Storm Financial Group

[Julia]

I would totally disagree that the Rockhampton couple mentioned in previous posts were greedy. They were obviously very good business people and employed an accountant to look after their business affairs. As I understand it from reading the media, and please correct me if I'm wrong, it was their accountant who told them to invest in storm financial.

Most accountants are quite good at saving you tax but know damn all about the share market or investments in general. There will, of course, be some who have made it their business to be capable of so advising.

That's what business people do they are so busy running their business that they employ expert finance people to take care of the financial side of the business. Once they retired they continued with this financial strategy. I fail to see how they can be called greedy simply because they invested with a financial planner.

You are twisting and misinterpreting what was said. No one has suggested any Stormer was greedy 'simply because they invested with a financial planner', have they? What Bunyip suggested was that $8 M could produce a passive income considerably in excess of what a lot of people comfortably live on, and I agreed with him.

This is a free country and whether you have one hundred dollars or one hundred trillion to invest it doesn't matter, what matters is if you go to an accountant or a financial planner they should be accountable for their actions.

Yes, indeed they should, but so also should the investors be accountable for considering whether the excessive levels of leverage suggested by Storm were really sensible.

Why do we only have to earn enough money to live on? If you are able to use your financial resources to earn a significant amount of money per year there are many worthwhile charities in this country and overseas who you could support. Imagine being able to write out a cheque every year for half a million dollars for the Salvation Army or Cancer research, how good would that make you feel. There are many people the world over in dire need of life's basics, if you had the finances to support any of these you would feel that you are putting your hard earned to good use.

Two points here: (1) if you look back at Bunyip's calculations, you would be well able to contribute generously to the charities of your choice.
(2) of course it's good to have a high level of disposable income, and of course it's good to keep your money working for you, but for god's sake, doesn't there come a level of capital where you stop borrowing to make more and more? Say $5M invested over a good range of blue chip stocks would, without leverage, provide a decent income, derived from growth and yield.

So, sure, borrow more if you want more and more and more, but don't come whining when that excessive borrowing without proper monitoring turns your whole investment sour.

Surely it's a case of benefits versus risks. And the Storm investors didn't worry about the risks when the market was going up. Only when it all fell in a heap did any of them cry foul about the strategy.

The bottom line here is all finance people should be accountable and at present they are not and this needs to change.

Agreed.

Storm financial told their clients that they would sell high and buy low and their investments would be constantly monitored by their team of experts, what a good selling point, and that's what they charged for. They failed to do any of the things they promised.

Agreed also that they well and truly need to be held accountable for not fulfilling the promise of monitoring and appropriately dealing with the investments. It seems they simply did not have a strategy for when the market fell.

There will always be those who know instinctively what to do and what not to do just as there will always be those who have no idea despite trying to learn.

I've always believed anyone can educate themselves financially, but since following this thread, I'm becoming convinced that is not so, that some people will for ever prefer to hand the responsibility for their own financial outcomes over to someone else.

I agree Harleyquin. I don't really see that they are more at fault because they had a lot of money invested. I do think they were naive to put all of their eggs in one basket and to blindly accept the advice given without considering the risks involved but that applies to all Stormers not just the rich ones. It also sounds like Storm was extremely good at fobbing off peoples concerns and making them feel stupid or ignorant for even questioning things. It would be devestating to go from a position of reasonable wealth to pennyless. If other Storm clients are victims then these people are victims too imo.

So Cuttlefish, would there never be a level of wealth that was 'enough' for you? Where you realised simple blue chip investing, without any leverage, would provide you with all you needed for a comfortable life?
And when that level was reached, why would there be any need to risk it all with excessive leverage?

I've known some people who lose objectivity about money, who become so addicted to making more and more, to the point where all perspective is lost.
Not saying this is necessarily the case with Storm clients, but it's just a phenomenon I don't understand, particularly when people are at or close to retirement age.

OK so this rockhampton couple had 8mill, some here are labelling them greedy for trying to gain more..Are you all telling me if you had 8Mill in the bank you would sit back stretch your legs, fold your arms behind your head, and say.. Hmmm thats enough.. Yawn, I think I will stop now... What a load of BS

Well Monario, I simply disagree with you. I do think there is a level of wealth where the further chasing of more and more money becomes an obsession rather than a need. That is not to say you would stick it in the bank and forget about it (though I know some people who happily do just that), but rather a level of wealth where you would simply not consider risking it by engaging in massive leverage. This is where the Stormers all fell over.

Soft Dough has correctly pointed out that had they just invested their retirement savings in good shares, without leverage, even if they had held these through the downturn, they would be gradually returning to previous levels.

I don't use any leverage at all. Sold my p/f when the downturn happened, lived off the interest easily, am now about 50% back in the market and am about $200K over the previous high in Nov. 2007.
So no one is suggesting you don't actively have your money working for you, rather just that you - after a certain level of achievement - don't take unnecessary risks with excessive borrowing.

Unfortunately GL I think it is seriously wishful thinking for the pair of them to look at it to much. Even though I do feel this sort of activity is just what the top dogs need to be watching for, and jumping on straight away.. the capitalist system may well be the best system of gonvernment we have yet developed, but it is not a system based on principles where lies and deceit can be used to manipulate the wealthy, or in this case even the poor out of there hard earned.

