From the President

Our core business, the financial services industry, has been, along with the rest of the business community, an engrossed audience in the unusual and unpredictable political atmosphere which began with the Presidential Campaign and continued through the new days and months of a new President.  The effect of a new administration is still unknown for our business although the stock market and business community has shown strength and resilience so far this year.  Similarly, our Company has gone through an unusual and unpredictable period of change in recent months.

As outlined in the following financial highlights and in our financial reports, the Company incurred a loss for the 2016 year end. Obviously this is a major concern to be addressed.  As a fact of business life, our Company operates in a legal and regulatory environment that exposes it to potentially significant litigation risks. Issuers of several alternative products sold by Capital Financial Services, Inc. in the 2007 to 2009 date range (while the Company’s broker dealer operation was under a former management group) had financial difficulties and went into receiverships or otherwise failed. As a result of the failure of those alternative products, the Company has been subject to arduous, expensive and time consuming legal and/or arbitration proceedings stemming from that regrettable period for years. On December 21, 2016, the Company made a settlement payment in the amount of $200,000 and in December 31, 2016, without admission of liability, the Company recorded a $63,000 liability, both on matters arising from the 2007-2009 era. In September of 2016, the Company settled all claims between the Company and its former liability insurer in exchange for payment by the Company of $82,500, again a matter relating back to the 2007-2009 era.  The expense of settlements alone for matters relating back to 2007-2009 cost the Company $355,000 in 2016 and that number does not include the outside legal fees of defending these suits.  Without these legal settlements and the legal fees that accompanied them, the Company would have been profitable in 2016.  My goal has been to rid the Company of this burdensome and incapacitating litigation. The good news is that I believe that during the year ended December 31, 2016 the last of these ominous matters were settled or resolved and happily none of our current management team was involved in the decisions that initiated these problems.  Because we are in a litigious society and a financial service business, legal liability will continue, but hopefully at more manageable costs.  In the coming year we will look for innovative ways to grow, control costs and gain revenues.  

New Department of Labor rules currently scheduled to be implemented in stages between June 9 of this year and January of 2018 will create new requirements and procedures for our business.  The uncertainty of the pending regulatory requirements has definitely created anxiety in the financial services industry and financial services professionals.  A few of our financial service representatives have chosen to retire rather than learn new rules and procedures.  We will continue to move forward with the rest of the industry as required.

In the last quarter of 2016 we purchased an office building about two miles from our current rented offices. Remodel and upgrades have been in process on the new office facility since the beginning of 2017.  The new facility is much more modern and technology friendly than our current facility and allows room for us to expand both people wise and technologically when opportunities present themselves.  Progress on the remodel and preparation of our new Company headquarters has gone well so far with only limited setbacks and issues with the project. Although the new building is larger than our current needs, we are considering options including renting a portion, creating an office condominium and selling a portion and/or potentially growing into the space over time.  We are anticipating moving into our new facility in June of 2017 in time for our annual meeting in July.   If you have the opportunity to attend the annual meeting you are welcome to a tour of the facility as our shareholder meeting will be held at the new office facility.

Our goal for 2017 is to grow, generate revenues and profits for our Company and you its shareholders and build a strong and sustainable dividend stream for the future. 

We are excited to move forward with new offices, fresh management, renewed energy and optimism.

Best Wishes,


Gordon Dihle

Chief Executive Officer

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