Storm Financial Group

[specialed]

I have read all the transcripts, Hansards and submissions....and have also watched many of the inquiries live....Unfortunately I don’t have the time to troll back through all of them to locate precisely where it is, however I believe it was during the Sydney hearing that the CBA acknowledged that they could not guarantee that all of their data was accurate all of the time.

Obviously margin calls can still be actioned irrespective of the data with which it is based. The investor just takes for granted that the “call “ is accurate and makes a decision on the basis of that information. Just because other dealer groups acted on margin calls does not mean they acted on accurate data. What reason do the other dealer groups have to bother checking the accuracy of information they receive. It has become clear that Storm, like most other FP’s are merely agents for others receiving generous commissions for their “impartial advice”.

In fact if I was an investor with another dealer group I would now be asking my advisor to go back over all the information to ensure that I was not also the recipient of bogus information. What are the implications for a banking institution if they admit that their systems and the information it produces ,which some 7000 dealer groups acted on is inaccurate and that the product they have sold is in fact not capable of doing what it was sold as being able to do?

I’m sure it was not only Storm investors for whom the CBA is unable to guarantee the accuracy of its information. However, it is only those investors who have challenged it so far….

Regarding the redemptions, It is also clear that any decisions made by storm in terms of redemptions were not aimed at helping clients but rather self preservation.

And although the only reason the inaccurate data has even come to light albeit after the fact, is because Manny and co are searching for anything to save themselves, this does mitigate others from their responsibility to ensure their data is accurate and communicated in a timely manner.

 

[Judd]

The date of the transcript was provided. Your arguments are threadbare in assuming that if one piece of data from a particular source is inaccurate then all data from that source is inaccurate. Degree of relevance applies.

Anyway, FYI, it's not my problem as I'm not in the position a number of Storm clients got themselves into, with the assistance of the conniving and cunning white shoe brigade dressed up as financial advisers.

Nevertheless, I can only wish ex-Storm clients all the best and hope the resolution process goes well, the CBA was not totally blameless in this fiasco as it has admitted.

 

[Julia]

I’m sure it was not only Storm investors for whom the CBA is unable to guarantee the accuracy of its information. However, it is only those investors who have challenged it so far….

That's a very disingenuous statement. How can you be so sure of this?
If it were the case that many other investors via many other dealer groups were similarly affected, why on earth would they not have hung on to the coat tails of the Storm enquiry and said so? As far as we know, no one has. The meltdown disaster seems to have been confined to Storm.
Thus, it seems pretty unreasonable to attribute the entire problem to the CBA.

 

[specialed]

That's a very disingenuous statement. How can you be so sure of this?
If it were the case that many other investors via many other dealer groups were similarly affected, why on earth would they not have hung on to the coat tails of the Storm enquiry and said so? As far as we know, no one has. The meltdown disaster seems to have been confined to Storm.
Thus, it seems pretty unreasonable to attribute the entire problem to the CBA.

Sorry for the misunderstanding Julia. Certainly don’t want to imply this is all the result of the CBA. It is very clear how much Storm is responsible for this whole mess. What I am asking is....

If some of the data issued to Storm by the CBA has been unreliable or inaccurate, and the CBA has confirmed this, Then surely if other dealers were the recipients of information obtained form the same systems then it stands to reason that they too may have received questionable data. However, how many dealer groups are willing, or have the resources to go after the CBA for clarification. Also given they have "made their dollar" through commissions what incentive is there to question the standard of the product they have sold.

This disaster has shown that many financial planners reliance on commissions has meant that many have little, if any motivation to place their clients interests above theirs or that of the institutions whose products they are selling. Further, if they question an institutions processes or systems they may quickly find themselves locked out of that system, with no access to a product range. This again reduces their ability to source commissions.

The CBA were only willing to concede they cant ensure the accuracy of data when facing a senate inquiry. Rest assured the CBA are never going to admit any specifics regarding fault any more then they already have. Confidentiality agreements, as part of the resolution process will act to further bury any damaging information. As has been stated by many, confidentiality agreements are not put in place to protect the victim.