And just a note on greed, when a national or multinational company makes money at the ill fortune of it customers and has no remorse in doing so THAT my friends is not only geedy but morally wrong and makes my body shudder.

A completely separate issue which has nothing to do with this thread.

When an individual is labeled greedy for trying to make there financial future stable through honest means, I think there is some rethinking on behalf of those labelling them needs to be done...

The above statement is a misrepresentation of what was said.
Of course we all want a 'stable' future. What Bunyip was referring to was the continuing of unreasonable levels of leverage AFTER the stability had been achieved.

Greed (also called avarice) in psychology is an inordinate desire to acquire or possess more than one needs or deserves, especially with respect to material wealth.

That's a good definition.

If you work on the above definition of greed, were all greedy. :

No, we are not. Some of us don't feel the compulsion to acquire more than we need.

 

[cuttlefish]

Cuttlefish, I could be wrong here but I think that many Storm clients believed that they weren't putting all of their eggs into one basket.

The message I got from any of the seminars I went to talked about the fact that by buying into the Storm funds we would be buying into a diversified portfolio that was made up of the whole range of companies that existed in the ASX 200 (or it may have been the 300 - I didn't get into it so I am not sure). This meant that people were exposed to a range of industrials, mining, financial, property companies etc. So if mining stocks went down, the fund dealt with it by adjusting the fund composition.

A number of the Storm clients were invested in several managed funds and this would give even more of a feeling of not having eggs all in one basket.

I do understand that - and it would be a reasonable expectation that good tailored financial advice would involve diversity - but by 'One Basket' I mean Storm financial itself. It would have been sensible to keep a portion of wealth aside and invested in a separate manner and not tied in any way to the investment funds allocated according to Storm's advice.

Trusting one party with all of your money is always a huge risk - and if it is to be done then it needs to be monitored extremely closely and you'd try to get as many unbiased, independant professional opinions of what you were doing as you could. That being said, it also sounds like some peoples accountants weren't offering 'independant' opinions because they were getting kickbacks for recommending Storm (which may have even been technically legal but its still shonky behaviour).

But the best way to avoid being sucked in by shonky behaviour is simply to not put all eggs into one basket.

 

[DocK]

True,

I also think most reasonably competent investors would not have forseen CBA pulling the plug on Storm branded index investments.

Perhaps people would have been better off with Vanguard, where the people who were not in margin calls would have not been forced to sell down, or were given the oppotunity to top up. Another area where EC may have sold out preferential investors at the expense of the herd.

I would love to know if the employees of Storm sold out or were able to sell out before the fund was closed.

Once again, indexed funds are great for amateurs ( although a portfolio of shares with percentage allocation to sectors would no doubt outperform ) it was ONLY the GEARING which caused the problems.

Although most storm clients probably felt they didn't have all their eggs in one basket due to the diversification achieved with an index fund, they did have all their eggs in the sharemarket as according to the storm model investment in property was foolish. Although to be truthful, storm loved to discuss chickens more than eggs - you had to protect those chickens! Shame a fox has been at my chickens - or maybe it was a black swan that got 'em???

In retrospect, I don't really think it was the gearing that caused the problems, although that was what did for us in the end. It was the lack of management. If our portfolios had been managed properly (and yes, we should have managed them ourselves when storm failed to - had we but known) we would have been cashed out of the index funds well before the point where the gearing killed us, and sitting safely on the sidelines waiting for the inevitable recovery to profit on the way back up. Storm totally failed to manage portfolios and chose instead to blindly hope the cba would continue to back them if the unthinkable happened and the market fell more than their clients gearing could handle - we all know the outcome.

My adviser was manny's son - and yes, I'd dearly love to know if he sold out while simultaneously advising his clients it was an ideal time to invest more while the market was low.

 

[Ironhalo]

Interesting comments on the generational effect this has had noting Storm's referrals were all mostly word-of-mouth. My family has been decimated by this, and we are a family of mostly competent financially informed people!

I never geared any property into my margin loan, but the biggest beef I have is that Colonial approved a pretty much risk free margin loan (that was a long way form margin call when the market dropped over three weeks) but sold us out and left us with an $18k loss three weeks after granting us the loan. We were well within our means to pay, our assets tripled the amount of the margin loan, and we had a 60% buffer before we got margin called.

But no, we got sold, with no phone call, nothing. My brother and sister (both in their twenties) lost about 70k between them, which consisted of the majority of the inheritence our late father left us. Both of them also didn't get into margin call, but we re sold at a loss for no valid reason. So much for trying to do the right thing.

My mother on the other hand lost in excess of 250k, and she got off lightly noting she has kept her house (paid for on a single income), but her mortgage is back to square one. Her last 15 years of work may as well not have counted.

We are but one family of uni educated people, and between us we have lost in excess of 350k. We all still have smiles, but my heart goes out to the elderly and close-to-retiring people that have lost the lot.

On the same topic, CBA are fast-tracking their resolution process and my mother will be done and dusted (in terms of knowing what the settlement will be) by Monday night. Hang in there Stormers, things are moving quicker then you would think! I don't want my market losses back (I fully accept them), but I want the cost of them selling my shares without notificiation at the bottom of the market back instead of holding onto them as they were supposed to.

