In a further sign of economic and legal trouble for the independent broker-dealer space, Pacific West Financial Group, based in Renton, Wash., announced it was discontinuing operations.
The firm also said it has entered into an agreement with Denver-based Multi-Financial Securities Corp., to “bring over select advisors from Pacific West and facilitate a seamless transition experience for the advisors and their clients.” The agreement is subject to FINRA approval.
“We have been evaluating for some time, from an ownership perspective, how much sense it makes to continue,” said Tony Pizelo, Pacific West’s CEO, in an interview. “The business is calling for independent firms to take on greater and greater risk, but the reward is not in line with those risks, especially for a firm of our size.”
“The primary reason Pacific West had a tough go of it was due to them having much more staffing than other firms their size,” said industry recruiter Jon Henschen of Henschen & Associates. “You have to be lean with up to date operational technology otherwise your overhead will eat up your profits. Exposure to off-the-beaten-trail tenants in common products would be the second reason, with further profit erosion as a result. Operating a broker-dealer out of Renton, Wash. would be the third factor with leasing and labor being high in that part of the county compared to say a midwestern or southern firm.”
The tenants in common assertion is something Pizelo strongly denied. “It definitely did not contribute to the announcement,” he said. “Yes, we have tenants in common investments, but we are well-capitalized, and our reserve requirements were such that we were in no way forced to make this decision.”