Judd, I am simply posing the questions...As you would be aware these systems are based on many complex algorithms. A small glitch or fault with just algorithm can send the system into disarray and the result is endless troubles. It is the same scenario with inaccurate phone bills, electricity bills, interest calculations by banks. All three of which are regularly found to have problems. In particular banks are regularly found to have both over charged and undercharged thousands of dollars on loans. This is usually because of human error in programming the systems. The systems use the same algorithms to send out tens or hundreds of thousands of data streams. Most clints will never know, because we have a belief that they will get it right. Its only when the odd person does a thorough check or when the mistake is very substantial that it becomes apparent. And only then does the extent of the problem show itself as more people begin checking statements etc. Except of course if the mistake is an overpayment by the bank, who are very quick to come chasing the over payment


If the other dealer groups are using information from the same system, then the same algorithms may have sent corrupted data to many more than just storm.

 

[Judd]

Sorry for the misunderstanding Julia. Certainly don’t want to imply this is all the result of the CBA. It is very clear how much Storm is responsible for this whole mess. What I am asking is....

If some of the data issued to Storm by the CBA has been unreliable or inaccurate, and the CBA has confirmed this, Then surely if other dealers were the recipients of information obtained form the same systems then it stands to reason that they too may have received questionable data. However, how many dealer groups are willing, or have the resources to go after the CBA for clarification. Also given they have "made their dollar" through commissions what incentive is there to question the standard of the product they have sold.

This disaster has shown that many financial planners reliance on commissions has meant that many have little, if any motivation to place their clients interests above theirs or that of the institutions whose products they are selling. Further, if they question an institutions processes or systems they may quickly find themselves locked out of that system, with no access to a product range. This again reduces their ability to source commissions.

The CBA were only willing to concede they cant ensure the accuracy of data when facing a senate inquiry. Rest assured the CBA are never going to admit any specifics regarding fault any more then they already have. Confidentiality agreements, as part of the resolution process will act to further bury any damaging information. As has been stated by many, confidentiality agreements are not put in place to protect the victim.

Judd, I am simply posing the questions...As you would be aware these systems are based on many complex algorithms. A small glitch or fault with just algorithm can send the system into disarray and the result is endless troubles. It is the same scenario with inaccurate phone bills, electricity bills, interest calculations by banks. All three of which are regularly found to have problems. In particular banks are regularly found to have both over charged and undercharged thousands of dollars on loans. This is usually because of human error in programming the systems. The systems use the same algorithms to send out tens or hundreds of thousands of data streams. Most clints will never know, because we have a belief that they will get it right. Its only when the odd person does a thorough check or when the mistake is very substantial that it becomes apparent. And only then does the extent of the problem show itself as more people begin checking statements etc. Except of course if the mistake is an overpayment by the bank, who are very quick to come chasing the over payment


If the other dealer groups are using information from the same system, then the same algorithms may have sent corrupted data to many more than just storm.

Again you continue to place a perverse spin on matters which were not said. I am no apologist for the CBA. Where it or its staff have stuffed up then that error must be rectified and those affected compensated to the extent as agreed. What the CBA did say in its evidence of 4 September 2009 before the Committee was (Page 72 of transcript):

"That is another question that we have looked at. Again, we are unable to verify, given the nature of the information, that every unit price for every customer over the period was up to date. [Yep, usual situation with data warehouses. Judd] We know that substantially all of them were. As part of the remediation process that we [the CBA] are talking about, one of the critical things her is if, in relation to any given client on any given day, information was wrong and that led or contributed to a client's loss. That is something that we would expect to come out in the remediation process. So we do know that substantially all the information was provided and it was substantially correct, at a minimum. But that does not mean that in isolated cases there may have been problems."

That is not at all conceding that the data was incorrect at any stage as implied by some. The CBA has admitted nothing in that regard. It is simply stating that, if proven, the data on any given day for any given client was wrong and that caused a loss, we will correct the wrong.

You allege "If some of the data issued to Storm by the CBA has been unreliable or inaccurate, and the CBA has confirmed this...". The CBA has confirmed nothing of the sort.

Your deliberate twisting of statements given in evidence to arrive at a erroneous blanket proposition is abhorrent. None the more and none the less.

 

[specialed]

Judd, I accept your analysis and apologise unreservedly for the "spin" you believe I have placed in my analysis. I guess unless ASIC come up with something then we well never know the extent to which CBA customers were compensated through the remediation process due to incorrect info, and therefore the extent of the incorrect data because of the confidentially clauses imbedded in the process. Cant say I hold much faith in ASIC however.