On another note, a member of the CBA resolution team has been trying to call me and my other half to arrange a 'resolution meeting'. I mentioned to the guy that 'we both work full time and can't meet a meeting appointment during business hours over the phone'. His response was, 'well Sir, we aren't allowed to conduct business after 4pm, our management discourage it.' Pretty much sums up their financial/customer policy right there.

The bloody hide....we're working full time to make back the losses their incompetence has left us with....how dare we not be at their beck and call Mon-Fri!

 

[Monario]

The above statement is a misrepresentation of what was said.
Of course we all want a 'stable' future. What Bunyip was referring to was the continuing of unreasonable levels of leverage AFTER the stability had been achieved.

Yes Julia, but what you miss is, none of us "stormers" entered into this stratergy (started out) with these large borrowings and heavy leverage, we ended up this way through continual bad advice and ignorance on behalf of our advisors..

Yes, if anyone started out in this fashion, I would also say you took the gamble, suffer the consequnces, but this is just not the case of how stormers came to their current positions..

 

[Monario]

No, we are not. Some of us don't feel the compulsion to acquire more than we need.

I would love to challenge you on that statement, what you material assests are V's what you really need to get by...

 

[Harleyquin]

What keeps coming up in this thread from those of you who have been investing in the share market for some time is the enormous amount of knowledge about how the share market works and investing in general. I think it is important for those of you who haven't realised it yet that storm clients were primarily naive and we placed all of our faith in a financial advisor thinking of course that we could do that if they had all the right pieces of paper. Hindsight is a wonderful thing and what we know now and what we knew way back when are two entirely different things. I don't remember seeing anywhere prior to joining storm where we had to learn so much about investing prior to going to a financial advisor so that we could understand what we were getting into.

This information is taken direct from ASIC 'The Australian Securities and Investments Commission (ASIC) has urged Australians approaching retirement to seek advice from licensed and professional financial advisers, as part of Financial Planning Week. “The decision about when you stop work and how you plan for retirement is one of the most important financial decisions you can make,” When you are financially naive and want some help from a financial planner, as we did, this is the advice that ASIC and other experts tell us to do. I see nothing in this statement that would suggest for one moment that we should have done more than we did so that we could understand fully what we were getting ourselves into. We sought advice from a licensed, professional financial planner as ASIC suggested and we took their advice, why, because that's what we are encouraged to do to plan for our retirement. Where have you ever seen it written that you have to fully understand the investment strategies proposed by financial planners before you take their advice. The storm financial planner that we saw made this investment strategy seem very plausible and they were going to take care of our financial future...

How many of you who are financially aware use a financial planner - few as far as I can gather. So then you uses a financial planner - those who are financially naive that's who! It isn't until something goes horribly wrong as it has in this case that somebody then says 'oh wait a moment you have to understand exactly what you are getting yourselves into before you do this'...well by then it's too late. Maybe the public need to be educated a little more about financial planning and financial planners, I know there are bound to be some good finance people among the bad apples but how do you find out who they are before it's too late? I'll be fine from now on I've learnt the hard way this year what I needed to know before going to a planner. This industry needs cleaning up before there is another disaster.

 

[Monario]

A completely separate issue which has nothing to do with this thread.

Julia, I dont think it is a seperate issue, there is proof that some national companies have taken advantage in this situation, and what they have done discusts me.. Can you say otherwise of the actions of some of the companies involved...

Maybe you could comment on the lending practices of some of the banks, that knew theses people were, or were close to reitirement but still leant rediculous sums against heavily mortgaged houses etc.

 

[Monario]

The above statement is a misrepresentation of what was said.
Of course we all want a 'stable' future. What Bunyip was referring to was the continuing of unreasonable levels of leverage AFTER the stability had been achieved.

What exactly do you deem as Stable julia? There are members on here, and recently posted in this thread Boasting of a single 3/4 of a Milliion share trade? Would that person be greedy perhaps? I dont see it like that!!

Can you tell me what you think is enough for me please Julia, as this will greatly help my projections of what I will need in retirement.

 

[GumbyLearner]

What exactly do you deem as Stable julia? There are members on here, and recently posted in this thread Boasting of a single 3/4 of a Milliion share trade? Would that person be greedy perhaps? I dont see it like that!!

Can you tell me what you think is enough for me please Julia, as this will greatly help my projections of what I will need in retirement.

Yes Monario I agree with your sentiments.

But what about the next doofus who invests?

Should there be a scheme for self-retirees and limits as to their trust in a Fin Planner?

Or should the system go the whole hog and require such fin planner experts pay more in private indemnities insurance to cover potential unforeseen/junkets losses?

The problem is either way you get f###ed with expenses!

 

[Garpal Gumnut]

There are a number of strands in this argument about happiness, greed, fear and remorse that apply to the topic of the Stormers, which perhaps may be better off in another thread, but as Storm Financial is a prime example of capitalism at it's worst a few points may be worth mentioning.


1. When the bull market was in full swing, not one Storm investor publically questioned the model, whether they are now SICAG members, former advisers or investors.

2. Many Storm investors made indecent profits through no skill of their own in the bulll market, but rather through a model which Manny charged 7% or more for , and at the time they felt justified in paying.

