300-Advisor Firm Winds Down Its Business, Blaming Broken Industry Model, Not Private Placements

Wednesday, December 07, 2011 07:48
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300-Advisor Firm Winds Down Its Business, Blaming Broken Industry Model, Not Private Placements

Tags: broker-dealers | M&A

Washington State broker-dealer Pacific West Financial Group is shutting down because as far as management is concerned, the industry can no longer justify the existence of firms of its size.

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Pacific West will be transitioning its 320 reps and some back-office staff to Multi-Financial Securities over the next quarter and will cease to exist by March.

 

While the firm did sell some tenant-in-common securities -- the latest segment of the private placement industry to create havoc -- there haven't been any major fines, issuer failures, or client complaints.

 

But management says that while Pacific West is doing fine now, the odds that it would get in over its head down the road are just too great.

 

To grow, they would need to take on "greater and greater risk," perhaps by selling the next asset class waiting to implode.

 

And until firms like theirs can find a way to boost profitability, they say, the independent broker-dealer business is "broken." 

 

Costs are rising and margins are in decline even though Pacific West is reportedly on track to boost its revenue a healthy 17% this year.

 

So they're giving up. It's interesting they didn't try to sell the business if it's in such great shape.

 

Deeply wounded firms like Securities America and Morgan Keegan are finding buyers. So why are Pacific West's leaders just walking away?

 

 

 

 

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