12.09.2011
By Terry Flanagan

Growth Opportunity for B-Ds

The opportunity for growth is ripe for broker-dealers as they can look to capitalize on the independent firms that have been closing up shop.

Multi-Financial Securities has announced that it has entered into an agreement with Pacific West Financial Group to bring over a group of advisors from Pacific West, to effectuate a “seamless transition for clients. Pacific West on the same day announced that it was discontinuing its operations as a result of declining margins in the independent broker-dealer space.

“Multi-Financial’s hands-on approach to helping advisors strengthen their client relationships is a deep-rooted value that we share with Pacific West, and we intend to continue to build on that value,” said Brett Harrison, president and chief executive officer of Multi-Financial. “Both parties agree this is the best path for the financial professionals currently affiliated with Pacific West, and we look forward to welcoming these advisors into the Multi-Financial family.”

Increasing compliance, technology and regulatory costs have left many independent broker-dealers with no choice but to shut down.

“Regulation has become so burdensome, (independent broker-dealers) can’t afford to keep up with it,” David Sobel, executive vice president, general counsel and chief compliance officer at Abel/Noser, a New York independent broker-dealer, told Markets Media. “Most of what they’re trying to regulate now could have been done with existing rules, if they tried to enforce it.”

The closure of Pacific West is the latest during a time that has been difficult for independent broker-dealers. MF Global was perhaps one of the more high-profile examples in recent memory, in a process that has been ongoing over the past several years. According to Finra, the amount of total registered broker-dealers has dropped about 10 percent in the past five years, from 5,029 in 2006 to 4,486 as of November. A majority of the downed brokers have been a result of the overall decline in equity trading volume, leading to tighter profit margins for many.

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