must register in the state(s) where they have a place of business, plus any state where they have more than a ‘de minimis’ number of clients (usually 5) – though notably, Louisiana requires registration from every state-registered RIA with clients in state, regardless of the number, and Texas requires state-registered RIAs to ‘notice file’ if they have less than the de minimis threshold. Several other states additionally require notice filings from SEC-registered advisors with clients in those states, meaning that even for SEC-registered RIAs, staying compliant with filing requirements requires them to understand the filing rules for each state in which the firm does business.

When it comes to the individual IARs employed by advisory firms, the registration requirements also fall along Federal and state lines. State-registered firms generally must have at least one IAR registered in each state where the firm itself is registered, and SEC-registered firms need only register IARs who work with a certain number of clients. The key difference between firm and IAR registration is that, regardless of whether the RIA firm is Federally or state-registered, IARs always register at the state level.

Ultimately, the key point is that the idiosyncrasies between state registration and filing requirements for firms and individuals warrant paying close attention to the rules of each state in which an RIA does business, regardless of whether the firm is Federally or state-registered. This is particularly relevant not only for startup firms but also for those that are expanding or adding clients in new states via new virtual meeting capabilities. By more deeply understanding the nuances of Federal and state filing rules, advisers can be better positioned to stay compliant while managing their changing circumstances!

Virtual Staff Cybersecurity Requirements: Compliance Issues When Adding New Employees Or Contractors

November 8, 2021 07:06 am 1 Comment CATEGORY: Practice Management

The owners of solo advisory firms often find themselves splitting their time between client-facing duties and the administrative work of running their business; yet, as the firm’s business increases, advisor-owners will inevitably reach the limits of their capacity. This can lead many advisors to hire support staff to handle more of the administrative work to free up their time so that they can focus on what they truly love – giving advice and managing client relationships. When making the decision to hire a candidate, though, it is not only necessary to put careful thought into how that person will help the advisor, but also to consider how the new hire will affect the firm from a compliance standpoint. Because, depending on the tasks that the new hire is expected to perform, they may be subject to different types of regulatory oversight based on whether the work they do actually constitutes providing advice to clients (even if offered indirectly, through a back-office role) and/or involves them having access to sensitive client information.

Though it is ultimately up to the advisory firm owner to decide what types of job duties to outsource to new personnel, and whether to hire an employee or independent contractor, it is necessary to know what these duties will be before going into the process of vetting and hiring a candidate. Because adding personnel to assist with developing or delivering investment advice to clients could significantly add to the firm’s oversight and reporting responsibilities (possibly undermining the firm owner’s goal of having more time to spend advising clients)!

For instance, if a new hire will be delivering investment advice to clients, that person may also need to register as an Investment Adviser Representative (IAR), requiring them to pass a qualifying examination such as the Series 65 exam or to hold a professional designation such as the CFP, which can supersede the requirement to pass a qualifying exam. Furthermore, a new hire who provides advice will likely be considered a “supervised person” by the SEC or state regulatory authorities and would be subject to the firm’s compliance and ethics policies (requiring the firm owner to meet certain oversight and reporting requirements for supervised persons under SEC or state regulations). Supervised persons with access to clients’ securities trading activity or the investment recommendations made to clients can also be considered “access persons” subject to additional personal securities account reporting requirements (which also must be reviewed by the firm’s owner or Chief Compliance Officer). Even if the role is one that does not entail the delivery of advice or access to securities trading information or investment recommendations, such as a client service associate or administrative assistant, the firm will still need to implement safeguards to control the employee or independent contractor’s access to clients’ Nonpublic Personal Information (NPI).

Ultimately, whether the new role is meant to be filled by an employee or independent contractor, the best practices are to assess the level of advice delivery and access to client information the role would entail, perform due diligence on candidates and understand what actions would need to be taken upon hiring (such as registering them as an IAR) to remain in compliance, plan for training and supervision on an ongoing basis, and have a plan of action if the arrangement is eventually terminated. And, as with all compliance tasks, it’s best to put all procedures in writing and document any actions along the way. As while the ultimate goal of hiring support staff is often to allow the owner more time for revenue-generating and advisory activities, being able to trust that their new hire will remain in compliance with laws and regulations will allow the firm owner to focus on their own advisory duties.

