Storm Financial Group

[Frank Ainslie]

Thanks Frank

So once again we had somebody with higher qualifications and experience in the industry which would suggest that when a person seeking advice and direction in financial matters, could reasonably expect to receive advice of a sound nature. I am pleased that eventually due process gave the required outcome.

I totally agree that the “I only followed orders!” is no defence for negligent and harmful advice. I've been looking over my notes, files and media about this saga and I believe that it is beneficial to revisit the financial climate of the time before the correction.

Most people I knew were doing very, very well with investments and speculations. Some had made millions in property and equities, there was a definite momentum for high returns on investments. I can fully understand why the Storm strategy looked attractive, especially to those who were sold the dream of a secure and hassle free retirement.

And then there were these words from the time by the "master"..

"Our focus has always been at the cutting edge of finance and technology but this is driven by our priority to serve clients. We planned our dress code, offices and attitude to feel homely and welcoming and we began with the philosophy of giving. Then and always whether on a financial or personal level if we can see a way to support of our clients we're there."

Also here's an article from the archives that may be of interest to you, in regard to the Masters course. http://www.theaustralian.com.au/news/storm-financial-found-fast-track-to-degrees/story-e6frg6oo-1225772096172

Hi Solly,

Very interesting! I missed this one but will certainly post it on my web site.

Personally, I am not willing to dismiss many of Storm Financial’s advisers as being unqualified. I do believe that experience in any one field is sometimes just as adequate as bits of paper. One of the most brilliant people I have met in my own particular field of expertise, freight forwarding, was one such individual. And I say that having professional qualifications myself.

At the same time, if there are financial advisers out there that do not have the background or the training, they should not be allowed to present themselves as professionals. The fact that many fall flat on both counts is more an inditement of the industry rather than people that operate within it. There’s also an integrity factor that comes into the equation. Some people have it and some people don’t!

“I believe that it is beneficial to revisit the financial climate of the time before the correction.” Absolutely! Many were speculating; no question about that! However, the vast majority of individuals that joined Storm signed up for the long haul at, what they thought, was "low risk". Speculation was the last thing on their minds.

Two points of interest in this article:

“During the week, the events surrounding Storm widened to include the National Australia Bank, where a Townsville man complained that he had been given a loan with the bank through Storm Financial, which he said he was unable to service because incorrect information had been recorded on his loan application form.”

That climate you mention created a feeding frenzy where banks were circling in the water for business. Many advisory firms were throwing them the meat off their investors' bones so both they and the sharks could be fed. The Banks and some of the advisory firms' standards and procedures suffered as a consequence. The financial advisers tended to forget that they had a contractual obligation to give sound advice, and the Banks conveniently overlooked the fact that they had signed off on various banking codes which have contractual implications once they agree to them. In Court, the BC's will be a central issue (if it gets that far?).

"The Commonwealth Bank has admitted some of its lending practices in relation to Storm clients were improper, and has set up a resolution process to help clients get back some of the money they lost when Storm collapsed earlier this year."

There’s a new site now at http://www.commonwealthbankdeception.com/about.htm

which may be of interest. It focuses on the wrongs of the CBA. It’s somewhat Spartan at the moment but I’m hoping it gains some momentum. I have fully covered the CBA on my website Storming on Banks https://sites.google.com/site/stormingonbanks/ for anyone that is interested. I did intend to create a separate website for the CBA's wrongdoings, but why reinvent the wheel?

Helen and I were not CBA clients but it really gets to me how the CBA , Slater & Gordon (who were supposed to be representing the CBA Storm customers) and ASIC have effectively locked the CBA resolution scheme participants out of any additional compensation. HOW? Because the “carve out” clause for additional compensation under Section 50 is not being pursued by ASIC! Once again, big business has had the last word.

I have written numerous letters to ASIC about this, but they claim they can’t discuss matters because they are now involved in litigation with the CBA?

In Slater & Gordon’s booklet entitled, “Proposal Framework & Advice Booklet” it states :

“65. What action could ASIC take against the CBA and how could this affect me?

65.1 If ASIC found that the CBA engaged in unlawful activity, then it could seek to impose sanctions including fines on the CBA through enforcement proceedings. Such proceedings would have no effect on you.

65.2 However there is one possible avenue that could affect you, which is if ASIC were to commence proceedings on your behalf under Section 50 of the ASIC Act. This mechanism has rarely been used by ASIC and there is no certainty that such powers would be invoked even if ASIC found that the Bank engaged in unlawful conduct. If Section 50 proceedings were brought against the CBA then it is possible that such proceedings could culminate in the Court making a determination that the CBA should pay you an award of damages.

65.3 If such an award was made for a monetary amount exceeding the value of the proposal made to you by the Bank through the Scheme, then the Bank would be required to increase the amount of its offer to you to ensure that you were no worse off.

ASIC is not pursuing the CBA under Section 50.

I wonder how many read the small print and whether this was fully explained to people.

The CBA is the worst offender of all where Storm were concerned. They have broken every rule in the book but ASIC are only charging that bank with UMIS?