3. Many Storm investors were so taken by their unearned largesse that they went on overseas trips with Manny and Julie, to expensive destinations, and spent much money on vanity and show. They bragged of their "skill" in choosing such a model and tried to convince friends and family to join the circus. Many succeeded.

4. Blind Freddie could have predicted that the whole show could become undone one day, but greed kept the Stormers loyal to the model. They are not alone in this, many investors on this forum , myself included could have gone to cash much earlier than they did.

5. Fear crept in late last year, when Storm, the advisers, principals and Banks lost the plot during an unprecedented, at least in our lifetime, bearmarket.

6. As many humans do, when greed leads to fear, and wealth and happiness are replaced by penury another emotion sets in. Remorse. The Stormers are angry, at themselves, their advisers, and those who escaped their fate, and anyone who points out the reality of the poor choices they made.

7. From the Tulip bubble, to the railroad failures in the US, to the Great Depression, to Ponzi, Pyramid, Skase, Bond and Cassimaties, this will be repeated in the future. It is in our nature to be foolish about money and possessions.

8. It cannot be legislated away without great expense to investors, and it is the muppets who will bear most of the expense as independent investors will continue to do a Bradbury behind the braying mob, without the expense of advisers.

9. When it comes down to it all, it is only money. And many are too attached to money, equating it with happiness. Penury or poverty, the complete lack of housing, food, safe water, health and safety are much more prevalent in third world countries than they are in Australia.

They are my thoughts on it anyway.

So, it now remains to be seen how much can be clawed back from those with the biggest pockets, Banks, Insurances and the Cassimatises and Advisers.

But believe me, no matter how much legislation, it will happen again.


gg

 

[Solly]

"CBA state regional manager steps down"

"THE Commonwealth Bank's state regional general manager John Hoey has resigned after 40 years with the bank.

The bank last night denied the announcement had anything to do with its involvement in the Storm Financial scandal....

...The Storm Investors Consumer Action Group called on Commonwealth Bank CEO Ralph Norris to be frank when he appeared before a parliamentary inquiry in Canberra on Wednesday."

More by Tony Raggatt in the Townsville Bulletin here;

http://www.townsvillebulletin.com.au/article/2009/10/24/88901_news.html

 

[cuttlefish]

There are a number of strands in this argument about happiness, greed, fear and remorse that apply to the topic of the Stormers, which perhaps may be better off in another thread, but as Storm Financial is a prime example of capitalism at it's worst a few points may be worth mentioning.


1. When the bull market was in full swing, not one ...
2. ... etc
3. ... etc
4. ... etc
5. ... etc
6. ... etc
7. ... etc
8. ... etc
9. ... etc

They are my thoughts on it anyway.

So, it now remains to be seen how much can be clawed back from those with the biggest pockets, Banks, Insurances and the Cassimatises and Advisers.

But believe me, no matter how much legislation, it will happen again.


gg

All very good points GG.

 

[cuttlefish]

So Cuttlefish, would there never be a level of wealth that was 'enough' for you? Where you realised simple blue chip investing, without any leverage, would provide you with all you needed for a comfortable life?
And when that level was reached, why would there be any need to risk it all with excessive leverage?

I've known some people who lose objectivity about money, who become so addicted to making more and more, to the point where all perspective is lost.
Not saying this is necessarily the case with Storm clients, but it's just a phenomenon I don't understand, particularly when people are at or close to retirement age.

Julia - its an interesting philosophical question and in trying to put together a response I ended up writing a short novel so I will attempt to keep it a bit more brief. To me people chase wealth for three primary reasons - security, freedom and power - and often the extent of each of these is limited only by the imagination and thus situations will vary from individual to individual.

For one individual security might be a comfortable home and a self sustaining income that provides for a comfortable lifestyle. Another person may not feel secure until they have a fortress with back to base security, a 24 hour armed body gaurd, a small plot of land that they can use for self subsistance in the event of a total collapse of the financial system, alternative safe havens in 5 different countries and a bomb shelter below their home.

Some people may consider freedom to be having enough income to take a camping trip up the coast once a year and pay the registration on the fishing tinny. For others it will be the freedom to travel to any given destination of their choosing at any time, eat whereever they feel like, visit whatever attractions they want to, and stay in whatever accomodation they want.

I agree that people can become obsessed - wealth can bring about its own challenges for people - both in terms of fear and greed as it can amplify both emotions - but I don't see that people that have accumulated wealth (wealth is such a relative term anyway - I doubt a New York or London resident with $3 million AUD would be considered particularly wealthy in that scenario) should be judged any differently in terms of the mistakes they may or may not have made in relation to Storm.

If a couple became wealthy through hard work building a business, then sold it all up and wanted to take a break to enjoy the fruits of their success but didn't consider themselves financially savvy - then it seems like a reasonable step to approach a licensed financial planner that appeared to have good credentials, a good track record, was fully licensed, recommended by other succesful and intelligent people, was supported by the banks, and implying that they have good risk controls in place and provided tailored solutions.

