I also understand they paid themselves $24m out of a FY2008 profit of $26m. I am sure that money is safely hidden away somewhere.
Storm Financial Group
- Thread starter Garpal Gumnut
- Start date
I also understand they paid themselves $24m out of a FY2008 profit of $26m. I am sure that money is safely hidden away somewhere.
Garpal Gumnut
Ross Island Hotel
- Joined
- 2 January 2006
- Posts
- 13,800
- Reactions
- 10,584
Thanks Junior and Doobsy.
See there's a lot of news, in the news over this past couple of days. Did gg and co buy the mansion for their new 'church', or did he leave it for someone who appreciates the gaudiness?
Hope the new owners hang an "under new ownership" sign on the front lawn - just in case some storm-battered locals forget and egg the place
It would be interesting to know where the money from the sales of Manny Cassimatis house at Melton Tce., the pad in Brisbane, and the antiques and furniture went.
Quite possibly the banks have their hands on it, but Manny may have worked out a way of keeping it.
Perhaps he may even start another financial advice company, once he has the irritation of all the court cases and investigations out of the way.
gg
- Joined
- 21 December 2008
- Posts
- 4,532
- Reactions
- 1
- Joined
- 15 May 2011
- Posts
- 294
- Reactions
- 0
Hi Solly,
If, as a CEO, any area of your business is doing particularly well, you will try and establish 'WHY' because you may be able to apply the principles being used in that area to other less successful areas of your business. Conversely, if a branch is performing below the norm, you will endeavour to establish the ‘WHY’ as well because it may be either market forces at play or poor management. Either way, you need to know! This is basic management!
Therefore Ralph Norris, and David Liddy of the BOQ for that matter, are lying through their teeth when claiming that that ‘THEY DIDN’T KNOW’ what was going on where their Banks’ were concerned in their dealings with Storm. Apparently, lying before the PJ-C is no big deal for them and ‘Mea Culpa’ simply means for them personally, “I’m sorry we were aught!”
Garpal Gumnut
Ross Island Hotel
- Joined
- 2 January 2006
- Posts
- 13,800
- Reactions
- 10,584
Manny would be entitled to join in the class actions against the banks. Does anyone know if he or any entities associated with him, Storm or associated companies are involved in any of the legal actions pending against the banks.
If he is a victim, he should be compensated. Many Storm victims still believe in Manny, fewer than before but there are some out there.
gg
- Joined
- 21 December 2008
- Posts
- 4,532
- Reactions
- 1
GG
I remember around Nov '09 it was reported that EC & JC were suing the CBA for $17 million, a claim for losses on their personal investment portfolio. I wonder how far this action has progressed.
S
Garpal Gumnut
Ross Island Hotel
- Joined
- 2 January 2006
- Posts
- 13,800
- Reactions
- 10,584
With lost interest and investment opportunity, that would be about $20m.
Manny is no slouch, it will be interesting to see how the cases progress. It may be cheaper for EC and JC to work through the class process in train at present though, with the other victims of Storm, against the Banks.
The GFC affected Manny and Julie as well, a point some forget.
I guess what MC is saying is that the Cassimatis family are victims too. They have lost their ability to land a helicopter in their backyard, their personal jet, their some would consider beautiful Mediterranean deco-red homes and the ability to spread financial advice and well-being amongst a willing populace.
This is not to mention the intangible self esteem that flows from a job well done.
gg
Solly
I’ve been away for the last week – hence the delay in getting back to you.
Double gearing – a risky strategy that’s very effective at multiplying profits in a bull market, and losses in a bear market.
Stocks go ‘up by the stairs and down by the elevator’ – therefore double gearing multiplies losses much faster than it multiplies profits.
Frank
This post is in response to Post 6013 on page 301.......for some reason the quote tags won’t work so I’m unable to quote that post.
The definition of ‘culprit’ is irrelevant to this debate.
And I’ve never suggested nor implied that you or your partner are culprits – I’ve simply said that you should take responsibility for your decisions and actions, as should everyone else who was involved in this debacle.
Nobody, culprit or otherwise, ‘took all your money’.
Your money disappeared due to a combination of decisions, events, and people, and also to a lack of decisions when decisive action was required.
It was your decision to invest heavily in the stock market. The market crash in 2008 caused you substantial losses – losses that were compounded by aggressive gearing, compounded by the failure of your lender and your adviser to deliver timely margin calls, compounded by your incompetent business manager sitting on his hands and doing nothing to help you, and compounded by the owner of the business (you) ‘taking your eye off the ball’ (to use your own words), and failing to step in and take control of your business by implementing defensive action to limit the damage.
Every one of these people should be accountable for their actions and also for their lack of action when decisive action was needed.
By all means go after the banks if you believe they did anything illegal – I’m not disagreeing with you on that point, I’d be doing the same in your situation. Go after Storm too – they were the primary architects of the whole dodgy scheme which included them extracting 145 grand of your hard earned money. You have little chance of ever getting any money out of them, but you’ve said that justice is your motivation, not money. So wouldn’t it be nice to know you helped put these unscrupulous people in jail for several years!
I’m amused by your continued insistence that the Storm strategy wasn’t a greedy push for big money, that nowhere did Storms SOA mention anything about the strategy being risky or designed to greatly magnify profits.
So what??? What other objective would you think heavy borrowing had, other than to greatly magnify profits?
How could that not be risky, given that all these borrowings plus your personal wealth were to be sunk into the stock market?
What Storm’s SOA said or didn't say does not in any way remove the fact that the strategy you chose to implement was aggressive and high risk, and it’s purpose was to magnify profits both for you, and for Storm via their outrageous upfront fee of 7%. You are clearly naïve in the extreme if you didn’t see this and still cannot see it.
Consider a man on 100 grand a year who asks his boss to triple or quadruple his salary by jacking him up to 300 or 400 grand a year. I’m sure the boss would consider that was a greedy push for big money.
Well that’s what the Storm strategy did – invest in stock index funds to harness the power of a bull market, then multiply that power by a factor of three or four through the use of gearing and then double gearing on top of that.