Anyone here believe in conspiracy theories. I am now a convert!

 

[Solly]

Hi Solly,

Very interesting! I missed this one but will certainly post it on my web site.

Personally, I am not willing to dismiss many of Storm Financial’s advisers as being unqualified. I do believe that experience in any one field is sometimes just as adequate as bits of paper. One of the most brilliant people I have met in my own particular field of expertise, freight forwarding, was one such individual. And I say that having professional qualifications myself.

......................

There’s a new site now at http://www.commonwealthbankdeception.com/about.htm

which may be of interest. It focuses on the wrongs of the CBA. It’s somewhat Spartan at the moment but I’m hoping it gains some momentum. I have fully covered the CBA on my website Storming on Banks https://sites.google.com/site/stormingonbanks/ for anyone that is interested. I did intend to create a separate website for the CBA's wrongdoings, but why reinvent the wheel?

Helen and I were not CBA clients but it really gets to me how the CBA , Slater & Gordon (who were supposed to be representing the CBA Storm customers) and ASIC have effectively locked the CBA resolution scheme participants out of any additional compensation. HOW? Because the “carve out” clause for additional compensation under Section 50 is not being pursued by ASIC! Once again, big business has had the last word.

I have written numerous letters to ASIC about this, but they claim they can’t discuss matters because they are now involved in litigation with the CBA?

..............................................

Anyone here believe in conspiracy theories. I am now a convert!

Hi Frank, I had a look at this link from the site.

http://www.commonwealthbankdeception.com/action.htm

Which states;

"- An ASIC source – The Plain Truth has obtained documents including emails from a source within ASIC. While this source had been more than forthcoming this person is no longer with ASIC. The indications to date are that the ASIC investigation has been deliberately misdirected and The Plain Truth has received credible but unconfirmed allegations that there has been collusion between the ASIC and the CBA to the detriment of Storm clients. At this point The Plain Truth believes these allegations but requires confirmation from someone within ASIC with integrity and courage."

If the above is indeed true and correct, I suggest that any information that this group has be given to the proper investigative authorities. If there is one grain of substance regarding these most serious allegations they should refer them to the Australian Federal Police.

As you can probably tell I'm not a firm believer in mass systemic institutional corruption or implied conspiracy theories. In my experience, it's better to deal with the facts and let those with the skill and resources, examine and investigate claims further. But what I do believe is that institutions and individuals forcefully seek to eliminate or mitigate harmful situations and those with the deepest pockets tend to dictate the direction, for a while anyway.

The following months will be very interesting and I look forward to further developments.

S

 

[Igetit]

Hi Frank, I had a look at this link from the site.

http://www.commonwealthbankdeception.com/action.htm

Which states;


If the above is indeed true and correct, I suggest that any information that this group has be given to the proper investigative authorities. If there is one grain of substance regarding these most serious allegations they should refer them to the Australian Federal Police.

As you can probably tell I'm not a firm believer in mass systemic institutional corruption or implied conspiracy theories. In my experience, it's better to deal with the facts and let those with the skill and resources, examine and investigate claims further. But what I do believe is that institutions and individuals forcefully seek to eliminate or mitigate harmful situations and those with the deepest pockets tend to dictate the direction, for a while anyway.

The following months will be very interesting and I look forward to further developments.

S

Hi Solly,

Very brieflyI have been made aware of the above allegations from a third party. Remains unsubstantiated. The relevant parties are pursuing the matter. Some to suppress, the others to uncover.

I am not sure if the CBA fully understands where they are likely heading should all be revealed. This is dangerous stuff. Some interesting days ahead.

 

[Solly]

Hi Solly,

Very brieflyI have been made aware of the above allegations from a third party. Remains unsubstantiated. The relevant parties are pursuing the matter. Some to suppress, the others to uncover.

I am not sure if the CBA fully understands where they are likely heading should all be revealed. This is dangerous stuff. Some interesting days ahead.

Hi Igetit

Dangerous more than aptly describes this situation, if true. I do not understand if such damning evidence is held by any party why an official complaint has not been made to the highest authority.

These allegations are of the most serious nature that I have been made aware of in this whole event. If I held such information I would be making Commissioner Tony Negus aware, he is also Chair of the Australian Crime Commission.

I believe that these allegations need to be fully investigated as a matter of urgency.

S

 

[Garpal Gumnut]

Mate, is the wind still coming from the inside or is it from the outside ?

I would prefer not to answer on a public forum

I do however have a software program called Wind-Ignite.

I would be happy to answer your question but there is a price, 7% on the gross outlay of every investment you make on acting upon this advice. Wind-Ignite is a cutting edge Excel sheet ponced up to appear legit, and a proprietary asset of the Gumnut Family Trust.

I will forward you a prospectus suitably adorned with misspellings and disclaimers.

gg

 

[Solly]

I would prefer not to answer on a public forum

I do however have a software program called Wind-Ignite.

I would be happy to answer your question but there is a price, 7% on the gross outlay of every investment you make on acting upon this advice. Wind-Ignite is a cutting edge Excel sheet ponced up to appear legit, and a proprietary asset of the Gumnut Family Trust.