I can see how they could have fallen into the trap of letting that organisation manage all of their money. I still think that putting all off their eggs in one basket is naive, and that the excessive gearing should have raised alarm bells in anyone, but it sounds like Storm did a good job of making it all sound very safe and very much the normal practice for 'succesful' investors. Throw in a year or two of good results and complacency would easily set in as well.

So just as it did for the less wealthy Stormers, I can see how it all could have happened to this couple in pretty much the same way.

 

[Harleyquin]

They are very good points GG and I for one will take them on board. There are many who joined storm in 2007 and afterwards who never experienced any of the upswings or other perks mentioned, in our case we didn't find out about the extras until we'd joined, we were just told they were very good to deal with. You are right though even with legislation it will happen again. Education hopefully will help to prevent it every becoming quite the problem that this one has. We all like the idea of becoming financially independent. That independence not only gives us the security that most of us have never had but also gives us the options to enjoy life a little fuller into retirement. I think you mentioned in a earlier post that financial education should start in school and I would agree wholeheartedly with that point.

When we went to school we learnt by rote, nowdays students are taught to be independent thinkers, to question, to take risks and to be responsible for their decisions, this type of education they say is perferable in the long term to the old system where they didn't expect you to think just to learn like sheep. We are already seeing the younger generation question and discuss anything they decide to do far more than many of our generation did and it's one of the pluses.

The margin loan, the level of gearing, the lack of diversification, never 'growing and working' our portfolios as they said they would, never monitoring are all factors which have contributed to this disaster, and add to that pure criminal activity if the evidence coming out in court is an indicator and it's an exposive mix. If jail for the Cassimatis' makes future Cassimatis' think twice about doing the same thing it may help.

 

[DocK]

There are a number of strands in this argument about happiness, greed, fear and remorse that apply to the topic of the Stormers, which perhaps may be better off in another thread, but as Storm Financial is a prime example of capitalism at it's worst a few points may be worth mentioning.


1. When the bull market was in full swing, not one Storm investor publically questioned the model, whether they are now SICAG members, former advisers or investors.

If you went ahead with storm because you'd attended their "education seminars" and had been convinced the model was a good strategy - why would you question it when it was doing what you'd been promised. Many people who sought advice from various other financial planning firms were following essentially the same strategy and achieving similar results. Why question something that appears to be working just fine? I believe the major cause of my current pain is in not managing the investment properly - ie. cashing out when the market turned down. During the full swing of the bull market this was not yet an issue, therefore not to be questioned at that time.

2. Many Storm investors made indecent profits through no skill of their own in the bulll market, but rather through a model which Manny charged 7% or more for , and at the time they felt justified in paying.

I wish I was one of them, but unfortunately I began with storm just a few months prior to the beginning of the downturn. Many investors, via storm or not, made indecent profits through no skill of their own in the bull market. People with skill presumably made more - I have absolutely no problem with that, if you acquire the skill you deserve to be rewarded for your efforts imo. Personally, I felt justified in paying a financial planner to build my wealth for me as I am used to paying for professionals to do a job that I am unable/unwilling to do myself - I pay my accountant to manage tax affairs, my doctor to advise on health matters, my dentist to clean my teeth etc. In hindsight I realise I was paying way too much for basically a simple model - my bad for not doing better research at the time. I am one of the many who knew people who had done very well through storm and followed personal recommendations from intelligent, trusted friends, without doing enough research of my own.

3. Many Storm investors were so taken by their unearned largesse that they went on overseas trips with Manny and Julie, to expensive destinations, and spent much money on vanity and show. They bragged of their "skill" in choosing such a model and tried to convince friends and family to join the circus. Many succeeded.

You could also say that many storm investors were so thrilled that the funds they'd worked hard most of their lives to earn were getting such a good return that they could take an overseas holiday. I know many, many people who have taken overseas holidays and see nothing wrong or shameful in this. You work hard, you save, you invest, you earn - why not reward yourself if you can afford it - and at the time these people thought they could. I know some who went on these holidays - and I would certainly not say they are the type of people to spend money on vanity and show - they simply love to travel wherever they can, yet are strangely overly frugal in other areas of their lives. Everyone has different priorities. I've no doubt some storm clients bragged of their skill, but this would be typical of the population at large, not simply storm clients. I have friends who loved to brag about how well they'd done also - but they were with a different firm altogether (and incidentally also received a margin call). It is human nature to want to share with friends and family anything that is seen as positive in your life - my storm friends genuinely believed the advice they were getting was fantastic and wanted to spread the joy!

4. Blind Freddie could have predicted that the whole show could become undone one day, but greed kept the Stormers loyal to the model. They are not alone in this, many investors on this forum , myself included could have gone to cash much earlier than they did.

It may have been greed in some cases, but in most I think it was more that the vast majority of storm clients were very used to being told what to do, and when, and trusted that the advisers that had looked after them well in the good times would continue to advise them well in the bad. Possibly more a case of not having the knowledge oneself and relying on those we thought did have the expertise to look after our best interests (and not just their own). As you acknowledge, many hung on a little longer than they should have in the hopes that the market would change direction - whether this was through greed, fear, uncertainty, sheer ignorance or blind hope will vary from case to case. In the case of most stormers, Blind Manny & Julie were the ones who had promised constant monitoring and clearly failed to act when they should have (as did we, the clients, in not taking control ourselves). Whether they did this through greed, fear, ignorance, blind hope or a mistaken belief in the strength of their relationship with their bankers is a question we will hopefully get some answers to..... I suspect the answer is a combination of all, with a liberal dose of ego thrown in.