It was a simple and effective strategy to greatly magnify returns from the market – it magnified profits while the market remained bullish, but it magnified losses when the market turned bearish.
You need to settle down a bit Frank - you could stress yourself into an early grave if you continue your angry outbursts against people whose views don’t exactly agree with your own.
This post is in response to Post 6013 on page 301.......for some reason the quote tags won’t work so I’m unable to quote that post.
The definition of ‘culprit’ is irrelevant to this debate.
And I’ve never suggested nor implied that you or your partner are culprits – I’ve simply said that you should take responsibility for your decisions and actions, as should everyone else who was involved in this debacle.
Nobody, culprit or otherwise, ‘took all your money’.
Your money disappeared due to a combination of decisions, events, and people, and also to a lack of decisions when decisive action was required.
It was your decision to invest heavily in the stock market. The market crash in 2008 caused you substantial losses – losses that were compounded by aggressive gearing, compounded by the failure of your lender and your adviser to deliver timely margin calls, compounded by your incompetent business manager sitting on his hands and doing nothing to help you, and compounded by the owner of the business (you) ‘taking your eye off the ball’ (to use your own words), and failing to step in and take control of your business by implementing defensive action to limit the damage.
Every one of these people should be accountable for their actions and also for their lack of action when decisive action was needed.
By all means go after the banks if you believe they did anything illegal – I’m not disagreeing with you on that point, I’d be doing the same in your situation. Go after Storm too – they were the primary architects of the whole dodgy scheme which included them extracting 145 grand of your hard earned money. You have little chance of ever getting any money out of them, but you’ve said that justice is your motivation, not money. So wouldn’t it be nice to know you helped put these unscrupulous people in jail for several years!
I’m amused by your continued insistence that the Storm strategy wasn’t a greedy push for big money, that nowhere did Storms SOA mention anything about the strategy being risky or designed to greatly magnify profits.
So what??? What other objective would you think heavy borrowing had, other than to greatly magnify profits?
How could that not be risky, given that all these borrowings plus your personal wealth were to be sunk into the stock market?
What Storm’s SOA said or didn't say does not in any way remove the fact that the strategy you chose to implement was aggressive and high risk, and it’s purpose was to magnify profits both for you, and for Storm via their outrageous upfront fee of 7%. You are clearly naïve in the extreme if you didn’t see this and still cannot see it.
Consider a man on 100 grand a year who asks his boss to triple or quadruple his salary by jacking him up to 300 or 400 grand a year. I’m sure the boss would consider that was a greedy push for big money.
Well that’s what the Storm strategy did – invest in stock index funds to harness the power of a bull market, then multiply that power by a factor of three or four through the use of gearing and then double gearing on top of that.
It was a simple and effective strategy to greatly magnify returns from the market – it magnified profits while the market remained bullish, but it magnified losses when the market turned bearish.
You need to settle down a bit Frank - you could stress yourself into an early grave if you continue your angry outbursts against people whose views don’t exactly agree with your own.
Maybe a level of amusement is needed.
HQ and co who want to know about the FP process and why it failed. My opinion is that it didn't, it was bad advice but the process undertaken was pretty much as it should have been.
The amusement as promised. If you wanted to buy some shoes and that industry had to go through the same process as a FP.
Here you go:
COMPARISONS TO THE FINANCIAL ADVISING INDUSTRY AT ITS BEST
Every industry I know is being plagued by the growing burden of compliance. The problem is it creates masses of paperwork for the good operators but at the same time is ignored by the shonks. What follows is a tongue and cheek article that tries to show what would happen in the shoe business if it was regulated in the same way as the securities industry. It’s a classic.
Following the Financial Services Reform Bill, the Australian Shoe Industry Commission (ASIC) has also introduced new guidelines.
Putting Things In Perspective? Shoe Shop Compliance
"I'd like to buy a pair of black leather shoes, please?"
"Sir, if it were only that simple. Here's my card and here's your Buyer's Guide."
What's this for?
It tells you that I can only talk to you about shoes and allied products sold by this shop. I can't talk to you about shoes sold by any other shoe shop, nor can I give any advice on, say, sausages, for example.
Er?
Probably the best way to proceed is to show you where we fit into the footwear industry. We buy in most of our products from the Far East at a fairly modest price and sell them on to the public at a considerably higher price; but of course, out of the mark-up we have to pay for transportation, import duties, rent and rates, display, staff, sales staff, cleaners and administration, etc, and our shareholders have to be paid a dividend out of the remaining profits. Not many people think about this when they buy their shoes, but we think it's important. With this in mind, I'd like to ask you a few questions to make sure you get the shoes, or even boots, which are exactly right for you. It may be that when we have all the facts, I recommend that you do not buy my footwear at all. May I proceed???
What do you want to know?
Well, how many arms and legs have you for a start?
What have arms got to do with shoes?
Well sir, if, for example, you only had one arm and I sold you a pair of shoes with laces, that could be construed as bad advice by LAUSTRO.
What is LAUSTRO?
The Laced and Unlaced Shoe Trade Regulatory Organisation.
What do they do?
Put the boot in. A friend of mine had to leave the industry. What did he do wrong? Sold a pair of carpet slippers.
What's wrong with that?
Turned out the guy didn't have carpet. So you see, I need to build a full picture for you. For example, do you need shoes for business or pleasure, or business and pleasure? How many shoes do you have already? How many brogues, casuals, suedes, plimsoll's, slippers, sandals, Wellingtons, etc? How many suits ? what colour are they? Do you have athlete's foot? Can you touch your toes? Any corns or bunions, or does your family have a history of dropped arches? What kind of socks do you wear? How often do you cut your toenails? How much do you earn and what is your overall clothes budget? ?
Well, thank you for that information. I'll give it some serious thought and get back to you.
Two weeks later
Ah, good morning sir. I've given serious thought and what you need is a pair of black leather shoes.
Isn't that what I asked for in the first place?