I will forward you a prospectus suitably adorned with misspellings and disclaimers.

gg

GG

I look forward to receiving that said prospectus, for the usual security and privacy reasons please send all corro to my encrypted Hushmail account.

I trust that the document will be of the usual polished standard featuring pictures of trusted members of the Gumnut Clan inner circle to add authenticity. Does everybody, including the women really wear fedoras?

I supposed the IPO will be launched, managed and underwritten by duly authorised representatives of a reputable newly incorporated Caribbean Building Society.

I have a canoe full of non consecutive Vatu fiat waiting in the boat shed in payment for a large guaranteed allocation. I'm just waiting for a suitably sized catamaran to become available to be able to sail the down payment into the assigned berth at Breakwater.

S

 

[Garpal Gumnut]

From Stuart Washington, earlier this year in Business Day.


http://m.theage.com.au/business/storm-investors-accidental-legacy-20110508-1ee73.html?page=1

Storm investors' accidental legacy
STUART WASHINGTON May 09, 2011

STORM Financial's investors should be remembered for the service they have done for Australian investors. It's of little consolation to them, but Storm investors have left the Australian investing public an enduring legacy.
As painful as Storm's pyre was, the investors' humiliating loss of an estimated $3 billion in the full public gaze provided the white-hot focus for change.
As a result, we will see a banking and financial planning industry stripped of distortionary commission payments that disadvantaged investors time and time again.
Events surrounding Storm are also a testament to the clunky, imperfect and slow interaction between the public, the press, the Parliament, the government and its bureaucrats.
I know this is unfashionable in this age of public distrust for politicians and, well, pretty much everyone, but in its clunky, imperfect and slow way, the system has worked.
This is not to say it has worked for Storm Financial investors, who are almost universally burnt out and much, much worse off.
More below

It is too too late for Storm investors, however their children and descendants may profit from tighter regulation on the adviser class in the future.

gg

 

[Solly]

"Storm founders put home under hammer

Residents of Townsville will finally be given the chance to cut their ties with two former townsfolk who probably don't pop around much any more."

More by Colin Kruger @ www.theage.com.au

 

[Frank Ainslie]

''’Must the greedy or the stupid always be indemnified by the taxpayer or the shareholder,'one letter writer to the Townsville Bulletin asked last month in an often-repeated sentiment.

This, of course, is a massive over-simplification.

There are laws in place to protect consumers from the unscrupulous and it would appear the banks have breached their banking code and contractual obligations and that financial advisers have not abided by laws dictating that advice is appropriate to the circumstances of their clients.” Storm Financial: Boulevard of broken dreams – TOWNSVILLE BULLETIN -TONY RAGGATT 26th December 2009

Hello, Bunnyip, old chap! That remark quoted above sounds like one of your?

We, Helen and I, really appreciate your concern but you are going to have a seizure if you keep this up. Let me put your mind at rest once and for all.

Everything you say is absolutely true! Why didn’t Helen and I see it before? “There are none so blind…” and all that! Where were you when we needed you most?

We were just plain greedy! No question about it! What gave us away? Was it my whistling “Money, money, money!” every time I contemplated the filthy lucre (shameful profit) we were making or was it the sumptuous lifestyle we were living at the time?

Go on, admit it! You had a peek at our Storm SOA, didn’t you? Which part gave you the clue?

Page 13 of 107 entitled, “Your Present Position - Personal Profile and Goals ...

“From the information you have supplied to us, we know that Frank you are 65 years of age, and Helen you are 60 years of age. Together you run your company PHAF Holdings Pty Ltd that operates the shopping centre "Smith Road Village". Helen, you also have your own company, Gillies Management
Pty Ltd, which operates a Laundromat located in Smith Road Village. You are currently both planning to sell your businesses and embrace retirement in the coming months.

You have asked our advice on the best ways to continue your wealth building over the next 5 to 7 years. Important financial goals for the future include building a solid capital base that will aid your wealth creation with a view of purchasing of a new vehicle, traveling, and maintaining a comfortable lifestyle as you prepare for your retirement in the short term. It is therefore a major aim to produce a portfolio of assets that will result in an income stream independent of your personal exertion work….

Page 79 of 107 Your Investment Timeframe

During our discussions, you have indicated that you initially wish to consider wealth creation to cover your immediate living needs and continue the growth of your assets to produce an income for now and over the next ten-year period. We have discussed this time frame and have explained that our recommendations need a minimum of a five-year time horizon due to the nature of the investments required to meet your goals. An Investment may be profitable within shorter or longer time horizons depending on which part of the economic cycle prevails at the start of your Investment.

However, it is our advice to you that the longer time horizon will allow you to ride out whatever volatility the market presents and still allows for a profit to be generated.