5. Fear crept in late last year, when Storm, the advisers, principals and Banks lost the plot during an unprecedented, at least in our lifetime, bearmarket.

Agree - but I would probably say terror rushed in.

6. As many humans do, when greed leads to fear, and wealth and happiness are replaced by penury another emotion sets in. Remorse. The Stormers are angry, at themselves, their advisers, and those who escaped their fate, and anyone who points out the reality of the poor choices they made.

Yes, guilt and anger are widespread. And not restricted to ex-stormers. The anger is deserved by some - ourselves, our so-called advisers, our bankers in a lot of cases. I'm not sure most of us are angry at anyone who escaped our fate, but most of us don't appreciate being labelled as "greedy fools who deserved what they got" and the like. It's also quite difficult to remain calm in the face of some patronising comments from would-be know-it-alls who think their way is the only way and cannot understand why anyone would take any risks with investments at all. I say - to each their own. There are many ways to skin a cat and to gear or not to gear is an individual choice depending upon circumstances and risk appetite. Certainly it was not a wise strategy for many that it was recommended to, but was an appropriate and valid strategy for others. If it had been managed properly, the gearing itself would not have been the issue.

Guilt is also something that is hard to shake. Guilt that we've deprived our children of the futures we'd planned for them, and the opportunities that they must now miss because we cannot afford them any longer. Guilt that we were too gullible/trusting/foolish/whatever to do more research ourselves. Guilt for being taken advantage of by storm/bank. Shame for being so easily conned. These feelings are fruitless in the end and will serve no useful purpose. The anger, if properly directed, might. It is an uphill battle to shake off the guilt, but is something that most ex-stormers must try to do if they are to move forward with their lives.

7. From the Tulip bubble, to the railroad failures in the US, to the Great Depression, to Ponzi, Pyramid, Skase, Bond and Cassimaties, this will be repeated in the future. It is in our nature to be foolish about money and possessions.

Agree. Nothing will change until future generations are better educated and far more financially savvy than the average Aussie is today. I wish I had the answer, but sadly I do not, and am inclined to believe there isn't one.

8. It cannot be legislated away without great expense to investors, and it is the muppets who will bear most of the expense as independent investors will continue to do a Bradbury behind the braying mob, without the expense of advisers.

Agree, but I dislike the use of "muppet" as I find it quite derogatory and condescending. Education is the key, but some key changes to the financial planning industry, such as transitioning trailing commission based advice to fee-for-service could only help imo.

9. When it comes down to it all, it is only money. And many are too attached to money, equating it with happiness. Penury or poverty, the complete lack of housing, food, safe water, health and safety are much more prevalent in third world countries than they are in Australia.

They are my thoughts on it anyway.

Whilst acknowledging that ex-stormers are indeed far better off than most third world citizens, I suspect it is much easier to claim people are too attached to money and possessions when one has them. Money might not ensure happiness, but I'm willing to be experimented upon to see what effect might have on me

So, it now remains to be seen how much can be clawed back from those with the biggest pockets, Banks, Insurances and the Cassimatises and Advisers.

But believe me, no matter how much legislation, it will happen again.


gg

Sadly, have to agree. The more it changes, the more it stays the same. I'm ever hopefuly that some compensation may one day materialise from somewhere for at least the most affected in this whole debacle - the elderly and retired who don't have the option to work their way out of trouble.

 

[mellifuous]

Agree. Nothing will change until future generations are better educated and far more financially savvy than the average Aussie is today. I wish I had the answer, but sadly I do not, and am inclined to believe there isn't one.

This idea that 'education will protect' is interesting - what education would have helped storm clients? and how would it have helped? (if you don't mind answering the questions).

As I understand it (and please correct me if I'm wrong), the model used by storm was not unique to storm - so, if true, then wasn't it a systemic failure within storm / lenders that led to the losses? - and if this is true, I fail to see where education would have been helpful.

I'm not a storm investor, my losses are elsewhere - ASIC has been pressing 'education' as the 'inoculation' for investors to protect against losses - but, isn't it the truth that education is useless unless ASIC acts proactively against self-interest, breach of law, incompetence, negligence, and criminal behavior?

 

[DocK]

This idea that 'education will protect' is interesting - what education would have helped storm clients? and how would it have helped? (if you don't mind answering the questions).

As I understand it (and please correct me if I'm wrong), the model used by storm was not unique to storm - so, if true, then wasn't it a systemic failure within storm / lenders that led to the losses? - and if this is true, I fail to see where education would have been helpful.

I'm not a storm investor, my losses are elsewhere - ASIC has been pressing 'education' as the 'inoculation' for investors to protect against losses - but, isn't it the truth that education is useless unless ASIC acts proactively against self-interest, breach of law, incompetence, negligence, and criminal behavior?

I don't know that education will ever entirely protect everyone from being taken by scams, con-artists, the unethical etc, but my own personal losses would certainly have been less if I had the knowledge then that I have now. True, the model used by storm wasn't unique at all, but other investors did not suffer losses to the same extent due in many cases to better management by their advisers, and less predatory behaviour by their advisers/lenders combined.

