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| Wealth Advisers Torn Over Taking Small-Business Aid | Wealth Advisers Torn Over Taking Small-Business Aid |
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| The federal government’s multibillion-dollar aid program to help small businesses hurt by the pandemic prompted outrage after billions went to public companies while mom-and-pop businesses were sidelined. | The federal government’s multibillion-dollar aid program to help small businesses hurt by the pandemic prompted outrage after billions went to public companies while mom-and-pop businesses were sidelined. |
| Now, another group of recipients is being scrutinized for taking the money: independent wealth management firms, some of which manage billions of dollars on behalf of affluent Americans. Their fees, which are typically 1 percent, can bring in tens of million annually regardless of market fluctuations. | Now, another group of recipients is being scrutinized for taking the money: independent wealth management firms, some of which manage billions of dollars on behalf of affluent Americans. Their fees, which are typically 1 percent, can bring in tens of million annually regardless of market fluctuations. |
| The initial $349 billion allocated in April for the Paycheck Protection Program went quickly, prompting Congress to approve an additional $310 billion. But some business owners found the guidelines for accepting the money confusing or too restrictive. | The initial $349 billion allocated in April for the Paycheck Protection Program went quickly, prompting Congress to approve an additional $310 billion. But some business owners found the guidelines for accepting the money confusing or too restrictive. |
| Now, a divide is growing between advisory firms that took the money and those that declined because of ethical concerns. | Now, a divide is growing between advisory firms that took the money and those that declined because of ethical concerns. |
| The issue is more than a tempest in a teapot. Some firms could lose millions in fees if their clients start pulling their wealth out. | The issue is more than a tempest in a teapot. Some firms could lose millions in fees if their clients start pulling their wealth out. |
| The Securities and Exchange Commission, which has oversight of these advisory firms, has recommended that they disclose receiving the loans as a material event that their clients need to know about. Some critics say that the firms should go further and discuss with their clients why they took the relief money, and that clients should be pushing for more transparency. | The Securities and Exchange Commission, which has oversight of these advisory firms, has recommended that they disclose receiving the loans as a material event that their clients need to know about. Some critics say that the firms should go further and discuss with their clients why they took the relief money, and that clients should be pushing for more transparency. |
| Two matters are under scrutiny. The first is a firm’s solvency, because the recipient had to attest to needing the money to survive the pandemic. If a firm is not well run, clients should be aware, because their wealth is at stake. The second are the ethics of the principals of any firm that might have applied for a loan the firm did not need. | Two matters are under scrutiny. The first is a firm’s solvency, because the recipient had to attest to needing the money to survive the pandemic. If a firm is not well run, clients should be aware, because their wealth is at stake. The second are the ethics of the principals of any firm that might have applied for a loan the firm did not need. |
| “We didn’t think it was very credible that these firms actually needed the money,” said Gary Ribe, the chief investment officer of Accretive Wealth Partners, which manages $130 million and did not apply a loan from the Paycheck Protection Program. “Getting it out of an abundance of caution — that didn’t seem credible, either.” | “We didn’t think it was very credible that these firms actually needed the money,” said Gary Ribe, the chief investment officer of Accretive Wealth Partners, which manages $130 million and did not apply a loan from the Paycheck Protection Program. “Getting it out of an abundance of caution — that didn’t seem credible, either.” |
| But advisory firms that took the money have been pushing back, saying that the action was legal and that there was enough money to go around, although many of them received the money in the first wave of bailout loans, when many of the neediest and smallest businesses were shut out. | But advisory firms that took the money have been pushing back, saying that the action was legal and that there was enough money to go around, although many of them received the money in the first wave of bailout loans, when many of the neediest and smallest businesses were shut out. |
| The firms that took loans also accuse their critics of hindsight bias: The market may be back to pre-pandemic levels now, but that did not seem obvious when the S&P 500 fell 12.5 percent in March and was down 20 percent for the first quarter. | The firms that took loans also accuse their critics of hindsight bias: The market may be back to pre-pandemic levels now, but that did not seem obvious when the S&P 500 fell 12.5 percent in March and was down 20 percent for the first quarter. |
| “We expected there to be a little pushback when we applied for this, but when we were having the discussion in March, our thinking was, ‘We have no idea what is happening,’” said Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management, which oversees $1.3 billion. | “We expected there to be a little pushback when we applied for this, but when we were having the discussion in March, our thinking was, ‘We have no idea what is happening,’” said Barry Ritholtz, chairman and chief investment officer of Ritholtz Wealth Management, which oversees $1.3 billion. |