The building of wealth is a journey - it is not a single event. We anticipate that
implementation of these Recommendations is the beginning of a process that will endure for the rest of your lifetime. However, it is reasonable to expect to begin to enjoy the proceeds of the Investment well before your lifetime is over! Before proceeding with implementing this Plan, it is important that you understand that a minimum of 5 to 7 years is required before you can expect to be spending from the profits of the Investment. “

You picked it, Bunnyip! We only agreed with Storm’s 5 to 7 years plan to hide our true intentions. We were really looking for a result within 15 months! Storm certainly delivered on that one! We knew that if someone like you came snooping around though with your nose for the truth, the game would be up! My fault! I shouldn't have left the incriminating evidence lying around.

Yes, we must admit that when we walked into Storm’s Brisbane Office and were asked what we wanted, I couldn’t help myself. “The sky’s the limit baby!” “Let’s go for broke, Helen!”, “Let’s live on the edge!”, “You can’t take it with you!”, “I want the money NOW! NOW! NOW!” I even wanted to take a pile of money to bed with me at one stage but Helen thought that was going too far!

Sorry! I’m getting a little carried away here! Money does that to people. Greed is a terrible thing!

You, of course, would have spotted at once that Storm had a gambling problem. We admit that we knew this when we agreed to sign up with Storm. After all, we were imbued with the same curse. “Let it ride baby!” Besides, we’re too young to care! What’s a million or two to us, I could always sell my body on the streets if the right numbers didn’t come up! Ahh, It only seems yesterday that I walked along that boulevard wondering what the poor people were doing. Now I’m wandering along that same boulevard wondering what the rich people are doing.

“Now I know Centrelink is around here somewhere!”

Now that Helen and I have confessed, does this finally make you happy! If so, get on with your life my friend. It’s just not worth it! You have certainly earned a break after such a concerted effort. Go out with SJG1974 (good year, that!) and have a drink together. You’re in good company. You never know! You might like one another! You seem to have a lot in common. You can mull over whom next to expose on this forum. There are plenty of suspicious characters if you ask me

We, Helen and I, in the meantime will place ourselves in the “unworthy basket” for all to see, and you can point out to everyone that you were right and we were wrong. Will this do?

One thing though! We’re hoping to hide ourselves among the real victims. Therefore, please do me a favour and don’t mention this to Stuart Levitt, our lawyer. He doesn’t have your mental sagacity for spotting the obvious. The poor fool thinks we too have a very strong case, and I don’t want to disillusion the man.

“Now I ask you, Frank, do you really think you were circumspect in your dealings with Storm?”

I’m off now to look up ‘CIRCUMSPECT’ in the dictionary I thought it was the same as ‘CIRCUMCISED’ but never mind!

“…do you really think you were circumcised in your dealings with Storm?” It doesn’t sound quite right somehow, does it, but it more aptly describes the experience!

“…prudent and astute?" Nah! It’s that greed factor again. We were blinded by the money! “Money, money, money…it’s now a poor man’s world!” We had this childish belief that our money was in safe hands. We would be (1) protected under the Corporations Act, (2) Storm had professional indemnity insurance, (3) Storm’s financial strategy was sound, (4) our Storm financial adviser had considered our individual circumstances and tailored our financial plan accordingly, and (5) our former Storm financial adviser was telling us the truth. I could go on but these are just flimsy excuses at best. Unlike you, we are not “A’ students in English so we didn’t know where to go to look up Storm’s past crimes!

One last thing! I was as poor as a church mouse when I met Helen. https://sites.google.com/site/stormingonbanks/home/our-staff/nothing-is-written-until-you-write-it

The money and assets all belonged to her. She wanted to leave a legacy for her children and grandchildren that would last well after we’ve gone. I’ve been in business a long time and I’ve never been an advocate of “putting all your eggs in on basket”. Besides, I knew nothing about investing and was always a great believer that one should always be on top of whatever one gets involved with. However, having said that, I, myself, felt reasonably comfortable with the Storm plan because we already had a lot of money, were debt free, and we were assured that safeguards were in place to protect what we had.

It may seem very foolish to everyone now but it’s easy to be wise after the event. At the time the principle of investing on a broad front sounded feasible enough. People tend to forget that IF Storm and the Banks had acted responsibly, we would have lost a lot of money but we would have survived. The issues now are about WHY THEY didn’t act responsibly. OUR WHY should therefore not be an issue although you still seem determined to make it one?

Every investor that employs a financial adviser deserves the same treatment, whether that investor be rich or of average means. The fact that 75% of the people that lost all their money in Storm were approaching or past retirement age should tell you that they were “low risk” candidates that were looking for secure investments. They could have had a collective brain meltdown, no question, but I think that’s highly unlikely. Don’t you?

As I said before, “There are none so blind…”

Now remember, Bunnyip and SJG1974 for that matter, we have confessed to our sins so you can get on with your life and not worry about us any more. We don’t wish to stress you any further! Breath deeply and think about your days when you were an ‘A’ student in English. How can I or anyone else compete with that?

Have a good day and try not to worry so much!

 

[SJG1974]

You just can't stay away can you Frank?