Weekend Reading for Financial Planners (Sept 11-12)

September 10, 2021 02:30 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a look at the latest SEC initiative on the 'gamification' of investing (e.g., Robinhood) to the use of behavioral nudges (e.g., certain robo-advisors), with a new warning that it will be delving deeper into the "digital engagement practices" of broker-dealers and investment advisers that use technology to entice investors to roll over assets and/or trade on their digital platforms... with a particular eye on when a technology-driven investment 'nudge' may turn into investment advice (with the higher fiduciary duty that would attach to such advice).

Also in the industry news this week are a number of other interesting industry headlines:

A recent survey shows that more than 9-in-10 CFP certificants are strongly satisfied with their choice of career, and that the majority of advisors have seen more prospects and had more communication with existing clients since the pandemic
FINRA's new Rule 4111 is taking effect, which will make it more onerous for broker-dealers to take on brokers with multiple dings on their on their regulatory record (in the hopes of curtailing the number of brokers that get re-hired after engaging in 'problematic' behavior)

From there, we have several articles on spending and saving, including:

How to think about the allocation of financial duties within couples (and ways for couples to structure their spending accounts for marital harmony)
Challenges in home affordability are being driven in part by the reduction in builders constructing "starter" homes, as the number of new homes costing <$200,000 has dropped from 60% in 2002 to <2% today
Tips on simple "money-saving" phone calls (from cable providers to property tax assessors), and potential services that can make those calls for you

We've also included a number of marketing-related articles:

The desire of advisory firm marketers to begin using testimonials is creating friction with compliance departments that are still figuring out how exactly to implement the new rules in their own practices
13 marketing KPIs that advisory firms should track to monitor the health of their advisory firm's growth path
The problems with marketing "service" as an advisory firm differentiator

We wrap up with three final articles, all around the theme of maximizing business efficiency and productivity:

Why it's problematic to simply look at "hours worked" because it rewards the high-hours inefficient worker over the more efficient employee who gets the work done in less time
The difference between efficiency (doing the same, with less) and productivity (doing more, with the same), and why efficiency drives profits but productivity drives growth
How companies historically showed their size by their employee counts and why a growing focus on productivity means "revenue per employee" may be a better metric for success

Enjoy the 'light' reading!

Advertising With Testimonials And Endorsements Under The New SEC Marketing Rule

February 3, 2021 07:08 am 5 Comments CATEGORY: Regulation & Compliance

The Registered Investment Adviser was established by the Investment Advisers Act of 1940, with an explicitly stated intention of separating “bona fide investment counselors” from the “unscrupulous tipsters and touts" trying to just sell the next hot investment scheme. Accordingly, from its very start, a key pillar in the regulation of investment advisers has been various prohibitions against any form of marketing or advertising that might be deemed ‘misleading’ to the public about the investment adviser’s anticipated investment returns. Which in 1961 was formally codified into an advertising rule that explicitly prohibited RIAs from using any form of client testimonial, under the auspices that the results and returns of any one client wouldn’t necessarily be representative of what any/all kinds could expect in the future… and that therefore testimonials were inherently misleading and a danger to the public.

In the years since, though, the world of marketing and advertising has evolved greatly, as have the services of RIAs themselves. As financial advisors expand into financial planning services beyond just portfolio management and are judged on the quality of their service beyond just the literal steps of managing the portfolio itself, it becomes harder and harder for consumers to evaluate an advisor’s quality and expertise with respect to the full breadth of their services. For which one of the most straightforward ways to assess is simply to ask other clients what their experience has been – a common approach in most industries that has led to a bonanza of various third-party review sites, from Google My Business to Yelp and more… but has remained remarkably absent from the realm of financial advisors due to the ongoing prohibition against client testimonials!

But now, the SEC has announced a new marketing rule – it’s first substantive refresh in nearly 60 years – which will, for the first time, allow financial advisors to proactively use testimonials (from clients), endorsements (from non-clients), and highlight their own ratings on various third-party review sites. Which means, simply put, that as the SEC’s new marketing rule takes effect in the coming months, it’s a new dawn for financial advisor marketing.