Out of interest does the following statement from your quote worry you ?

"Again, we are unable to verify, given the nature of the information, that every unit price for every customer over the period was up to date."

During the market downturn were you watching your portfolio ? Do you have funds under management ? What would your reaction be if while watching your portfolio or managed fund and attempting to make informed decisions during a rapid market decline you were informed that "given the nature of the information we are unable to verify that your unit prices are up to date". There might be an interesting exercise in contacting Commsec and asking them if the can guarantee (in writing) that at all times their published unit prices are accurate, in particular for managed funds.

Regardless of the Storm situation do you find this concerning ? For "small " funds lets say sub $500 000 if sold with unit prices slightly incorrect the amount may be negligible, but what about portfolios over $ 5m.

 

[specialed]

My understanding is that Manny's suits against the CBA are on the basis of the alleged inaccurate information. What are the implications for these cases....not that I believe they will ever get to court

 

[Julia]

If some of the data issued to Storm by the CBA has been unreliable or inaccurate, and the CBA has confirmed this, Then surely if other dealers were the recipients of information obtained form the same systems then it stands to reason that they too may have received questionable data. However, how many dealer groups are willing, or have the resources to go after the CBA for clarification. Also given they have "made their dollar" through commissions what incentive is there to question the standard of the product they have sold.

What incentive is there? Perhaps just basic integrity and care for the welfare of their clients.

Re dealer groups having the resources "to go after the CBA", I don't quite understand what you're meaning here. e.g. if they were to have sought clarification wouldn't that have occurred at the time? But your expression "go after the CBA" implies an 'after the event' claim such as is now under way via Slater and Gordon.
If the latter, then why would they not simply have put in their submission alleging incompetence of the CBA for the enquiry?

Perhaps there are dealer groups whose complaints have not been aired.
The entire focus has been on Storm. Given the extent of the media reporting, I'd have thought if complaints from other organisations have been made we would have heard something about it.

 

[specialed]

What incentive is there? Perhaps just basic integrity and care for the welfare of their clients.

Re dealer groups having the resources "to go after the CBA", I don't quite understand what you're meaning here. e.g. if they were to have sought clarification wouldn't that have occurred at the time? But your expression "go after the CBA" implies an 'after the event' claim such as is now under way via Slater and Gordon.
If the latter, then why would they not simply have put in their submission alleging incompetence of the CBA for the enquiry?

Perhaps there are dealer groups whose complaints have not been aired.
The entire focus has been on Storm. Given the extent of the media reporting, I'd have thought if complaints from other organisations have been made we would have heard something about it.

Will clarify Juia,

1) My understanding is that the push for a legislative ban on commissions is that there is a belief that some, not all, but some FPs do not act with integrity or with the best issues of their clients. This is because there is a conflict between selling the better or more ideal product to a client and selling the product whereby the FP receives the higher commission. Surely you do not believe that Storm are the only FP operating without integrity

2) Storm have only gone after CBA, BOQ etc because they have been decimated, are trying to save themselves etc. Ie. They have little to loose. Are other FP’s in the same position ?. Would they risk losing everything in a court battle for the sake of their clients, who as I have already highlighted, they may have little real care for. Further, would they risk losing access to a range of products that bring in their commissions. What impact would it have on a FP if they could not access to sell funds managed by CBA, Macquarie etc. I have read many incite full comments from you on this thread and therefore am confident you are not so naive to believe that all FP operate with integrity or with the best interests of their clients. Do you have the same belief with insulation providers ? There are many reputable ones, but there are a lot that aint !

I am not trying to be a conspiracy theorist here, but am simply stating that if the issues of incorrect data are proven true, but resolved in the resolution process then they are bound by confidentiality. Therefore, clients of other dealer groups will have little reason to question their FP’s about the information used by the other 7000 groups the CBA referred to. I’m sure this would also suit many FP’s who do not wish or do not have the resources to go begin checking through the specifics when decisions were made last year.

As stated I understand that Manny and the 60 are going after CBA on the basis of this incorrect data. If they were to win, what would be the implication for CBA. Would other clients of other FP then want there data trolled through.