Yes your adviser screwed you with inappropriate advice, yes Storm didn't do what they said they would, yes the banks were involved, yes laws may have been broken....blah blah blah. Noone is arguing with any of that Frank. But the other party to this mess who seems to have escaped any criticism from you is the most important one of all....YOU!!

If YOU had have been more diligent with YOUR life savings Frank, the life savings YOU and Helen had worked YOUR buts off to build, then YOU would just be another interested onlooker in this whole disaster, and not caught in the middle of it.

The question that has been asked of YOU all along remains unanswered:

Why, when YOU had well over $1,000,000 of investable assets and only wanted $45,000 per annum to enjoy a comfortable retirement (thats only 4.5% of $1,000,000, considerably less if you had over $1,000,000 by my calculations), did YOU see the need to risk it all by undertaking an incredibly high risk strategy that YOU clearly did not understand? It was YOUR money Frank, and YOU just blindly handed it over because a guy with qualifications told you to?

WHY??????????????????????????????????

 

[Frank Ainslie]

You just can't stay away can you Frank?

Yes your adviser screwed you with inappropriate advice, yes Storm didn't do what they said they would, yes the banks were involved, yes laws may have been broken....blah blah blah. Noone is arguing with any of that Frank. But the other party to this mess who seems to have escaped any criticism from you is the most important one of all....YOU!!

If YOU had have been more diligent with YOUR life savings Frank, the life savings YOU and Helen had worked YOUR buts off to build, then YOU would just be another interested onlooker in this whole disaster, and not caught in the middle of it.

The question that has been asked of YOU all along remains unanswered:

Why, when YOU had well over $1,000,000 of investable assets and only wanted $45,000 per annum to enjoy a comfortable retirement (thats only 4.5% of $1,000,000, considerably less if you had over $1,000,000 by my calculations), did YOU see the need to risk it all by undertaking an incredibly high risk strategy that YOU clearly did not understand? It was YOUR money Frank, and YOU just blindly handed it over because a guy with qualifications told you to?

WHY??????????????????????????????????

Hello SIG1974!

I thought you would be popping up sooner or later.

I’m glad you agree that “your adviser screwed you with inappropriate advice, yes Storm didn't do what they said they would, yes the banks were involved, yes laws may have been broken....blah blah blah. No one is arguing with any of that Frank.”

We have some common ground at last. As for the rest, I think I’ve given you our reasons already. There are some people that will never change their opinion of us on this forum! You and Bunnyip are just two such people.

Quite frankly, Helen and I don’t really care what you, Bunnyip or anyone else feels about us. It’s unimportant in the scheme of things. It’s not going to alter our lives dramatically one way or the other!

You have both expressed your feelings here on this forum. You’ve left no one in any doubt so why keep on repeating the same old thing over and over? Why should it be any concern of yours anyway? Whatever decisions we have made, we have to live with – you don’t!

Incidentally, there were many people that invested in Storm that had more than we did in assets. I guess they can be thrown away too?

“Ah, well! Such is life” Ned Kelly said just before they hanged him. Now that you want to hang us, I don’t think I can improve too much on his last words.

 

[doobsy]

I would have thought that part of helping others would be explaining how Storm managed to convince you to invest Frank. Explain that to others so they can learn from your experience and avoid the next version of Storm which will inevitably show up during the next bull market.

People are bombarded with offers and deals and told they have to make their money work harder every day. Tell people how to avoid the traps that you unfortunately fell into. You have done an excellent job of telling people about the pitfalls that can and do occur when you borrow and the banks change the rules but the forum is interested in why you invested with Storm so that maybe the next time we are all at a BBQ and someone starts talking about some foolproof strategy that a maverick is convincing them can't fail we can all see the signs and maybe steer them away from being ripped off also.

I am interested from a professional point of view. I notice that there is talk of "continuing to grow the assets". Was that the difference? You could get your income conservatively but not "grow your assets" for the next generation? A noble cause but one that resulted in the loss of your capital so help others out and please do explain why YOU felt Storm was the right investment strategy for you. I can accept others on this forum saying they didn't understand, I can accept some saying they took a punt and it didn't work out so they are back re-building as I type. Was that the case for you Frank or was it a combination.

I think everyone agrees and the conversation is over that the banks have a level of blame whether it be inappropriate lending or failure to trigger margin calls or high LVR's or whatever, the next step as I see it is getting forum readers to understand how Storm managed to create the cult in the first place and that can only come from Storm investors telling us why they not only chose the company but also why when it came to the push that they accepted the advice. We weren't there so we can't understand without an explanation.

Maybe it was the soft cheeses at head office, maybe it was the gold plated urinals, maybe it was the big "group hug" culture of the place, maybe they made clients feel dumb or bad if they didn't proceed after 6 months of "education", maybe Manny was a better salesman that we know.The forum is interested.

 

[Julia]

The building of wealth is a journey - it is not a single event. We anticipate that
implementation of these Recommendations is the beginning of a process that will endure for the rest of your lifetime. However, it is reasonable to expect to begin to enjoy the proceeds of the Investment well before your lifetime is over! Before proceeding with implementing this Plan, it is important that you understand that a minimum of 5 to 7 years is required before you can expect to be spending from the profits of the Investment. “

From the above Storm blurb:; " However, it is reasonable to expect to begin to enjoy the proceeds of the Investment well before your lifetime is over!"

