The Unforgiving Forgivable Loan

In the investment industry, dealers are always looking to grow the value of investments under their management. They do this in a variety of ways, including hiring advisers with large customer bases away from other dealers under the expectation that the customers will remain loyal to the adviser.

To make a potential workplace change appealing to an adviser, a recruiting dealer will often provide a significant upfront payment to the adviser based on the value of assets under the adviser's management. The upfront payment will generally be structured as a forgivable loan.

Some advisers view the forgivable loan like a bonus, never expecting that any portion will need to be repaid to the dealer. However when the relationship between a dealer and an adviser sours, the reality that the "bonus" is nothing more than a "loan" can be unforgiving.