Not surprisingly, though, the SEC is not granting carte blanche permission for RIAs to use testimonials and endorsements however they wish. Instead, the new rules provide both a series of 7 general prohibitions that still apply to testimonials and endorsements (e.g., that they not be untrue or misleading regarding any material facts), a series of specific requirements that apply to testimonials and endorsements, from new required disclosures to additional oversight and compliance obligations regarding both the RIA and the “promoter” for the RIA, and certain limitations on who can even be a promoter providing an endorsement or testimonial in the first place.

In addition, the SEC’s new marketing rule provides additional clarity about when and how RIAs can leverage various third-party rating and review sites (e.g., Yelp, or various ‘Top Advisor’ lists), including a due diligence obligation (to affirm that the reviews had equal opportunity to be favorable or unfavorable) and additional disclosure requirements regarding the criteria used to determine the rating or review and what it actually pertains to (e.g., explicitly disclosing that a “Top Advisor” ranking is based on AUM alone doesn’t necessarily speak to the quality of the advisor’s advice).

Notably, though, the new marketing rule and its permissiveness of testimonials, endorsements, and the use of third-party review sites are technically only for SEC-registered investment advisers. Those RIAs that are registered at the state level will still need to conform to their state’s own marketing rules, which may or may not incorporate (or be updated for) the SEC’s new rule going forward. And FINRA-registered brokers are ultimately still subject to FINRA’s own rules on advertising and communications (not the SEC’s rules for RIAs).

Nonetheless, the reality is that the SEC’s new marketing rule represents a dramatic shift in the regulatory environment for RIAs when it comes to marketing and a recognition that when the business of advice goes far beyond just investment returns, testimonials and endorsements – and more generally, the perspective from those who have actually paid for and used the adviser’s services – can be an effective way to communicate the value the adviser brings to the marketplace. Albeit with the kind of (very reasonable) disclosures and compliance oversight that would still be expected to ensure that the adviser’s marketing is still reasonable and not misleading about the financial advisor’s services!

Offering Student Loan Planning As Part Of An Advisory Firm Business Model

December 21, 2020 07:03 am 4 Comments CATEGORY: Debt & Liabilities

With Federal student loan debt in the United States currently exceeding $1.5 trillion, there is a huge market of borrowers who are in need of advice on managing their (potentially very sizable) debt… especially because often those with the largest student loan debts also have the highest post-graduate-school earnings (e.g., doctors, lawyers, etc.), which makes decisions about student loan repayment a very high-stakes proposition. And because of the complexity of student loans, many of these borrowers are looking for professionals with the right expertise to help them avoid heading down the wrong path. As while there are many moving parts inherent in the myriad of Federal student loan programs that impact borrowers, borrowers themselves are often unsure of how different life changes (e.g., marriage, a job change, or living in a different state) may further impact how their student loan plans will affect their financial future.

In this guest post, Ryan Frailich – Founder of Deliberate Finances in New Orleans, Louisiana – discusses how financial advisors can offer value to their clients who have significant student loan debt by acquiring the right expertise, designing a systematic student loan planning process, and developing a business model that incorporates student loan planning into their menu of services offered. After all, the reality is that a thorough student loan plan may potentially help a borrower save tens or even hundreds of thousands of dollars, leaving ample room for advisors to earn a substantive fee for the value they provide (which still amounts to a cost that is a tiny fraction of the potential debt savings). Not to mention the benefits of helping clients understand the different options available to them, how their choices may impact their student loan repayment plan, and how their career and life decisions can affect their overall student loan debt.

In order to offer their clients the most effective student loan advice, advisors need to acquire the appropriate depth of knowledge on the various student loan programs and their rules. While self-study is one option for financial advisors to obtain the subject matter expertise required to provide in-depth student loan planning services, others may wish to pursue the Certified Student Loan Professional (CSLP®) program. The CSLP is the first student loan planning designation designed to guide advisors through the process of helping clients navigate their student loans and addresses essential planning topics, including types of student loans, Public Service Loan Forgiveness, analysis of various student loan programs, and how student loan planning relates to broader financial planning topics. Once advisors acquire the requisite core knowledge, they can then work to design a repeatable process to screen and meet with clients, gather and analyze client data, and develop an in-depth student loan plan.