3) Slater and Gordan are going after CBA, BOQ etc because the believe , they can earn lots of money, it brings publicity to them, and they believe they can win.

 

[Judd]

What incentive is there? Perhaps just basic integrity and care for the welfare of their clients.

Re dealer groups having the resources "to go after the CBA", I don't quite understand what you're meaning here. e.g. if they were to have sought clarification wouldn't that have occurred at the time? But your expression "go after the CBA" implies an 'after the event' claim such as is now under way via Slater and Gordon.
If the latter, then why would they not simply have put in their submission alleging incompetence of the CBA for the enquiry?

Perhaps there are dealer groups whose complaints have not been aired.
The entire focus has been on Storm. Given the extent of the media reporting, I'd have thought if complaints from other organisations have been made we would have heard something about it.

Julia,

I have read and read and read the transcripts of the inquiry. You know what? Only EC has said that the data was wrong but provided absolutely no evidence as to which aspect or aspects of the data was incorrect.

From the opening remarks of evidence provided on 4 September 2009:

"We also now know that CBA data feeds to Storm, and hence its website on which the customers and Storm were supposed to be able to check their positions, were deeply and hopelessly flawed [How do we know this? What is the basis on which you make this statement?] Let me repeat that; CBA data feeds to Storm, and hence its website on which the customers and Storm were supposed to be able to check their positions, were deeply and hopelessly flawed. [Always repeat and emphasize a position when you may not be in possession of definite facts as this will give the impression of absolute knowledge.] The errors were not simply that they were a few days late because a few funds were suspended for a few days or because the markets were in turmoil: the data, we now know, was scrambled. [To what degree, ie 100%>0%, was the data scrambled and what elements of it were incorrect?] This is what I have been saying all along – that is, that the problem was not excessive debt or excessive gearing [Oh yes it bloody was: $10m portfolio supported by $8M of debt, when the market goes down 50%, you are left with no equity and a $3m debt]; the problem was that the CBA chose to destroy the asset that services that debt. [You mean that it called in the corporate debt because you had no liquidity or solvency at a corporate level - as happens with a multitude of business, Kleenmaid springs to mind] I might add that the disruption of Storm by the CBA has affected other banks, in that their loans also cannot be serviced. [Only due to the fact that the market tanked, your clients were so geared to buggery the even a 15% movement in market values would have had them up rhubarb creek in a barbed-wire canoe spearing tadpoles with a crowbar.]

Not one member of the Committee challenged the assertion that the data was corrupt. They just accepted it as a given. And now people run with the hares, ie "'It's dirty data, it's dirty data!"

So what aspects were wrong? The client ID and units held, the loan outstanding, the buy/sell spread, the unit pricing? Absolutely zilch evidence provided but there are elements which wish to make a hue and cry about it - and use convoluted confabulated obfuscation to establish arguments supported by a total absence of evidence.

Such intellectual dishonesty by the EC apologists makes you want to weep or at least kick the cat if you had one to kick.

 

[Julia]

Judd, thank you. As I thought.
What in the name of hell were the enquiry members doing by not challenging EC's assertion and demanding proof of what he said!

Perhaps it's possible that the ASIC investigation will eventually hold EC to account over this?

I'm still knocked over by the breathtakingly revolutionary suggestion from the enquiry that 'financial advisers should act in the best interests of their clients'!
That this should have to be spelled out and legislated is beyond belief imo.

I don't know what the enquiry by Ripoll & Co cost, but it must have been plenty. And who has benefited from it? Are the Storm clients any wiser or do they feel at all vindicated? I can't see why they would.

Truly, with each day that passes, I just despair more and more of the clowns that are running this country. And the fact that they do not have a viable opposition is even more depressing.

 

[DocK]

Lots of money wasted on an enquiry to hear submissions stating the bleeding obvious, the completely untrue, the truth, and many versions of it. But the pollies were able to show how concerned they are and what jolly good jobs they're doing - but they've actually failed to recommend much of anything concrete. I'm sure they're well-intentioned, just as I'm sure ASIC don't set out to be largely ineffective, but I reckon most ex-stormers would have preferred the money spent on all these enquiries and hearings had simply been divvied up between them

Lots of lawyers representing lots of disgruntled investors, so-called planners, CEOs (or was he?, poor Manny couldn't remember himself), bankers etc. The lawyers seem to currently be attacking each other as well as whichever parties they're gunning for - no surprises there, the lawyers will be the winners in the end no matter who is possibly found to "blame".

