Sequoia Financial Group, with approximately $ 4.6 billion in assets under management, accepted a loan from the government-backed Paycheck Protection Program (PPP), according to a recent Securities and Exchange (SEC) file.
The Akron, Ohio RIA revealed in its May 21 ADV update that it had taken out the loan for an undisclosed amount. The existence of the loan was not previously reported and the company did not respond to requests for comment.
In its dossier, Sequoia said it applied for the loan “due to the current economic uncertainty caused by the global Covid-19 pandemic”, but did not explain in detail why it needed the loan or how it intended to use it. funds. .
At the same time, the company said it had “no financial commitments that would compromise its ability to meet its contractual and fiduciary commitments” to its customers and that it had not been the subject of a proceeding. bankruptcy.
PPP loans are government guaranteed loans issued by the Small Business Administration (SBA) intended to encourage employers affected by the coronavirus pandemic to keep their employees on their payrolls instead of firing them. Small businesses can take out loans through the program up to 2.5 times their monthly payroll or $ 10 million, whichever is less.
A company that takes out a PPP loan must certify that the financing is “necessary to support the applicant’s ongoing operations”.
The SBA may cancel up to 100% of loan proceeds used for payroll, rent, mortgages, and utilities if the borrower does not lay off a full-time employee within eight weeks of loan funding and upon completion of the loan. minus 75% of the amount remitted is used to cover the payroll.
RIAs have seen their businesses take a hit in recent months due to the pandemic, as falling asset prices saw them earn less income from market-linked assets below management fees. Several large companies took out PPP loans during the pandemic, including $ 12 billion Carson Group, $ 4.9 billion RegentAtlantic and $ 1.96 billion Wealth Consulting Group, and $ 1.2 billion Robertson Stephens.
Adviser Investments, which manages about $ 5.5 billion, has turned down about $ 2.2 million in PPP funding. Its chairman, Daniel Wiener, wrote in a recent guest column for Citywire that RIAs involved in the program should return the money so it can go to businesses hardest hit by the pandemic.
Founded in 1991, Sequoia has offices in Ohio, Florida and Michigan. In 2018, the company merged with RIA LJPR Financial Advisors, based in Troy, Michigan.
According to previous reports from Citywire, Sequoia’s wealth management clients – typically business owners – have between $ 2 million and $ 25 million, while its financial advice clients typically have less than $ 2 million. LJPR, meanwhile, has specialized in serving mass customers, focusing on niches such as police and firefighters and business owners. His clients ranged from $ 500,000 to $ 30 million.
Léon LaBrecque, Director of Growth at Sequoia, recently spoke to ThinkAdvisor regarding the delivery of PPP loans. “I love the concept of helping small businesses, unfortunately the devil is in the details,” LaBrecque said.