Depending on their firm's structure, advisors can choose to build student loan planning into their firm’s own service model, develop student loan planning as a component of ongoing comprehensive financial planning, or offer standalone student loan plans as short-term planning projects. This is often very appealing to high-income, high-debt young professionals, which can be of value for early-stage firms working to build a millennial client base.

A variety of fee models are available for advisors to consider as well, each with distinct benefits and drawbacks. Some commonly used fee models used by student loan planners include flat fees for one-time projects, fees based on the amount of student loan debt (a “debt under management” approach similar to the industry’s popular Assets Under Management approach for more affluent clientele), hourly fees, and fees as an additional expense included as part of a comprehensive financial plan. Accordingly, some advisory firms will build student loan planning to be a profitable service line unto itself, while others may focus on it as a way to profitably serve younger clients now while also planting seeds for later firm growth (as some clients who initially seek one-time project-based plans may come back as long-term comprehensive planning clients, and/or become AUM clients as their student loan debt is repaid and they become asset accumulators, especially in the case of high-debt high-income clients).

Ultimately, the key point is that student loan planning offers financial advisors a wide realm of business opportunities, either for shorter-term or longer-term engagements. For many firms, offering student loan advice can be an important differentiator to attract higher-income, upwardly mobile next-generation clients (i.e., those with high earnings but currently facing high debt burdens, where the impact of student loan advice is significant and so is the long-term client potential). Additionally, establishing expertise in the subject matter can yield client referrals (by becoming known in a niche of student loan planning), and opportunities to collaborate with other financial advisors who need student loan planning expertise – all of which can potentially turn into valuable, long-lasting relationships!

#FASuccess Ep 189: Experimenting With Advisor Marketing To Find The (Digital) Formula That Works For You, with Taylor Schulte

August 11, 2020 07:05 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 189th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Taylor Schulte. Taylor is the founder of Define Financial, an independent RIA based in San Diego, CA that oversees $76 million of assets under management for 60 families in or approaching retirement. What's unique about Taylor, though, is the way he's grown his practice by proactively spending on marketing, from hiring a branding and website design agency to a PR firm to running ongoing advisor marketing experiments, and everything from local SEO to email marketing automation.

In this episode, we talk in-depth about both the hits and the misses in marketing that Taylor has experienced along the way. From the initial $12,000 he invested into his original website that, in retrospect, wasn't focused enough to succeed, to the $24,000 he spent on a PR firm that was deemed valuable but not something he continued, how Taylor figured out how to turn podcast listeners into clients (but only after 3 years of trying), and the way all his marketing results accelerated once he decided to narrow to a more focused target clientele to pursue, even though it meant firing his mother and his grandfather from being clients, such that today, 75% of all of Taylor's new clients first reach out to him through his well-targeted website that speaks to his niche clientele.

We also talk about Taylor's own evolution within the business. How he hit the wall at $250,000 of revenue and got stuck, unable to grow further, not because of his marketing, but his operations limitations, the way he got through the blocking point by hiring an office manager to take over and focus on those operational aspects, the unique hiring process that Taylor used to find the ideal office manager, and the journal that Taylor now keeps to monitor what he should be doing and what he needs to start delegating.

And be certain to listen to the end, where Taylor shares how working with business coaches have helped him break through the key blocking points in his business, how he has come to rely on CRM workflows, even though Taylor in his own words is not operations-minded, and why Taylor's biggest regret is that he didn't focus on his niche clientele earlier, even as he recognizes that struggling without a niche focus for several years may have been the only way he could eventually accept why getting more focused would help the way that it has.

Kitces & Carl Ep 38: Coming Up With Content Ideas That Will Resonate With Your Clients And Prospects

July 16, 2020 07:21 am 4 Comments CATEGORY: Kitces & Carl Podcast

When financial advisors have the urge to create original content for their clients (or with hopes of attracting new ones), the overwhelming volume of resources that are already publicly available for consumers can easily create the impression that there’s nothing new or unique to say... or worse, that no one wants to hear their own perspective and insights. The end result is that many advisors simply give up before they ever get started, out of the fear that they will have nothing impactful to create or contribute. Yet the reality is that often, creating meaningful content that connects with clients and prospects can be as simple as just answering the questions they’re already asking!