Purely from my own perspective, I think a better financial education would have helped me in the following ways:

1. I would have been aware that I could very easily do for myself what storm charged me 7% to do, using either managed index funds via vanguard, or and index-based lic such as STW or Argo, Aust Found etc. Gearing optional, but easily arranged via a plethora of margin lenders.

2. I would have been aware of the cyclical nature of the sharemarket and been on the lookout for any black swans on the horizon. I may not have got out of the market as early as I should have, but I would have got out a lot earlier than I did. Much capital could have been preserved and put back to work in March/April, rather than the little I was left with.

3. I would have known what a stop-loss was, how they worked and why they can often save your hide!

4. I would have seen storm's operation and lack of managemet for what it was. I would not have been as gullible as I was.

5. I would have had the confidence to manage my own affairs, and possibly would have spread my capital between the sharemarket and property investment, instead of all in shares.

6. I doubt I would have been able to obtain the amount of debt from cba that I did if I were not affiliated with storm. This is irrelevant to the topic of education in a way, but had I known more before I went to the first storm seminar I would not have gone back for a second, hence less borrowing etc.

I agree that ASIC certainly need to be more proactive, rather than the reactive toothless tiger they appear to be at present. But I also feel that a better financial education would not only help people be better able to manage their own affairs with expert advice sought where necessary, but would more importantly enable them to see a lot of the money-grabbing schemes such as storms for what they are. Possibly more important yet, if more young people realised the importance of getting a good start on investing at an early age, there would be less desperate middle-aged folk worried about surviving on the pension for the vultures to prey on. If there has been anything positive for me to find in my situation, it is that my kids will be a hell of a lot better prepared than I was. I'll be doing everything I can to make sure they never make the same mistakes their parents did.

 

[Julia]

Maybe you could comment on the lending practices of some of the banks, that knew theses people were, or were close to reitirement but still leant rediculous sums against heavily mortgaged houses etc.

No, I couldn't because I don't have first hand information about how any inappropriate lending happened. Nowhere on this thread has anyone (that I have seen) clearly known whether (a) the banks acted on information provided to them by Storm who in turn had apparently been given authority to act as the clients' agents, or (b) the banks altered information themselves.

I'd have liked to think that banks would ensure a loan was within the capacity of the borrower, but in reality I suppose if they have adequate collateral in the form of property, then they don't care. This should be role of the financial adviser, and it's fairly clearly one of the areas where Storm failed their clients.

What exactly do you deem as Stable julia? There are members on here, and recently posted in this thread Boasting of a single 3/4 of a Milliion share trade? Would that person be greedy perhaps? I dont see it like that!!

Not up to me to comment on the above share trade. If that person has a level of wealth that makes such a trade appropriate, then that is his business.
He is not complaining about anyone or anything, just stating what may or may not be a fact about his own business.

Can you tell me what you think is enough for me please Julia, as this will greatly help my projections of what I will need in retirement.

No. That is not my job. There are plenty of avenues which will offer you this information if you insert the bits of information. If you sincerely are looking for such projections, I'd suggest you start with the ASIC website.

The Stormers are angry, at themselves, their advisers, and those who escaped their fate, and anyone who points out the reality of the poor choices they made.

Yes.

hindsight I realise I was paying way too much for basically a simple model - my bad for not doing better research at the time. I am one of the many who knew people who had done very well through storm and followed personal recommendations from intelligent, trusted friends, without doing enough research of my own.

And it would have been difficult to see that the people who had done so well had done so because, as gg has pointed out, they were in a bull market when obviously the gearing worked brilliantly.

It may have been greed in some cases, but in most I think it was more that the vast majority of storm clients were very used to being told what to do, and when, and trusted that the advisers that had looked after them well in the good times would continue to advise them well in the bad.

This is a really good point and relates also to what I said earlier about some people always depending on someone to advise them, a reluctance to acquire their own financial education, or perhaps just not enough faith in themselves and their capacity to look after their own finances, believing perhaps that it's way more difficult than it really is.

In the case of most stormers, Blind Manny & Julie were the ones who had promised constant monitoring and clearly failed to act when they should have (as did we, the clients, in not taking control ourselves). Whether they did this through greed, fear, ignorance, blind hope or a mistaken belief in the strength of their relationship with their bankers is a question we will hopefully get some answers to..... I suspect the answer is a combination of all, with a liberal dose of ego thrown in.

You're right, I'm sure. This is absolutely where Manny and Julie need to be absolutely accountable in that they had apparently promised constant monitoring.

It's also quite difficult to remain calm in the face of some patronising comments from would-be know-it-alls who think their way is the only way and cannot understand why anyone would take any risks with investments at all. I say - to each their own. There are many ways to skin a cat and to gear or not to gear is an individual choice depending upon circumstances and risk appetite.

Agree. No one is saying gearing should or should not be used, rather that if you are going to use high levels of leverage then don't consider that it's a risk free strategy. And yes, I have questioned why anyone would want to risk all they have built up over their whole lives, when that is already enough by all objective measures, to make more and more and more.
But perhaps I'm just risk averse.