With respect sir, you have now had the benefit of my professional advice, based on all the relevant facts as given, and you now know with some certainty that what you need is a pair of black leather shoes. All the guesswork's been taken out of it. Here's your Reasons Why letter. I recommend that you buy these black leather shoes because they'll keep your feet dry, match your suits, look smart and you can afford them.
Well, I'm glad that's settled.
You want the shoes, then?
Yes, please.
Right, if you'd like to complete this application form, here's your illustration, which I'd like you to sign. It shows a complete breakdown of costs and profits and includes my commission. Your Product Particulars describe in great detail how the shoes are made and the Key Features are a summary of the product's particulars, highlighting the risk factors.
Risk factors?
Yes. For example, if you live too long, the shoes may need repairing. On the other hand, if you die before you've had your wear out of them, I'm afraid there'll be no refund, even if they don't fit any other member of the family.
I see.
So, just to recap. You've got my card; your Buyer's Guide; Product Particulars; Key Features; Illustration; Reasons Why letter. You will get a letter from my Head Office telling you that I do, in fact, work for this company and also a Cooling Off notice. You can return the shoes within 14 days and have a full refund if you don't like them for any reason. How would you like to pay sir?
Cash.
Ah, well, would you mind nipping home for a copy of the gas bill or something to prove your identity, as you are not known to me. One last thing sir. Do any of your friends require shoes?
HQ and co who want to know about the FP process and why it failed. My opinion is that it didn't, it was bad advice but the process undertaken was pretty much as it should have been.
The amusement as promised. If you wanted to buy some shoes and that industry had to go through the same process as a FP.
Here you go:
COMPARISONS TO THE FINANCIAL ADVISING INDUSTRY AT ITS BEST
Every industry I know is being plagued by the growing burden of compliance. The problem is it creates masses of paperwork for the good operators but at the same time is ignored by the shonks. What follows is a tongue and cheek article that tries to show what would happen in the shoe business if it was regulated in the same way as the securities industry. It’s a classic.
Following the Financial Services Reform Bill, the Australian Shoe Industry Commission (ASIC) has also introduced new guidelines.
Putting Things In Perspective? Shoe Shop Compliance
"I'd like to buy a pair of black leather shoes, please?"
"Sir, if it were only that simple. Here's my card and here's your Buyer's Guide."
What's this for?
It tells you that I can only talk to you about shoes and allied products sold by this shop. I can't talk to you about shoes sold by any other shoe shop, nor can I give any advice on, say, sausages, for example.
Er?
Probably the best way to proceed is to show you where we fit into the footwear industry. We buy in most of our products from the Far East at a fairly modest price and sell them on to the public at a considerably higher price; but of course, out of the mark-up we have to pay for transportation, import duties, rent and rates, display, staff, sales staff, cleaners and administration, etc, and our shareholders have to be paid a dividend out of the remaining profits. Not many people think about this when they buy their shoes, but we think it's important. With this in mind, I'd like to ask you a few questions to make sure you get the shoes, or even boots, which are exactly right for you. It may be that when we have all the facts, I recommend that you do not buy my footwear at all. May I proceed???
What do you want to know?
Well, how many arms and legs have you for a start?
What have arms got to do with shoes?
Well sir, if, for example, you only had one arm and I sold you a pair of shoes with laces, that could be construed as bad advice by LAUSTRO.
What is LAUSTRO?
The Laced and Unlaced Shoe Trade Regulatory Organisation.
What do they do?
Put the boot in. A friend of mine had to leave the industry. What did he do wrong? Sold a pair of carpet slippers.
What's wrong with that?
Turned out the guy didn't have carpet. So you see, I need to build a full picture for you. For example, do you need shoes for business or pleasure, or business and pleasure? How many shoes do you have already? How many brogues, casuals, suedes, plimsoll's, slippers, sandals, Wellingtons, etc? How many suits ? what colour are they? Do you have athlete's foot? Can you touch your toes? Any corns or bunions, or does your family have a history of dropped arches? What kind of socks do you wear? How often do you cut your toenails? How much do you earn and what is your overall clothes budget? ?
Well, thank you for that information. I'll give it some serious thought and get back to you.
Two weeks later
Ah, good morning sir. I've given serious thought and what you need is a pair of black leather shoes.
Isn't that what I asked for in the first place?
With respect sir, you have now had the benefit of my professional advice, based on all the relevant facts as given, and you now know with some certainty that what you need is a pair of black leather shoes. All the guesswork's been taken out of it. Here's your Reasons Why letter. I recommend that you buy these black leather shoes because they'll keep your feet dry, match your suits, look smart and you can afford them.
Well, I'm glad that's settled.
You want the shoes, then?
Yes, please.
Right, if you'd like to complete this application form, here's your illustration, which I'd like you to sign. It shows a complete breakdown of costs and profits and includes my commission. Your Product Particulars describe in great detail how the shoes are made and the Key Features are a summary of the product's particulars, highlighting the risk factors.
Risk factors?
Yes. For example, if you live too long, the shoes may need repairing. On the other hand, if you die before you've had your wear out of them, I'm afraid there'll be no refund, even if they don't fit any other member of the family.
I see.
So, just to recap. You've got my card; your Buyer's Guide; Product Particulars; Key Features; Illustration; Reasons Why letter. You will get a letter from my Head Office telling you that I do, in fact, work for this company and also a Cooling Off notice. You can return the shoes within 14 days and have a full refund if you don't like them for any reason. How would you like to pay sir?
Cash.
Ah, well, would you mind nipping home for a copy of the gas bill or something to prove your identity, as you are not known to me. One last thing sir. Do any of your friends require shoes?
- Joined
- 15 May 2011
- Posts
- 294
- Reactions
- 0
To Doobsy (and others involved in the financial advisory sector)
Confidence restorer!
“HQ and co who want to know about the FP process and why it failed. My opinion is that it didn't, it was bad advice but the process undertaken was pretty much as it should have been.”