That's such a comfort, huh. This to people in their mid 60"s????

To accept a 'plan' that tells you not to expect any earnings for five to seven years, when such a period might be all you have left, is what I can't comprehend.

 

[Frank Ainslie]

Our reasons why!

Doobsy (and others) have asked me to explain why we signed up with Storm Financial in the first place.

In late 2006 when our shopping center was on the market, we started to look around for suitable investments that would ensure that any capital we had would not erode away over time. Our two prime objects at that time were (1) to ensure that our assets would be secure and (2) that they would appreciate over time.

We looked at a number of options. Allocated pension plans were considered. So was putting our money in the Bank and just living off the interest. However, with inflation and lack of growth, we thought that these were not viable options in the long term.

We then started looking around for investment advice.That’s when Storm Financial was recommended to us by some friends of ours. They had been with Storm for some years and their investments had shown considerable growth during that time.

Now, before we joined Storm, I did a ‘Google’ search which failed to produce any adverse comments about Storm. It should be bourne in mind that the Storm Financial of today was not the Storm Financial that we signed up with in 2007. What we know about Storm today, we did not know then or we and many others would have had nothing to do with that firm.

Storm at that time had a track record, were leaders in their field, had a considerable data base of clients, employed qualified financial advisers, were backed by some of the major banks in this country, and had an impressive infra-structure. There was nothing to suggest to us at the time that there was something untoward about the way they operated.

Storm certainly projected an image of success and efficiency. When one walked into Storm’s Brisbane office, the number of people sitting at their computer consuls instilled in one’s mind that they had everything under control and our investments were in safe hands.

The financial plan they sold to us did seem to make sense – liquefy our assets and invest the capital from such in the market place. Even their idea of taking out housing loans and margin loans for investment purposes seemed to have some merit.

“Page 39 of 107 stormfinancial
Discipline

Borrowing to Invest

Recall that the primary purpose of investing is to derive an income from a source that does not involve your personal exertion. This is made possible by having your capital base working for you. Different people will have different levels of income they desire. They will also have different amounts of time available for the investment process, and different capacities to access capital. Each investor is in different circumstances, and must have an investment plan custom- made to reflect their own wishes and limitations.

However, we can generalize to a certain extent about the role of borrowings within an investment plan. If people are to be freed from the need for income from their personal exertion, then their income must come from capital. The amount of income desired or required will be determined by their lifestyle and choices. The amount of income that is possible to earn from the capital base is determined in large part by the size of the capital base. Many clients find that the income and growth that is possible to achieve with the capital base they possess is inadequate to fulfill their wishes. In that case, the capital base can be increased in order to raise the potential for income and growth..."

Helen and I always thought that we could repay any loans in this regard because we already had enough capital to cover all contingencies, or so we thought. Further, the Storm approach was not unique as some other financial advisory firms were also giving out the same advice.

One should also remember that we sought advice from Storm because we had no investment knowledge ourselves. Therefore, we relied solely on Storm to give us the best advice available. We paid them a considerable amount in fees for doing so. Further, we had Storm’s assurances that it had built-in protections, had sufficient and effective professional indemnity insurance, was governed by regulatory laws, and was ASIC compliant. This impression was reinforced by the support of some major banks and the asset base of the Cassimatises which was reputed to be some $450 million

One must also remember that in 2007 when we joined, Storm was on an acquisition binge. It had bought a planning group in Melbourne, then expanded across Queensland into Brisbane, the Gold Coast and Sydney. It snapped up 10 companies in March alone. These acquisitions amounted to $32.9 million. We had no reason therefore to suspect that Storm was anything but what they professed to be. It didn’t sound to us like a company in trouble. Rather, this instilled in us confidence that Storm Financial was solid.

We were told by Storm that we could draw off $100,000 per year in “living expenses” from what our share portfolio would produce for us. This was better than the 7% we were offered by the Banks at that time on one million dollars which we received for our shopping centre. But more importantly, our capital would grow over time rather than reduce as it would in a bank. In other words, Storm told us that we would make more than enough to cover all the debt we had signed up for and still have enough ($8000 per month) for our immediate needs. Our capital would be safe and our investments would increase over the course of time. The figure mentioned in the Court of $45,000 was an amount we were living on prior to our selling the shopping centre and joining Storm.

We were shown numerous projections on Storm's software system that seemed to bear out these claims. We were told that these were conservative estimates based on all outlays for housing and margin loan interest payments and Storm’s fees. Our asset base would grow rather than decrease and they would monitor our investment portfolios every step of the way.

At the time our financial adviser knew he would have to give us a far better return than any Bank could do ($70,000 at that time), and he set out to make us believe that the figures presented were logical and genuine. Unbeknown to us, he turned our “low risk” request into a “high-risk” strategy for his own ends, and he is now paying the price like us.