In our 38th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards explore some of the straightforward ways to create content to enhance relationships with existing clients or deepen a connection with prospects, without feeling overly burdened to “be original”, and how to overcome the “analysis paralysis” that comes with trying to choose the “perfect” topic (that doesn’t actually need to be so perfect!). Because ultimately, the biggest roadblocks to creating content are often put up by our own inner critics that create unrealistically high expectations (as in the end, clients and prospects simply want content that shares something relevant and of interest to them).

One simple solution for choosing timely and relevant topics for client and prospect communication is for advisors to track the questions they’re already being asked – especially those that are asked multiple times by different clients – and to create content by answering those most frequently asked questions. By preparing thoughtful, thorough answers that address these questions, advisors can easily create content that by definition is already on the minds of clients and prospects… but in an even more efficient manner that reaches an audience of many (versus answering the same question one client at a time!). Similarly, another strategy to cultivate content ideas is just to notice the environment around you – the ideas that are compelling, the conversations that stick in your head, and articles or stories that have a personal impact to you (and would therefore feel meaningful to share with others).

Having a system in place to capture ideas as they come can also help organize (and later, prioritize) potential topics to develop into shareable marketing content. Notably, there are several tools that can help keep track of content ideas, including apps like Evernote, Google Keep, Apple Voice Memos, Pocket, or even a simple physical notebook or daily planner.

Equally important is establishing a habit of regularly scheduling time to work on developing the ideas, as well as devoting time to review and reflect on the ideas that have been captured. And advisors can leverage tools like Google Analytics for quantative feedback on overall engagement to understand what kind of content really is resonating (or not).

Ultimately, the key point is that most financial advisors already have more than enough interest and knowledge to create rich and valuable content that will be well-received by clients and prospects… simply by focusing on the questions they’re already being asked, and translating the news and events around them into the messages and information that their clients and prospects need to hear. Establishing a system to capture ideas, and developing a regular practice of reviewing those ideas, can be helpful when organizing and prioritizing relevant topics that will be valuable to readers. And committing to a regular routine of actually creating the content will help keep the process on track, by creating a system that the advisor can be accountable to in the first place!

How RIAs Can Determine If They Need To Disclose PPP Loans on ADV Part 2A

April 30, 2020 08:47 am 11 Comments CATEGORY: Practice Management

Last month, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing Americans with $2+ trillion of emergency fiscal stimulus funding in response to the economic damage caused by the Coronavirus pandemic. Part of the Act included the Paycheck Protection Program (PPP), which initially authorized up to $349 billion in forgivable loans intended to be used by small business owners to pay their employees during the crisis. However, the overwhelming demand for PPP loans depleted funds in a matter of just a few weeks, leading to an additional round of funding of $310B made available in late April 2020.

Accordingly, small business owners still have the opportunity to apply for funding, leaving many financial advisors faced with the decision over whether to apply for a PPP loan themselves. As while loans are intended for small businesses (with 500 or fewer employees) experiencing economic uncertainty resulting from COVID-19 who need the funding to continue business operations, advisors who receive loans also need to determine whether their loans are disclosable events.

For brokers regulated by FINRA, PPP loans are not considered disclosable events for purposes of Form U4 Question 14K, as FINRA determined that forgiveness of the PPP loan does not constitute a “compromise with creditors” because the potential for loan forgiveness is part of the original terms of the loan.

On the other hand, RIAs must disclose their PPP loans on Item 18 of the ADV Part 2A if the loan constitutes a “material fact” pertinent to the advisory relationship. In most cases, if PPP loans are used for the intended purposes of covering payroll expenses for persons performing primarily advisory functions, the loan would be considered a material fact relating to the advisory relationship. Accordingly, RIAs should be prepared to disclose their PPP loans on their ADVs.

However, while PPP loans should likely be disclosed in most circumstances, RIAs may be able to avoid such disclosure in limited situations. For example, a firm could try to avoid disclosure by claiming that the funds were obtained primarily due to the economic uncertainty posed by COVID-19, but not necessarily because they were “required”. This argument, however, may be difficult to make given the Small Business Administration’s requirement of certifying a PPP loan as necessary due to the current economic uncertainty cause by the COVID-19 crisis.