| Mr. Ritholtz, a financial commentator on Bloomberg Television, would not discuss the size of the loan. He said the firm had applied for it only to cover the salaries of about half of its 32 employees who served in support roles. | Mr. Ritholtz, a financial commentator on Bloomberg Television, would not discuss the size of the loan. He said the firm had applied for it only to cover the salaries of about half of its 32 employees who served in support roles. |
| Dynasty Financial Partners, which has more than $40 billion under management, oversees a network of 46 affiliated advisory firms that maintain their own businesses and S.E.C. registrations. At least 11 of those firms applied for relief under the Paycheck Protection Program, said Jonathan Morris, the firm’s chief legal and governance officer. | Dynasty Financial Partners, which has more than $40 billion under management, oversees a network of 46 affiliated advisory firms that maintain their own businesses and S.E.C. registrations. At least 11 of those firms applied for relief under the Paycheck Protection Program, said Jonathan Morris, the firm’s chief legal and governance officer. |
| “They’re all small businesses,” Mr. Morris said. “We don’t own them. They make their own individual decisions.” | “They’re all small businesses,” Mr. Morris said. “We don’t own them. They make their own individual decisions.” |
| Dynasty did offer to connect its network of affiliated firms with a bank it uses in St. Petersburg, Fla., where it is based, but Mr. Morris said the company had also helped about 100 clients apply for the paycheck loans. | Dynasty did offer to connect its network of affiliated firms with a bank it uses in St. Petersburg, Fla., where it is based, but Mr. Morris said the company had also helped about 100 clients apply for the paycheck loans. |
| The program was created as part of the CARES Act when the economic impact of the coronavirus was first becoming apparent. It was meant to provide quick support to businesses to help maintain their payrolls. | The program was created as part of the CARES Act when the economic impact of the coronavirus was first becoming apparent. It was meant to provide quick support to businesses to help maintain their payrolls. |
| In the initial rush, larger firms with more resources were able to get first in line for the loans, squeezing out smaller business. Large chains like Shake Shack and Ruth’s Hospitality were taken to task for requesting money that some felt should have gone to local restaurants. After a public outcry, those companies and dozens of others returned the money. | In the initial rush, larger firms with more resources were able to get first in line for the loans, squeezing out smaller business. Large chains like Shake Shack and Ruth’s Hospitality were taken to task for requesting money that some felt should have gone to local restaurants. After a public outcry, those companies and dozens of others returned the money. |
| Unlike restaurants and shops, or even small professional services firms like law offices and consultants, wealth managers did not have an interruption in their revenue. They deduct their fees quarterly from their clients’ accounts regardless of whether the market is up or down. This discrepancy has been at the heart of the debate, particularly when firms have been slow to disclose receiving a loan or have changed their reasons. | Unlike restaurants and shops, or even small professional services firms like law offices and consultants, wealth managers did not have an interruption in their revenue. They deduct their fees quarterly from their clients’ accounts regardless of whether the market is up or down. This discrepancy has been at the heart of the debate, particularly when firms have been slow to disclose receiving a loan or have changed their reasons. |
| But pressure has mounted for wealth management firms to disclose whether they received aid, said Amit Singh, a corporate securities partner at Stradling, a law firm. | But pressure has mounted for wealth management firms to disclose whether they received aid, said Amit Singh, a corporate securities partner at Stradling, a law firm. |
| “Disclosing the loan doesn’t necessarily say your business was terrible,” he said. “Even if it may not be a legal obligation to disclose what you might ultimately need it for, it will be bad politically not to.” | “Disclosing the loan doesn’t necessarily say your business was terrible,” he said. “Even if it may not be a legal obligation to disclose what you might ultimately need it for, it will be bad politically not to.” |
| Mr. Ritholtz said his firm had a solid reason for taking the loan. Revenue was down about 12 percent in the first quarter, but he had been thinking longer term when he applied. “It wasn’t about the revenue drop in the April billing cycle,” he said. “It was about how bad does this get in the fourth quarter and in 2021.” | Mr. Ritholtz said his firm had a solid reason for taking the loan. Revenue was down about 12 percent in the first quarter, but he had been thinking longer term when he applied. “It wasn’t about the revenue drop in the April billing cycle,” he said. “It was about how bad does this get in the fourth quarter and in 2021.” |
| Brian Hamburger, a lawyer who represents independent investment advisers, said he had warned firms applying for paycheck loans to expect blowback, which came more quickly than he had expected. | Brian Hamburger, a lawyer who represents independent investment advisers, said he had warned firms applying for paycheck loans to expect blowback, which came more quickly than he had expected. |