Before we signed up I asked him to state in writing that the trigger-points were in place as claimed to protect our investments. I have written proof that he lied to us in this regard as well.

Doobsy:

1 How did Storm manage to convince us to invest?
Because it appeared that they were offering a safe harbour for our money and sustained growth over 7 to 10 years. These were our two prime reasons for signing with Storm.

2. How can people avoid the traps that we fell into.
With great difficulty because people with little or no experience of a particular field such as investing rely on professionals for advice. Some have said that people need to educate themselves before considering going to professionals. Whilst there is some truth in this, I also believe that investors need more protection. New regulations have been introduced since the Storm collapse but they do not go far enough. Unless the financial advisory sector is willing to lean the lessons of Storm and do something to eradicate the “bad eggs” they’ll always be another Storm waiting around the corner.

3. "...someone starts talking about some foolproof strategy that a maverick is convincing them can't fail we can all see the signs and maybe steer them away from being ripped off also."

The new Financial Planners Association (FPA) television adverts clearly state that if you are looking for a Financial Adviser then you should make sure that they are a FPA member. That's when you can be assured you are receiving the best professional advice at the highest standards.

Storm Financial services was a member of the FPA. The FPA took no compliance reviews of Storm while they were a member and only acted after the collapse of the business. The full extent of their action was to then fine Storm $20,000. The fine was never paid.

A professional body should not only hold their members to a higher level, but they should also audit their members. Therefore, the advert is totally misleading!

If you don't want people to listen to cowboys, get rid of the cowboys. In order to do this, your industry needs an overseeing body. The FPA cannot do the job because it is a toothless tiger just like ASIC. You need a body that conducts audits and monitors its members on a regular basis. Clearly the FPA is not designed or geared to do this and its role is therefore merely window dressing.

4. "I notice that there is talk of "continuing to grow the assets". Was that the difference?"
Yes, most certainly. I have already elaborated on this in my previous remarks.

5. How did Storm managed to create the cult in the first place?
By being successful although it seems strange saying this now. In a market that was going up over a sustained period of time, Storm’s strategy took on some legitimacy. The Banks were early converts in this regard. The in-built problem with Storm’s approach though was that it was only designed to work in the good times and Storm didn’t build in any exit plan.

We, of course, invested in Storm, blissfully unaware that their were forces in play that would ultimately come together to cause a gigantic meltdown. People in the financial sector may have looked on enviously at what Storm was achieving and they may have had some misgivings. However, they didn’t come out and condemn Storm publicly. If someone had, a few might have been warned in time.

 

[Solly]

For those interested;

FEDERAL COURT OF AUSTRALIA
Queensland Registry
Wednesday, 16 November 2011

Harry Gibbs Commonwealth Law Courts Building
Level 6, 119 North Quay
BRISBANE, 4000

Justice Reeves Court No. 1, Level 7

10:15 AM Directions

1 QUD577/2010 ASIC v STORM FINANCIAL LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) & ORS

Directions & Interlocutory Hearing

2 NSD811/2010 LESLIE JAMES SHERWOOD & ORS v COMMONWEALTH BANK OF AUSTRALIA & ANOR

3 QUD590/2010 TRACEY RICHARDS v MACQUARIE BANK LIMITED

 

[Solly]

I would prefer not to answer on a public forum

I do however have a software program called Wind-Ignite.

I would be happy to answer your question but there is a price, 7% on the gross outlay of every investment you make on acting upon this advice. Wind-Ignite is a cutting edge Excel sheet ponced up to appear legit, and a proprietary asset of the Gumnut Family Trust.

I will forward you a prospectus suitably adorned with misspellings and disclaimers.

gg

GG

Looks like the Melton auction is now, Sat 19-Nov-11 11:00AM.

Will you be taking Byrnsie to the Ross Island for a drink afterwards ?

S

 

[doobsy]

Thanks Frank

I think that background actually will give many on here a bit more "understanding".

Comments from the darkside. Most people do not understand investments and superannuation. Decent research for the average joe to gain an understanding of this is difficult and time consuming, a luxury few people have.

I appreciate the toothless tiger comments but I will again say that unfortunately in any industry, those who are looking to rip off clients will fly under the radar and find loopholes. Planners around NQ being on the front line and seeing Storm from the early days did send in reports to all parties (ASIC, FPA) questioning certain practices but in a bull market the strategy worked. Hard to prosecute someone for making clients money. It was never known or understood that they could never cope when the markets turned and they got thousands of margin calls all at once. Apparently neither could the bank.

The point I was trying to prove asking my questions and the point you confirmed is that the sales pitch was slick, the logic tested and the answers to questions by clients provided to advisers to make sure the sale went through. They were dogged, if a client baulked, it just meant they needed more time, more evidence.

The worst part of the whole thing is that the fee grab meant that you ended up 200% exposed to Australian Shares. Contributions to super, an allocated pension with 25-40% share exposure would probably have modelled exactly the same and provided a sustainable $100K pa. You would be down $200K and would not have sold a single share.