I’m not sure I agree with you on this. Certainly, the advice was bad but the process was not as it should have been. If “bad advice” was the only issue the Banks would not find themselves in the dock as well.
Be that as it may, the Storm collapse and the many other financial crises that have occurred in the past have emanated in part from financial advisers that do the wrong things by their clients, not just in terms of “bad advice” but rather criminal wrongdoings for which, many investors that suffered as a consequence have little recourse. People are being inundated by media stories of financial advisers that shaft their clients and they start to worry that the same could happen to them if they employ a financial adviser. This eroding of trust must be worrying for those in the financial advisory sector because it will, if it hasn't already, impact on their livelyhood.
How does one restore that confidence? I believe that this can only be done by introducing safeguards that will provide investors with the degree of protection that will restore their faith in the processes and encourage them to fully place their trust once again in financial advisers.
Okay! New regulations have been introduced but do they go far enough and may be a burden rather than a help? Some have been introduced in part by people outside the financial advisory industry that may not be fully aware of the ramifications on the financial industry at large. Government bodies for instance. I found in my time in management that many radical systems would be suggested (mostly software) that were not in step with the needs of those involved in my industry (international logistics) because no one bothered to ask the people at the coalface who would be responsible for operating them. Computer geeks are notorious in this regard!
I have mentioned professional indemnity insurance in the past for a reason. Investors cannot be insured against market losses because this is impractical. However, they should be able to take out a cover against wrongdoing by their financial advisers that impact on their investments. I believe the Government had a window of opportunity to give certainty to investors by providing a comprehensive professional indemnity insurance cover that is mandatory for all investors and financial advisers. So far, it has failed to do this in its new regulations.
How would this work?
Here’s part of what I said on this subject to ASIC:
“It should be incumbent on all credit licensees to take out a professional indemnity insurance cover for an adequate sum of money (sliding scale depending on the value of the individuals' investment assets) that contains a deeming clause extendable (for claim purposes) for a year beyond the expiration of the policy. The Storm fiasco should have taught your organization and this Government that nothing less is workable. This professional indemnity insurance cover should be mandatory!
If it costs a little more so what! It's better than it costing investors everything later on! Investors would rather pay a little more now and have some form of security instead of being left out on a limb as they clearly have been!
For that matter the Government itself might consider offering a special form of insurance of its own to investors, effectively by-passing the insurance industry altogether. It would be: (1) a revenue earner, (2) it would restore confidence in the market place, and (3) it would ensure that the likes of another Storm Financial episode would be minimised.”
To my mind, introducing such an insurance cover, particularly if it is Government controlled,would give future investors the confidence they need to use financial advisers with a degree of certainty. Any claims could be fast-tracked and the onus would be on the Government to get its act together and ensure that compliance was being carried out.
Having said this, I am not at the coalface. Indeed, I am not even in the mine so I am commenting merely as an outsider. However, it does seem to me that such a move would be a confidence restorer for the industry at a time when it badly needs one.
Your views on this will be of interest.
Confidence restorer!
“HQ and co who want to know about the FP process and why it failed. My opinion is that it didn't, it was bad advice but the process undertaken was pretty much as it should have been.”
I’m not sure I agree with you on this. Certainly, the advice was bad but the process was not as it should have been. If “bad advice” was the only issue the Banks would not find themselves in the dock as well.
Be that as it may, the Storm collapse and the many other financial crises that have occurred in the past have emanated in part from financial advisers that do the wrong things by their clients, not just in terms of “bad advice” but rather criminal wrongdoings for which, many investors that suffered as a consequence have little recourse. People are being inundated by media stories of financial advisers that shaft their clients and they start to worry that the same could happen to them if they employ a financial adviser. This eroding of trust must be worrying for those in the financial advisory sector because it will, if it hasn't already, impact on their livelyhood.
How does one restore that confidence? I believe that this can only be done by introducing safeguards that will provide investors with the degree of protection that will restore their faith in the processes and encourage them to fully place their trust once again in financial advisers.
Okay! New regulations have been introduced but do they go far enough and may be a burden rather than a help? Some have been introduced in part by people outside the financial advisory industry that may not be fully aware of the ramifications on the financial industry at large. Government bodies for instance. I found in my time in management that many radical systems would be suggested (mostly software) that were not in step with the needs of those involved in my industry (international logistics) because no one bothered to ask the people at the coalface who would be responsible for operating them. Computer geeks are notorious in this regard!
I have mentioned professional indemnity insurance in the past for a reason. Investors cannot be insured against market losses because this is impractical. However, they should be able to take out a cover against wrongdoing by their financial advisers that impact on their investments. I believe the Government had a window of opportunity to give certainty to investors by providing a comprehensive professional indemnity insurance cover that is mandatory for all investors and financial advisers. So far, it has failed to do this in its new regulations.
How would this work?
Here’s part of what I said on this subject to ASIC:
“It should be incumbent on all credit licensees to take out a professional indemnity insurance cover for an adequate sum of money (sliding scale depending on the value of the individuals' investment assets) that contains a deeming clause extendable (for claim purposes) for a year beyond the expiration of the policy. The Storm fiasco should have taught your organization and this Government that nothing less is workable. This professional indemnity insurance cover should be mandatory!
If it costs a little more so what! It's better than it costing investors everything later on! Investors would rather pay a little more now and have some form of security instead of being left out on a limb as they clearly have been!
For that matter the Government itself might consider offering a special form of insurance of its own to investors, effectively by-passing the insurance industry altogether. It would be: (1) a revenue earner, (2) it would restore confidence in the market place, and (3) it would ensure that the likes of another Storm Financial episode would be minimised.”
To my mind, introducing such an insurance cover, particularly if it is Government controlled,would give future investors the confidence they need to use financial advisers with a degree of certainty. Any claims could be fast-tracked and the onus would be on the Government to get its act together and ensure that compliance was being carried out.
Having said this, I am not at the coalface. Indeed, I am not even in the mine so I am commenting merely as an outsider. However, it does seem to me that such a move would be a confidence restorer for the industry at a time when it badly needs one.