Guilt is also something that is hard to shake. Guilt that we've deprived our children of the futures we'd planned for them, and the opportunities that they must now miss because we cannot afford them any longer. Guilt that we were too gullible/trusting/foolish/whatever to do more research ourselves. Guilt for being taken advantage of by storm/bank. Shame for being so easily conned. These feelings are fruitless in the end and will serve no useful purpose. The anger, if properly directed, might. It is an uphill battle to shake off the guilt, but is something that most ex-stormers must try to do if they are to move forward with their lives.

DoCK, you make a lot of sense, as usual. Guilt is one of the most useless and unproductive of all human emotions imo, but as you say it's very difficult to shake off.

There seems to be some sense that Stormers are the only people who have ever fallen victim to a con artist. gg has pointed out some of the better known historical scams, eg the tulip bubble.
I'd say most people have been at some stage given bad advice.
I first started in the share market via a full service broker, in the belief as shown by Stormers, that in exchange for the hefty brokerage, I would receive expert advice about what shares to own. They made 12 recommendations which I followed. This was in a bull market.
At the end of a year, ten of these 12 had lost me money, some considerable amounts. When I had questioned the falling SP, I was offered the reassurance that 'oh, it's just a bit of temporary volatility" etc etc.
So I decided I couldn't do a worse job myself, having during this year picked up a bit from simply being exposed to the market.
I'd just say that many full service brokers are serving their own ends rather than that of their small clients.

And, as I've also said earlier in this thread, I was conned by a shonky lawyer and lost quite a lot of money there too. Didn't help my financial situation at the time that he was disbarred and fined.

So, Stormers, you're not the only people who have experienced bad advice.
You all have your own ways of handling what has happened. I found that yes, I was angry for a while, but recognised the futility of that, and worked on finding a way to get out of the mess and move on.

People are all different, I guess, but I've never known anyone who has benefited from continuing to go over and over either the anger or the guilt/remorse. What has happened has happened, and seeking strategies for the future is surely going to be more productive.

Agree. Nothing will change until future generations are better educated and far more financially savvy than the average Aussie is today. I wish I had the answer, but sadly I do not, and am inclined to believe there isn't one.

There is a heap of free education out there. People just have to take advantage of it.
The Youth Mentoring Programme of which I'm part have offered a financial education programme to the local high schools. No response. I suppose the curriculum is already overcrowded.

Agree, but I dislike the use of "muppet" as I find it quite derogatory and condescending. Education is the key, but some key changes to the financial planning industry, such as transitioning trailing commission based advice to fee-for-service could only help imo.

Agree about trail commissions. On education, the ASX website, E-trade website, both have good education about how the share market works.
ASIC and the ATO have various educational facilities.

Whilst acknowledging that ex-stormers are indeed far better off than most third world citizens, I suspect it is much easier to claim people are too attached to money and possessions when one has them. Money might not ensure happiness, but I'm willing to be experimented upon to see what effect might have on me

Well, I can't win, can I! In other threads, I've been jumped on for saying happiness and absolute poverty don't go together, and that a minimum level of income is necessary to prevent anxiety and a sense of insecurity.

 

[Garpal Gumnut]

I don't know that education will ever entirely protect everyone from being taken by scams, con-artists, the unethical etc, but my own personal losses would certainly have been less if I had the knowledge then that I have now. True, the model used by storm wasn't unique at all, but other investors did not suffer losses to the same extent due in many cases to better management by their advisers, and less predatory behaviour by their advisers/lenders combined.

Purely from my own perspective, I think a better financial education would have helped me in the following ways:

1. I would have been aware that I could very easily do for myself what storm charged me 7% to do, using either managed index funds via vanguard, or and index-based lic such as STW or Argo, Aust Found etc. Gearing optional, but easily arranged via a plethora of margin lenders.

2. I would have been aware of the cyclical nature of the sharemarket and been on the lookout for any black swans on the horizon. I may not have got out of the market as early as I should have, but I would have got out a lot earlier than I did. Much capital could have been preserved and put back to work in March/April, rather than the little I was left with.

3. I would have known what a stop-loss was, how they worked and why they can often save your hide!

4. I would have seen storm's operation and lack of managemet for what it was. I would not have been as gullible as I was.

5. I would have had the confidence to manage my own affairs, and possibly would have spread my capital between the sharemarket and property investment, instead of all in shares.

6. I doubt I would have been able to obtain the amount of debt from cba that I did if I were not affiliated with storm. This is irrelevant to the topic of education in a way, but had I known more before I went to the first storm seminar I would not have gone back for a second, hence less borrowing etc.

I agree that ASIC certainly need to be more proactive, rather than the reactive toothless tiger they appear to be at present. But I also feel that a better financial education would not only help people be better able to manage their own affairs with expert advice sought where necessary, but would more importantly enable them to see a lot of the money-grabbing schemes such as storms for what they are. Possibly more important yet, if more young people realised the importance of getting a good start on investing at an early age, there would be less desperate middle-aged folk worried about surviving on the pension for the vultures to prey on. If there has been anything positive for me to find in my situation, it is that my kids will be a hell of a lot better prepared than I was. I'll be doing everything I can to make sure they never make the same mistakes their parents did.

Excellent post mate.

It should be a reference point for every new member of asf.

gg