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ENTERPRISE–UTC Brokerage Offers Personal Touch to Institutional Investors

When Michelle and Tom Schoeffel decided to start their own stock brokerage, they knew they would be giving up steady jobs for the uncertainties of self-employment.

They also knew they would be competing with mega-brokerages with hundreds of employees and tremendous marketing budgets.

But that didn’t daunt the pair, who struck out on their own in February 1997 to found Pacific American Securities LLC. After three years of growth, their University Towne Centre firm has 33 employees in its local headquarters and its New York City branch office.

Their holding company, Pacific American Services Group LLC, has seven more employees and also oversees the investment adviser subsidiary, Pacific American Advisors LLC as well as Pacific American Securities.

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With gross revenues of more than $2 million a month for the past five months, they are trading about 10 million shares of stock a day for their institutional customers and high net-worth clients with more than $250,000 to invest, the pair said. Their company had $12 million in gross revenues in 1999, up from $1.2 million in 1998, they said.

The company has been active with mergers and acquisitions as well, buying Lichter & Associates, a Los Angeles-based accounting firm in December 1999.

That followed a March 1998 transaction in which they sold a 42 percent interest in their company to First American Financial Corp. of Santa Ana, a provider of title insurance and real estate services.

Simultaneously, they acquired the assets of Yaeger Capital Markets, one of the first woman-owned institutional stock brokerages in the country.


Along the way to building their business, they said they came up with some maxims that will work well for anyone starting their own company.

But don’t ask for any specific advice on what stocks to buy or sell. Their company is strictly a brokerage for clients who have their own investment advisers. However, Tom Schoeffel offered one observation about investments:

“Time and patience are the secrets to successful investing and they’re both free,” he said.

The firm specializes in knowing how many shares of a particular stock can be bought or sold in any one transaction without the price being driven up or down dramatically by the laws of supply and demand.

By concentrating on institutional investors who might need to sell large amounts of stock, the firm avoids the extensive paperwork of many small accounts.

The decision to specialize in institutional accounts rather than retail clients was based on the fact that the start-up costs were higher with a retail brokerage, Tom Schoeffel said.

“The retail stock brokerage business is much more labor-intensive than the institutional business,” said Tom Schoeffel, 37. “You can put as much time into a small account as you do with a very large one.”

Going into the institutional brokerage business was an easier step for the pair than a retail brokerage would be, since they already dealt with large accounts, they said.

Michelle Schoeffel, 39, was a vice president of Mellon Private Asset Management in Los Angeles, a subsidiary of Mellon Bank, where she provided trust and investment management services for wealthy individuals.

Tom Schoeffel was also a vice president and private asset manager at Mellon Financial Services.

In all, Michelle has 17 years experience in the industry and Tom has 14.

“I wanted to do things on my own terms,” Michelle Schoeffel said. “Large companies are more number-oriented than small ones, and I wanted to be able to develop personal relationships with clients that I couldn’t do at a big company.”

Start-Up Success

The experience of starting their own business sharpened their perceptions of what it takes to succeed, they said.

“Most small businesses don’t fail because of lack of capital. They fail because they don’t have a long-term game plan,” Tom Schoeffel said.

He offered suggestions for people planning to start a business:

1. Assess the potential target market and client base to determine if it can be effectively penetrated and how long it will take.

2. Take advantage of technology.

3. Don’t try to get rich playing another person’s game. Do what you know how to do best.

3. Differentiate yourself from the competition by adding features that increase value.

“For example, our stock traders have an average of 14 years experience, which is higher than the industry average, and we tell the client that. We also tell them it is our responsibility to get the best price possible when we execute a trade,” Tom Schoeffel said.

4. Have plenty of capital reserves.

5. Build a company with equity rather than debt.

6. Choose partners carefully by making sure they have the same goals, equal commitment and mutual respect.

John R. Glasmann, 31, senior vice president of trading, said what makes Pacific American Securities unique is the staff’s knowledge of how many shares of a company can be traded without the price being adversely affected.

“John himself has a unique feel for how much can be sold without affecting market value,” Tom Schoeffel said.

Actress Marion Ross, famous for her role as Marion Cunningham on television’s “Happy Days,” is one of the high net-worth individuals who use Pacific American Securities. She had her account with Yaeger Capital Markets and stayed with the Schoeffels when they acquired the firm.

“The compliment for Michelle is that most of the people who had accounts have continued to stay with her,” Ross said. “She made a point of taking me to lunch, getting to know me and introducing herself so I would feel secure and we would have a personal relationship.”

Ross, who gets her financial advice from an accountant, said she likes bonds as investments.

Keley Petersen, an executive with DeLoitte & Touche in San Jose, was introduced to Michelle Schoeffel while Petersen was working for Progress Investment Management Inc. of San Francisco. That firm specializes in recommending woman- and minority-owned money management companies to public employee retirement funds.

“Michelle came in and made her presentation. I had seen a lot of stock dealers and money managers already, but I was really impressed with what she was doing,” Petersen said.

“I took the time to get to know her a little better. I found that she and Tom have great integrity and I decided I would trust them with any of my clients because I felt they could do a really good job.”

Petersen said the money managers she introduced to Pacific American Securities were also very impressed with the company’s ability to execute trades in a timely and effective manner without hurting the price.

“I just think they are a top-notch firm,” Petersen said.

Pacific American Securities LLC

CEO: Michelle M. Schoeffel

Year Established: 1997

Employees: 33

Headquarters: 9191 Towne Centre Drive, Suite 406, San Diego

Revenues: $12 million gross revenues in 1999. $1.2 million gross revenues in 1998.

Business: Stock brokerage for institutional and high-net-worth investors


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