Your views on this will be of interest.
Frank
Again I say that the process worked. To give good advice you need to get to know the clients situation, their needs, their objectives, their timeframe, their risk tolerance.
If the adviser then ignores all that then the process isn't broken, the adviser is.
I still think that from what I saw Storm were probably even more thorough than the norm in their fact finding. I see this as their way to ensure they 'maximised' each client for their own means rather than any love of the process.
I laugh every time someone brings up process with financial planners. Why not anytime we look to have a transaction over $1,000. Why shouldn't Harvey Norman go through a financial fact find to see if the client can really afford the $10,000 of electrical equipment they are about to purchase. Why shouldn't doctors be bound by a "client best interest" clause when recommending a prescription. Surely if they were we would all be sent to get the generic brand rather than the name brand that costs 50% more and provides all sorts of undisclosed kickbacks to doctors and pharmacy operators.
How about schools? Do teachers sign off stating they will act in the best interests of each student? I would say that education is one of the few things that ranks ahead of finance in terms of long term damage or loss of opportunity.
Frank, when you owned the shopping centre. Should every shopper have been provided with a breakdown of the item purchased? What went to the shop, what was actually kept after costs? Should they have had to disclose their markups on the product? Should they have had to disclose if the supplier had promised them a freebie if they sold a certain amount that quarter?
I think we are the only industry that is even close to transparant. How about asking the banks to disclose the "before return" fees taken on a savings account.
Frank, who judges all of the things you outline. Just because something loses money doesn't mean the advice was bad and there was wrongdoing. ASIC have been shown to be inept even where we can all see open and shut cases that are current.
I understand we play with people's money and that is a sensative area. I just feel that in alot of ways more compliance won't fix things. What will fix things is an ability to clearly differentiate between salesman and advisers. No different to tax agents and accountants. There is a massive difference in the quality of the experience and therefore the advice.
Would that have stopped storm? No, but maybe the industry needs to keep setting the bar higher (already happening) to call yourself a financial adviser.
Independent audit by industry experts? That works for me. Quality long term well respected advisers paid by ASIC to review plans (blind, no names) of other firms. They report back to ASIC if they see any flags. That way it is not a pencil pusher ticking boxes, it is someone who gives advice on a daily basis looking over a plan.
Nothing would have stopped Storm, why, because you change the rules and EC just works out a new way to get around them. You put in place the insurance and you increase the cost for everyone in Australia using a planner to save the 3000 people who picked the wrong planner. Harsh but realistic.
Again I say that the process worked. To give good advice you need to get to know the clients situation, their needs, their objectives, their timeframe, their risk tolerance.
If the adviser then ignores all that then the process isn't broken, the adviser is.
I still think that from what I saw Storm were probably even more thorough than the norm in their fact finding. I see this as their way to ensure they 'maximised' each client for their own means rather than any love of the process.
I laugh every time someone brings up process with financial planners. Why not anytime we look to have a transaction over $1,000. Why shouldn't Harvey Norman go through a financial fact find to see if the client can really afford the $10,000 of electrical equipment they are about to purchase. Why shouldn't doctors be bound by a "client best interest" clause when recommending a prescription. Surely if they were we would all be sent to get the generic brand rather than the name brand that costs 50% more and provides all sorts of undisclosed kickbacks to doctors and pharmacy operators.
How about schools? Do teachers sign off stating they will act in the best interests of each student? I would say that education is one of the few things that ranks ahead of finance in terms of long term damage or loss of opportunity.
Frank, when you owned the shopping centre. Should every shopper have been provided with a breakdown of the item purchased? What went to the shop, what was actually kept after costs? Should they have had to disclose their markups on the product? Should they have had to disclose if the supplier had promised them a freebie if they sold a certain amount that quarter?
I think we are the only industry that is even close to transparant. How about asking the banks to disclose the "before return" fees taken on a savings account.
Frank, who judges all of the things you outline. Just because something loses money doesn't mean the advice was bad and there was wrongdoing. ASIC have been shown to be inept even where we can all see open and shut cases that are current.
I understand we play with people's money and that is a sensative area. I just feel that in alot of ways more compliance won't fix things. What will fix things is an ability to clearly differentiate between salesman and advisers. No different to tax agents and accountants. There is a massive difference in the quality of the experience and therefore the advice.
Would that have stopped storm? No, but maybe the industry needs to keep setting the bar higher (already happening) to call yourself a financial adviser.
Independent audit by industry experts? That works for me. Quality long term well respected advisers paid by ASIC to review plans (blind, no names) of other firms. They report back to ASIC if they see any flags. That way it is not a pencil pusher ticking boxes, it is someone who gives advice on a daily basis looking over a plan.
Nothing would have stopped Storm, why, because you change the rules and EC just works out a new way to get around them. You put in place the insurance and you increase the cost for everyone in Australia using a planner to save the 3000 people who picked the wrong planner. Harsh but realistic.
And the client should be able to judge for themselves after all of that whether the risks they take are worth the potential rewards (or pitfalls). I mean this isn't like a Madoff ponzi scheme or a dodgy investment that has gone under. This wasn't some black hole. This was a simple strategy that was easy to follow but which was BLOODY RISKY.
8 out of 10 who visited Storm walked away. I wonder why?
I mean if people don't understand that borrowing against their house and then gearing up again via a margin loan into shares isn't highly risky, then all of the rules and regulations in the world won't protect them. Even after all thats happend, some people still can't see it was risky! Difficult to protect people from themselves.
I have said it before and I will say it until I am blue in the face, the clients made the decision to follow the advice. Manny didn't make it for them. Either did Stuart Drummond or any other adviser. If the client didn't understand the advice or the risks involved, then it was their responsibility to ensure they did. How much responsibility do people want to pass onto others?
I continue to find it amazing that people will shop around when they are looking to buy a $1,000 tv to ensure this large sum of money isn't wasted. And yet people will hand over their life savings to an adviser, believe every word he says (even when he says that double gearing isn't risky), and not even do a simple check to ensure they are investing wisely!