Lots of burnt investors, some more than others, some wiser and some not. Some compensated, and some not (or not yet). Some will recover and some won't. Some will make the same mistakes, and some will be empowered. Most will have trouble with "trusting" anyone again - and perhaps this is as it should be.

A couple of ex-directors who will probably come out of this much better off than they should - but such is the way of the world. Justice is often hard to come by. I just hope their memories recover in time...... I like to believe in karma.

The only things I absolutely believe to be true are that it will all happen again in one form or another, and that no amount of legislation will ever prevent it.
The more things change, the more they stay the same.

Yours in cynicism,

DocK

 

[Gerkin]

I was expecting that the **** would fall out of this property market especialy in Townsville. From my research it hasnt, can anyone confirm this. From what i understand Cairns property is in alt worse shape than Townsville.

 

[Harleyquin]

:xmaswaveMerry Christmas to everyone on the Storm Financial thread. Whether we agree, disagree or agree to disagree I wish each and every one of you a wonderful safe Christmas and we'll put our boxing gloves on again in 2010 with more of the same. Hopefully the new year will bring some welcome relief for ex stormies as this year has been a shocker. :chimney:wreath

 

[sailteam30]

Believe it or not - some good has come out of this disaster for me - I worked for many years on wages and "retired" (thanks to storm I resigned from my secure professional occupation) to live on my income from shares and not to be a burden on the taxpayer for the meagre age pension.

The good news is that I was forced to go back to work and open my own business which has boomed during the GFC and post GFC (we are out of it now arent we?), not only that it has brought our family much closer together.

I am hoping for some more good news from the Resolution Process but it looks more like the lawyers and hangers on are feasting at the moment.

 

[DocK]

Believe it or not - some good has come out of this disaster for me - I worked for many years on wages and "retired" (thanks to storm I resigned from my secure professional occupation) to live on my income from shares and not to be a burden on the taxpayer for the meagre age pension.

The good news is that I was forced to go back to work and open my own business which has boomed during the GFC and post GFC (we are out of it now arent we?), not only that it has brought our family much closer together.

I am hoping for some more good news from the Resolution Process but it looks more like the lawyers and hangers on are feasting at the moment.

Good to hear some positive fallout, given all the negative. What type of business Sailteam30? And yes, the lawyers certainly seem to be doing well out of the resolution process - no surprises there though

 

[Julia]

Believe it or not - some good has come out of this disaster for me - I worked for many years on wages and "retired" (thanks to storm I resigned from my secure professional occupation) to live on my income from shares and not to be a burden on the taxpayer for the meagre age pension.

The good news is that I was forced to go back to work and open my own business which has boomed during the GFC and post GFC (we are out of it now arent we?), not only that it has brought our family much closer together.

I am hoping for some more good news from the Resolution Process but it looks more like the lawyers and hangers on are feasting at the moment.

Sailteam, it would be my guess that the success of your business is largely due to your constructive and positive attitude. Instead of succumbing to depression and despair, you've taken a pro-active approach to getting your life back on track. It's a huge credit to you and your success is very much deserved.

So glad to know that it has worked out so well for you. Clearly, you really deserve that it should be so. All the best for 2010 and beyond.

 

[Solly]

"Storm Financial: Boulevard of broken dreams"

More by Tony Raggatt in the Townsville Bulletin here;

http://www.townsvillebulletin.com.au/article/2009/12/26/103455_news.html

 

[Harleyquin]

Sailteam30 I agree with DoK what type of business have you started. Congratulations on such a positive attitude when so many have gone downhill. I admire your fortitude and positive attitude. If you have any ideas on how we can all recover from this disaster I'd be interested in hearing them, not just for ourselves but for the many many people who are really suffering after this disaster. Good luck and congratulations on your success.

 

[Harleyquin]

Solly welcome back and thank you for Tony Raggatt's story in the Townsville Bulliten, he really has a good 'handle' on what has happened with Storm Financial. I'm very impressed by his comments. Hope the New Year is shaping up to be far better than the last one for all.