Broker-Dealer Pacific West to Close its Doors

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.”

Pacific West, established in 1972, has 320 reps and clears through Pershing, National Financial and TD Ameritrade.

Multi-Financial Securities Corporation, headquartered in Denver, was founded in 1981 and has 1,000 reps.

“We’ve been talking with Pacific West for about 12 months,” said Brett Harrison (left), president and chief executive officer of Multi-Financial Securities Corporation, when asked about the genesis of the deal in an interview. "We signed the current agreement on Nov. 8, but it isn’t to acquire Pacific West outright. Rather, we will talk to each one of their reps individually to make sure they are comfortable with coming on board and we are comfortable with having them come on board.”

When asked about specific retention targets, Harrison said, “Anytime you engage in something like this, you hope the retention is high,” adding that he is confident in the process the firm has laid out.

Pizelo said the conversion of reps is set to take place in early March. Erinn Ford, the firm’s chief marketing officer and daughter of Pacific West’s founder, will join Multi-Financial in a key role and also parent company Cetera Financial Group’s leadership team. Certain Pacific West employees will remain in place for several weeks or months after the conversion to address any outstanding issues.