| “I think a lot of the criticism was brought on by the firms themselves who took the money,” Mr. Hamburger said. “A lot of those firms leading into the pandemic talked about their economic might and that they were running such a great business. They’ve opened themselves up to a lot of criticism.” | “I think a lot of the criticism was brought on by the firms themselves who took the money,” Mr. Hamburger said. “A lot of those firms leading into the pandemic talked about their economic might and that they were running such a great business. They’ve opened themselves up to a lot of criticism.” |
| Updated June 12, 2020 | Updated June 12, 2020 |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. | The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. |
| Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission. | Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission. |
| Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home. | Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home. |
| States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. | States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications. | Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications. |
| The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing. | The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing. |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. | If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. |
| Citywire, a publication that covers the advisory industry, has been publishing almost daily updates on the firms that have disclosed that they received a loan or quietly filed amendments to their regulatory statements. | Citywire, a publication that covers the advisory industry, has been publishing almost daily updates on the firms that have disclosed that they received a loan or quietly filed amendments to their regulatory statements. |
| Advisory firms that took a loan are faced with what to do with the money now that most of the market losses from March have been erased. They have three choices: Ask for the loan to be forgiven, if they used the money for payroll, health care and other related business expenses; pay it back at a low 1 percent interest rate; or return it. | Advisory firms that took a loan are faced with what to do with the money now that most of the market losses from March have been erased. They have three choices: Ask for the loan to be forgiven, if they used the money for payroll, health care and other related business expenses; pay it back at a low 1 percent interest rate; or return it. |
| Dynasty is not mandating how its advisers handle the money. “It’s going to be up to the individual firms,” Mr. Morris said. “We don’t dictate what they do.” | Dynasty is not mandating how its advisers handle the money. “It’s going to be up to the individual firms,” Mr. Morris said. “We don’t dictate what they do.” |
| But many firms that did not apply for the money — or pulled their applications once the market began to improve — said clients ought to ask advisers for more disclosure around taking the money. They argue that a fee-based advisory firm should not have needed the money unless it was just starting out. | But many firms that did not apply for the money — or pulled their applications once the market began to improve — said clients ought to ask advisers for more disclosure around taking the money. They argue that a fee-based advisory firm should not have needed the money unless it was just starting out. |
| Mr. Ritholtz said he along with his firm and its chief executive, Joshua M. Brown, who writes in a blog called The Reformed Broker, were well enough known that their clients had heard their rationale already through tweets, blog posts and television appearances. | Mr. Ritholtz said he along with his firm and its chief executive, Joshua M. Brown, who writes in a blog called The Reformed Broker, were well enough known that their clients had heard their rationale already through tweets, blog posts and television appearances. |
| At Dynasty, each firm maintains its own regulatory filings, so it’s up to those advisers to make note of the loan. | At Dynasty, each firm maintains its own regulatory filings, so it’s up to those advisers to make note of the loan. |
| “The S.E.C. has provided guidance, but it’s not mandated,” Mr. Morris said. “The S.E.C. said where you needed the money to continue to employ portfolio managers, you’d want to disclose it, but where you were using it for administrative personnel, you may not need to disclose it.” | “The S.E.C. has provided guidance, but it’s not mandated,” Mr. Morris said. “The S.E.C. said where you needed the money to continue to employ portfolio managers, you’d want to disclose it, but where you were using it for administrative personnel, you may not need to disclose it.” |
| That, though, is the kind of logic that critics say investors need to push back on. “Some firms are going to dance on a pin and say it was for support staff, not investment staff, but money is fungible,” Mr. Ribe said. | That, though, is the kind of logic that critics say investors need to push back on. “Some firms are going to dance on a pin and say it was for support staff, not investment staff, but money is fungible,” Mr. Ribe said. |
| Whatever their initial rationale for applying for the government aid, firms need to stick with it, Mr. Hamburger said, or their clients might have reason to worry about their sincerity. | Whatever their initial rationale for applying for the government aid, firms need to stick with it, Mr. Hamburger said, or their clients might have reason to worry about their sincerity. |
| “If a firm is going to take that money, there should be no shame in taking it, but they’ve got to own it,” he said. “They can’t sit there and posture and change that characterization of that benefit.” | “If a firm is going to take that money, there should be no shame in taking it, but they’ve got to own it,” he said. “They can’t sit there and posture and change that characterization of that benefit.” |
| Returns always fluctuate, but trust, after all, should be the reason someone picks an adviser. | Returns always fluctuate, but trust, after all, should be the reason someone picks an adviser. |