Possibly because they can actually see, feel and look at the tv but with finance? A tad nebulous and uncertain so more reliant on someone who actually "knows" about such stuff. While both the salesperson in the store and the financial adviser are actually selling something is a matter which probably goes over their heads.
That and the fact a salesperson in a store isn't required to have formal qualifications, and so can be ignored as someone just trying to flog a product to get a commission. Whereas a financial planner? Whew, that's something different.
And I am not trying to denigrate FPs, just trying to put myself in the place of the punter.
Sadly, there are rogues in every industry - law, medicine, finance and even in families where members have been ripped off by one of their own. Where money or assets are involved you are going to either encounter it or read about it.
Same here – I too am amazed at the casual and trusting attitudes that some people adopt when dealing in high finance, whereas their attitudes are entirely different to matters of lesser financial importance.
Equally amazing is their belief that membership of a reputable organisation like the FPA is some sort of automatic guarantee that every person in that organisation will behave with the highest ethics and the utmost integrity.
Life gives us so many examples of disreputable people belonging to reputable organisations.
For example......
* car salesmen belonging to the Motor Traders Association of Queensland or some other reputable motoring organisation
* real estate salesmen belonging to the Real Estate Institute of Queensland or some other reputable real estate organisation
The ethical people in the real estate and motor industries are probably in the majority, yet all of us know of the propensity of some people in those industries to be less than honest. It’s absurd to expect that the situation would be any different in the financial services industry.
People selling a product are salesmen/women, regardless of what qualifications they hold or what organisations they belong to. It’s unrealistic and naïve to assume that every single salesman is honest.
With all due respect, Frank.......If you'd looked into the Storm strategy thoroughly instead of trusting them implicitly and believing everything they said, you would have found a number of reasons to doubt that Storm could deliver on its promises.
Every single one of these reasons has been outlined to you on this forum over the last several weeks.
80% of those who approached Storm walked away after reviewing the strategy - clearly they found some pretty solid reasons to doubt that Storm could deliver on its promises.
- Joined
- 15 May 2011
- Posts
- 294
- Reactions
- 0
Doobsy
“Frank, when you owned the shopping center should every shopper have been provided with a breakdown of the item purchased? What went to the shop, what was actually kept after costs? Should they have had to disclose their markups on the product? Should they have had to disclose if the supplier had promised them a freebie if they sold a certain amount that quarter?”
Your using a shop sale to illustrate your point is, I feel, a poor example because the circumstances are somewhat different. The “shoes” story was not applicable either although it was somewhat amusing. If financial advisers want to stick by the maxim, “Let the buyer beware” as you seem to be advocating in your postings then perhaps financial advisers should be inserting a clause on any written advice they give, “This advice could be toxic” much as one does when selling cigarettes or other products that could be harmful (in financial parlance) to one’s financial well-being)? Why? Because only when a purchaser has been warned, can he or she rightfully ASSUME THE RISK that the product might be either defective or unsuitable to his or her needs. That’s Law by the way!
Such warnings when shown on packages are not designed to shield sellers who engage in fraud or bad faith dealing by making false or misleading representations about the quality or condition of a particular product. They are there to inform the buyers that they have accepted the risks that have been outlined at face value.
The modern trend in laws protecting consumers has put the onus back on the seller. Although the buyer is still required to make a reasonable inspection of goods upon purchase, increased responsibilities have been placed upon the seller, and the doctrine of caveat venditor "let the seller beware") has become more prevalent. Generally, there is a legal presumption that a seller makes certain warranties unless the buyer and the seller agree otherwise. One such warranty is the implied warranty of merchantability. To be "merchantable", the goods must reasonably conform to an ordinary buyer's expectations.
A seller who is in the business of regularly selling a particular type of goods or services for that matter has still greater responsibilities in dealing with an average customer. A person receiving financial advice for instance is justified in his or her reliance on the expertise of that adviser.
If both the buyer and the seller were negotiating from equal bargaining positions, the doctrine of “caveat emptor” would apply. I put it to you that financial advisers and their clients are not negotiating from equal bargaining positions and your examples are therefore spurious. Financial advice should be about “full disclosure” rather than “let the investor beware”. If the advice financial advisers hand out is not honest and aboveboard, then they are not fit to be financial advisers, pure and simple!
“I think we are the only industry that is even close to transparent.”
After everything that has been written these last three years about Storm and the Banks and the financial advisory sector in general, your claim of transparency is at odds with the facts. For example:
Mr. Scott MCKENSIE – (Vice President of the Australian Investors Association) stated before the PJ-C in 2009:
“We have had four or five years to try to get it right and that has not worked. I can tell you that the layers of fees that exist between the investor and the product manufacturer via the licensee are so many that, even if you disclosed them, all the client would be is shocked; he would not understand it. I am talking about shelf fees and all manner of fees that you would come across. I do not think disclosure is the answer. I think fiduciary responsibility is the answer."
This doesn’t sound like transparency to me?
“ASIC have been shown to be inept even where we can all see open and shut cases that are current.”
No question in my mind that ASIC is a paper tiger. That’s why the financial advisory sector is a mess and so many investors have been shafted. Let’s hope the new regulations brings this sector back in line and people that wish to invest can get a fair go at long last.
“I understand we play with people's money and that is a sensitive area. I just feel that in a lot of ways more compliance won't fix things.”
No, I agree! More compliance is not the answer, but rather effective compliance backed up by regular monitoring, which should identify some of the malefactors. Industry standards and systems of behaviour reinforced by statutory regulations designed to make financial advisers tow the line are a must. “Regulations are for the guidance of wise men and the obedience of knaves!” You must have checks and balances in place or miscreants will continue to take advantage of loose systems. The financial sector has been too loose for far too long, and it needs to be tightened up. The number of lawsuits against financial advisers in the last few years is testament to this.
“Independent audit by industry experts? That works for me. Quality long term well-respected advisers paid by ASIC to review plans (blind, no names) of other firms. They report back to ASIC if they see any flags. That way it is not a pencil pusher ticking boxes, it is someone who gives advice on a daily basis looking over a plan.”