Another way that an RIA may be able to justify not disclosing receipt of a PPP loan on their ADV Part 2 would be by claiming that funding was used for the payroll of employees who were not directly involved in advisory functions (e.g., staff involved in marketing, events, receptionist duties).

Ultimately, the key point is that because RIA firms and brokers have different criteria for disclosure events, the requirements to disclose PPP loans are different for each. For brokers, the principal question is whether a compromise with a creditor has been made, whereas for RIAs the question is whether the event has a financial impact that materially (or potentially) impacts the ability to fulfill obligations to the client. As such, FINRA brokers are not required to disclose PPP loans on their U4 Forms (assuming they are used according to the original terms of the loan) but RIAs, regulated by the SEC, should lean heavily towards disclosing their PPP loans on Part 2A of their Form ADV.

Should Financial Advisors Accept (And Disclose) Paycheck Protection Program Loans?

April 23, 2020 09:52 am 59 Comments CATEGORY: Practice Management

Last month, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2+ trillion emergency fiscal stimulus package, with the intention to mitigate the economic damage created by the Coronavirus pandemic. For many individuals and small business owners who are facing financial hardship, including many financial advisors themselves, the Paycheck Protection Program (PPP), which originally authorized $349 billion in forgivable loans, is a compelling opportunity offered by the CARES Act providing much-needed financial relief.

While the initial round of funding was quickly depleted (as funds were exhausted only 2 weeks after applications were first accepted), Congress is now considering renewing PPP funds with an additional $310 billion. While the opportunity for relief with a loan (potentially one that is tax-free and forgivable, depending on how it is used) is attractive, the question for many financial advisors is whether or not they should take a loan in the first place, as there are many factors for advisors to consider.

First is whether the funds being requested are truly necessary to keep the business running, and whether the advisor really does need the funds as much as the next person in danger of losing their business. PPP funding is forgivable only if used for specific purposes (namely, payroll costs, mortgage interest, rent, utilities, and interest on other loans incurred prior to February 15, 2020); importantly, loans are not intended to serve as a ‘rainy-day’ fund or as reserves for future anticipated hardship.

Another important consideration that advisors should make is around disclosure requirements. As while PPP loans are not required to be disclosed in item 14K on FINRA Form U-4, they may need to be included in Item 18B of the Adviser’s ADV. Furthermore, while the ADV disclosure is not considered a derogatory mark against the advisor by regulatory agencies, clients (or potential clients) may feel otherwise. However, the manner in which the advisor chooses to present themselves to clients can influence their perception of the disclosure (e.g., some advisors who openly talk about the loan with clients have encouraged those who also need financial relief to apply for a loan; this approach has worked well to inspire some clients).

Ultimately, the key point is that the PPP has been (and, if more funding becomes available, can continue to be) a valuable resource that may help financial advisors in financial distress caused by the Coronavirus. While there are many considerations to make before choosing to apply for a loan, advisors should think quickly and be ready to apply for funding should more funds become available.

An Advisor’s Guide to the Paycheck Protection Program

The Paycheck Protection Program (PPP) provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act, is designed to help small businesses facing economic uncertainty in light of the COVID-19 crisis to help fund near-term expenses and to retain employees. The $349 billion initially funding the program is 100% backed by the SBA, and loans issued may be up to 100% forgivable. An additional $310 billion in funding was approved for the program on April 21, 2020.

For further discussion of strategically when an advisory firm should consider using the PPP instead of other available small business coronavirus relief programs under the CARES Act, see "Quickly Maximizing Paycheck Protection Program’s (PPP) Forgivable Loan Opportunity For Financial Advisors".

As of April 16, 2020, the funds initially allocated for the PPP have been depleted. While applications for PPP loans will no longer be processed, individuals in need of funding should continue to move forward and prepare to apply for assistance in case Congress approves additional funding.

As of April 27, 2020, the SBA has resumed accepting PPP loan applications.

Nerd Note: The information found here was last updated on May 14, 2020 and includes considerations per the SBA's Immediate Interim Rule and the updated Treasury Department Paycheck Protection Program FAQ Fact Sheet which includes information on the Safe Harbor for PPP loans less than $2 million.