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Financial Instruments - Credit Losses (Notes)
 3 Months Ended
Mar. 31, 2021
Credit Loss [Abstract]  
Financial Instruments - Credit Losses Financial Instruments - Credit Losses
On January 1, 2020, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which replaces the incurred loss methodology with a current expected credit loss ("CECL") methodology. The Company elected the modified retrospective method which did not result in a cumulative effect adjustment at the date of adoption.

The Company can elect to use an approach to measure the allowance for credit losses using the fair value of collateral where the borrower is required to, and reasonably expected to, continually adjust and replenish the amount of collateral securing the instrument to reflect changes in the fair value of such collateral. The Company has elected to use this approach for securities borrowed, margin loans and reverse repurchase agreements. No material historical losses have been reported on these assets. See note 9 for details.

As of March 31, 2021, the Company had $48.8 million of notes receivable. Notes receivable represents recruiting and retention payments generally in the form of upfront loans to financial advisors and key revenue producers as part of the Company's overall growth strategy. These notes generally amortize over a service period of 3 to 10 years from the initial date of the note or based on productivity levels of employees. All such notes are contingent on the employees' continued employment with the Company. The unforgiven portion of the notes becomes due on demand in the event the employee departs during the service period. At this point any uncollected portion of the notes gets reclassified into a defaulted notes category.

The allowance for uncollectibles is a valuation account that is deducted from the amortized cost basis of the defaulted notes balance to present the net amount expected to be collected. Balances are charged-off against the allowance when management deems the amount to be uncollectible.

The Company reserves 100% of the uncollected balance of defaulted notes which are five years and older and applies an expected loss rate to the remaining balance. The expected loss rate is based on historical collection rates of defaulted notes. The expected loss rate is adjusted for changes in environmental and market conditions such as changes in unemployment rates, changes in interest rates and other relevant factors. For the three months ended March 31, 2021 no adjustments were made to the expected loss rates. The Company will continuously monitor the effect of these factors on the expected loss rate and adjust it as necessary.

The allowance is measured on a pool basis as the Company has determined that the entire defaulted portion of notes receivable has similar risk characteristics.

As of March 31, 2021, the uncollected balance of defaulted notes was $6.5 million and the allowance for uncollectibles was $4.8 million. The allowance for uncollectibles consisted of $3.5 million related to defaulted notes balances (five years and older) and $1.3 million (under five years) using an expected loss rate of 42.7%.
The following table presents the disaggregation of defaulted notes by year of origination as of March 31, 2021:
(Expressed in thousands)
As of March 31, 2021
2021$1,064 
2020644 
2019444 
2018173 
2017662 
2016 and prior3,491 
Total$6,478 

The following table presents activity in the allowance for uncollectibles of defaulted notes for the three months ended
March 31, 2021:
(Expressed in thousands)
For the Three Months Ended
March 31, 2021
Beginning balance$4,234 
      Additions and other adjustments532 
Ending balance$4,766