We agree on this too! I have done some work for Government and I can therefore appreciate that industry trained people rather than government automatons are best suited to carry out this work. I also believe that a standard SOA including those aspects that need to be included by all financial advisers should be mandatory. Naturally, the plan itself can differ, but the fundamental principles of sound financial management should be included in order to protect the investor.
“Nothing would have stopped Storm, why, because you change the rules and EC just works out a new way to get around them.”
This suggests that a “Storm” was inevitable and unstoppable. The air of resignation in your tone is somewhat apparent! “We couldn’t do anything because Cassimatis would always find a way of beating the system!” What kind of message does that send out? Not a hopeful one I’m afraid.
To stop any abuse happening within any organization or industry for that matter, you need to look at what is taking place, and then put systems (regulations) in place to fix the “loopholes”. The ‘YOU’ being the people that work within your industry and Government. If you want conformity and discipline in your industry you need to be doing something constructive now to fix the problems rather than complain about the fact that it is all becoming far too hard as some of your postings suggest. After all, you brought these new regulations down on your own heads by not getting it right in the first place! And please, don’t tell me now that all is well with the financial advisory sector. There are thousands of hardship stories out there that tell us differently.
“You put in place the insurance and you increase the cost for everyone in Australia using a planner to save the 3000 people who picked the wrong planner. Harsh but realistic.”
Does “harsh but realistic” apply to the 3000 people that picked the wrong planner by using Storm and those that follow who may do the same thing. By writing “…to save the 3000 people who picked the wrong planner” you make it sound like the financial advisory business is being run like a lottery. “Sorry chaps! Your number didn’t come up today! Please pass ‘GO’ and go straight to the workhouse.” Mind you, 3000 of us would concur with you that finding a decent financial planner is akin to a lottery so I must say on reflection, I agree with you once again.
As for “increasing the cost for everyone in Australia using a planner” if they took out an insurance cover, is this really a problem? Don’t you think that if people are prepared to engage a financial adviser and pay that person fees, they will also be prepared to pay a little extra for an insurance cover to indemnify them against loss if their financial adviser does the wrong thing? We are talking 3000 Storm victims today but what about tomorrow? Can you or anyone else guarantee that another Storm won’t happen all over again? Of course you can’t! From the attitudes expressed by some on this forum, I would say it’s an absolute certainty.
Financial advisers can ‘huff and puff’ all they want, but unless they themselves can up with some answers to reassure would-be investors, they will find it hard going forward to engender investor confidence in an industry that has been rife with shysters. It’s of no importance to the 3000 of us (incidentally I think Storm had some 12,500 investors on its books but we won’t quibble) because we won’t be investing again anyway, but I would have thought that you and others would have had it high on your priorities to get it right. Judging from the remarks by you and others on this forum, you still seem to be blaming the Storm investors rather than the industry. Unless you can change this line of thinking, you don’t have a hope in Hell of getting it right.
It seems to me, and I am echoing HQ again here, that people within the financial sector would have been quite happy to leave everything in place and ignore the Storm’s of this world, treating the victims of such as collateral damage that could not be avoided. Fortunately, those in high places have seen the light even if those in the industry can’t! Bleating will get you nowhere because it’s happening ayway and the 3000 of us say, “Not before blxxdy time!” To leave the financial sector as it was would be to invite further ‘Storms’ on those that decide to place their trust in what has now been proven to be a flawed industry.
“Frank, when you owned the shopping center should every shopper have been provided with a breakdown of the item purchased? What went to the shop, what was actually kept after costs? Should they have had to disclose their markups on the product? Should they have had to disclose if the supplier had promised them a freebie if they sold a certain amount that quarter?”
Your using a shop sale to illustrate your point is, I feel, a poor example because the circumstances are somewhat different. The “shoes” story was not applicable either although it was somewhat amusing. If financial advisers want to stick by the maxim, “Let the buyer beware” as you seem to be advocating in your postings then perhaps financial advisers should be inserting a clause on any written advice they give, “This advice could be toxic” much as one does when selling cigarettes or other products that could be harmful (in financial parlance) to one’s financial well-being)? Why? Because only when a purchaser has been warned, can he or she rightfully ASSUME THE RISK that the product might be either defective or unsuitable to his or her needs. That’s Law by the way!
Such warnings when shown on packages are not designed to shield sellers who engage in fraud or bad faith dealing by making false or misleading representations about the quality or condition of a particular product. They are there to inform the buyers that they have accepted the risks that have been outlined at face value.
The modern trend in laws protecting consumers has put the onus back on the seller. Although the buyer is still required to make a reasonable inspection of goods upon purchase, increased responsibilities have been placed upon the seller, and the doctrine of caveat venditor "let the seller beware") has become more prevalent. Generally, there is a legal presumption that a seller makes certain warranties unless the buyer and the seller agree otherwise. One such warranty is the implied warranty of merchantability. To be "merchantable", the goods must reasonably conform to an ordinary buyer's expectations.
A seller who is in the business of regularly selling a particular type of goods or services for that matter has still greater responsibilities in dealing with an average customer. A person receiving financial advice for instance is justified in his or her reliance on the expertise of that adviser.
If both the buyer and the seller were negotiating from equal bargaining positions, the doctrine of “caveat emptor” would apply. I put it to you that financial advisers and their clients are not negotiating from equal bargaining positions and your examples are therefore spurious. Financial advice should be about “full disclosure” rather than “let the investor beware”. If the advice financial advisers hand out is not honest and aboveboard, then they are not fit to be financial advisers, pure and simple!
“I think we are the only industry that is even close to transparent.”
After everything that has been written these last three years about Storm and the Banks and the financial advisory sector in general, your claim of transparency is at odds with the facts. For example:
Mr. Scott MCKENSIE – (Vice President of the Australian Investors Association) stated before the PJ-C in 2009:
“We have had four or five years to try to get it right and that has not worked. I can tell you that the layers of fees that exist between the investor and the product manufacturer via the licensee are so many that, even if you disclosed them, all the client would be is shocked; he would not understand it. I am talking about shelf fees and all manner of fees that you would come across. I do not think disclosure is the answer. I think fiduciary responsibility is the answer."