I think others on the forum need to understand that clients will believe what planners say. The only advice I can give is to meet with at least 2-3 planners and try to get a feel for what strategies they feel are appropriate. This might be hard depending on whether the planners charge for their time.

Frank, again I think that has added considerable value.

 

[Julia]

We then started looking around for investment advice.That’s when Storm Financial was recommended to us by some friends of ours. They had been with Storm for some years and their investments had shown considerable growth during that time.

Considering there was a strong bull market at the time, it's difficult to understand why you would give credit to Storm for this growth.
Surely you were aware of how the market had been growing when you consulted Storm???

Helen and I always thought that we could repay any loans in this regard because we already had enough capital to cover all contingencies, or so we thought.

Either you could or you couldn't. Not too hard to do the basic sums.

Further, we had Storm’s assurances that it had built-in protections, had sufficient and effective professional indemnity insurance,

So did you quantify that indemnity insurance? i.e. find out the total number of clients, know what the total capital invested was of all these clients, and then determine that the indemnity insurance would absolutely cover you in the face of the firm failing? ???

One must also remember that in 2007 when we joined, Storm was on an acquisition binge. It had bought a planning group in Melbourne, then expanded across Queensland into Brisbane, the Gold Coast and Sydney. It snapped up 10 companies in March alone. These acquisitions amounted to $32.9 million.

So what? Before it failed so spectacularly, ABC Learning also went on a massive acquisition binge. What makes you think this is an indicator of a well managed company?

We had no reason therefore to suspect that Storm was anything but what they professed to be. It didn’t sound to us like a company in trouble. Rather, this instilled in us confidence that Storm Financial was solid.

Really?

We were told by Storm that we could draw off $100,000 per year in “living expenses” from what our share portfolio would produce for us

Hold on a moment: earlier you told us that they'd informed you not to expect any profits or capacity to draw an income for five to seven years.
You are directly contradicting yourself here.

Further, did you have them explain how exactly this $100K p.a. would be derived, i.e. X amount will come from growth of your capital, X amount will come from dividends, and X amount will come from franking credits?

If so, (and I rather doubt that you would have) how could you have felt assured of the growth factor? Or the dividend yield for that matter?

This was better than the 7% we were offered by the Banks at that time on one million dollars which we received for our shopping centre. But more importantly, our capital would grow over time rather than reduce as it would in a bank. In other words, Storm told us that we would make more than enough to cover all the debt we had signed up for and still have enough ($8000 per month) for our immediate needs.

$8000 per month? I thought you said you only had an expectation of $45,000 p.a.?
Can't help wondering what you'd feel obliged to spend $8000 per month on in retirement. Yet another contradiction.

New regulations have been introduced since the Storm collapse but they do not go far enough.

Disagree entirely. If the nanny state continues to increase at the same exponential rate, we will all soon be told when we may take a breath.

Unless the financial advisory sector is willing to lean the lessons of Storm and do something to eradicate the “bad eggs” they’ll always be another Storm waiting around the corner.

It doesn't matter how much regulation you have, there will always be scammers able to find a way round it. We should not over-regulate the thinking population in an attempt to safeguard those who want to have their hands held every minute.

The new Financial Planners Association (FPA) television adverts clearly state that if you are looking for a Financial Adviser then you should make sure that they are a FPA member. That's when you can be assured you are receiving the best professional advice at the highest standards.

Storm Financial services was a member of the FPA. The FPA took no compliance reviews of Storm while they were a member and only acted after the collapse of the business. The full extent of their action was to then fine Storm $20,000. The fine was never paid.

This is an entirely justified complaint imo. But it was ever thus. Belonging to an industry's overseeing body is absolutely no guarantee of that firm's ethics. Most of it is window dressing. Never depend on a professional body offering any guarantee of ethical behaviour.

 

[Julia]

Comments from the darkside. Most people do not understand investments and superannuation. Decent research for the average joe to gain an understanding of this is difficult and time consuming, a luxury few people have.

With respect doobsy, I disagree entirely. There is everything an investor needs to know available in this technological age. It's simply a matter of spending a bit of time acquiring financial literacy.

It does, of course, make sense for you - as a financial adviser - to promote the idea that people need 'expert help'. Nothing wrong with that. You're in business to make a living, and I'm sure you provide genuine assistance to many clients.

But I hold that it's simply wrong to suggest that it's beyond your average Australian to understand superannuation or to acquire financial literacy plus an understanding of how the market works.

 

[Garpal Gumnut]

GG

Looks like the Melton auction is now, Sat 19-Nov-11 11:00AM.

Will you be taking Byrnsie to the Ross Island for a drink afterwards ?

S

There are unfortunately too many pubs and clubs, of both low and high repute between Melton and the Ross Island, and I am unsure where Byrnsie and I will find land.

With the best of intentions, having found a mug or buyer or both or none for such an indecent pile, as Casa Cassimatis, Byrnsie may be in need of something to calm him down.

I may take a shortcut through the Cathedral and say a prayer for the Storm victims, before having the first cold one in the North Queensland Club, I have that august hole as a member of my clubs of first resort after matins of a Sunday.

gg