This doesn’t sound like transparency to me?
“ASIC have been shown to be inept even where we can all see open and shut cases that are current.”
No question in my mind that ASIC is a paper tiger. That’s why the financial advisory sector is a mess and so many investors have been shafted. Let’s hope the new regulations brings this sector back in line and people that wish to invest can get a fair go at long last.
“I understand we play with people's money and that is a sensitive area. I just feel that in a lot of ways more compliance won't fix things.”
No, I agree! More compliance is not the answer, but rather effective compliance backed up by regular monitoring, which should identify some of the malefactors. Industry standards and systems of behaviour reinforced by statutory regulations designed to make financial advisers tow the line are a must. “Regulations are for the guidance of wise men and the obedience of knaves!” You must have checks and balances in place or miscreants will continue to take advantage of loose systems. The financial sector has been too loose for far too long, and it needs to be tightened up. The number of lawsuits against financial advisers in the last few years is testament to this.
“Independent audit by industry experts? That works for me. Quality long term well-respected advisers paid by ASIC to review plans (blind, no names) of other firms. They report back to ASIC if they see any flags. That way it is not a pencil pusher ticking boxes, it is someone who gives advice on a daily basis looking over a plan.”
We agree on this too! I have done some work for Government and I can therefore appreciate that industry trained people rather than government automatons are best suited to carry out this work. I also believe that a standard SOA including those aspects that need to be included by all financial advisers should be mandatory. Naturally, the plan itself can differ, but the fundamental principles of sound financial management should be included in order to protect the investor.
“Nothing would have stopped Storm, why, because you change the rules and EC just works out a new way to get around them.”
This suggests that a “Storm” was inevitable and unstoppable. The air of resignation in your tone is somewhat apparent! “We couldn’t do anything because Cassimatis would always find a way of beating the system!” What kind of message does that send out? Not a hopeful one I’m afraid.
To stop any abuse happening within any organization or industry for that matter, you need to look at what is taking place, and then put systems (regulations) in place to fix the “loopholes”. The ‘YOU’ being the people that work within your industry and Government. If you want conformity and discipline in your industry you need to be doing something constructive now to fix the problems rather than complain about the fact that it is all becoming far too hard as some of your postings suggest. After all, you brought these new regulations down on your own heads by not getting it right in the first place! And please, don’t tell me now that all is well with the financial advisory sector. There are thousands of hardship stories out there that tell us differently.
“You put in place the insurance and you increase the cost for everyone in Australia using a planner to save the 3000 people who picked the wrong planner. Harsh but realistic.”
Does “harsh but realistic” apply to the 3000 people that picked the wrong planner by using Storm and those that follow who may do the same thing. By writing “…to save the 3000 people who picked the wrong planner” you make it sound like the financial advisory business is being run like a lottery. “Sorry chaps! Your number didn’t come up today! Please pass ‘GO’ and go straight to the workhouse.” Mind you, 3000 of us would concur with you that finding a decent financial planner is akin to a lottery so I must say on reflection, I agree with you once again.
As for “increasing the cost for everyone in Australia using a planner” if they took out an insurance cover, is this really a problem? Don’t you think that if people are prepared to engage a financial adviser and pay that person fees, they will also be prepared to pay a little extra for an insurance cover to indemnify them against loss if their financial adviser does the wrong thing? We are talking 3000 Storm victims today but what about tomorrow? Can you or anyone else guarantee that another Storm won’t happen all over again? Of course you can’t! From the attitudes expressed by some on this forum, I would say it’s an absolute certainty.
Financial advisers can ‘huff and puff’ all they want, but unless they themselves can up with some answers to reassure would-be investors, they will find it hard going forward to engender investor confidence in an industry that has been rife with shysters. It’s of no importance to the 3000 of us (incidentally I think Storm had some 12,500 investors on its books but we won’t quibble) because we won’t be investing again anyway, but I would have thought that you and others would have had it high on your priorities to get it right. Judging from the remarks by you and others on this forum, you still seem to be blaming the Storm investors rather than the industry. Unless you can change this line of thinking, you don’t have a hope in Hell of getting it right.
It seems to me, and I am echoing HQ again here, that people within the financial sector would have been quite happy to leave everything in place and ignore the Storm’s of this world, treating the victims of such as collateral damage that could not be avoided. Fortunately, those in high places have seen the light even if those in the industry can’t! Bleating will get you nowhere because it’s happening ayway and the 3000 of us say, “Not before blxxdy time!” To leave the financial sector as it was would be to invite further ‘Storms’ on those that decide to place their trust in what has now been proven to be a flawed industry.
OMG! I find myself nodding and agreeing with a good deal of what Frank has just posted
For myself, I'd like to see the entire industry move to a "fee for service" basis, and get rid of the commission system entirely. Same for real estate actually. It has always seemed unfair to me that if investor A has 20K and investor B has 500K, and they wind up with basically the same plan and investments, that investor B ends up paying so much more if both cop the same yearly management fee when in reality the amount of work done on each plan wouldn't differ by much. Same with selling properties - there may be more advertising etc on the more upmarket properties, but not enough to warrant the difference in commission most times. I'd love to see a move to a negotiated fee for the service to be offered. IMO it would lead to a much more honest industry as it would remove a lot of the impetus for directing funds to the products that pay a higher commission, or the continual ramping up that storm carried out, and would see planners paid for the service they provide, rather than the product, much the same as accountants. If my tax work takes 10 hours that's what I pay for - not the amount of the refund obtained, or a % of my turnover for the year. You get the point.... To me it denotes the difference between a salesman and a professional. Many years ago I worked for a little while for an insurance salesman, and I was gobsmacked by the trail commission he continued to earn on policies written years before, although he hadn't spoken to the client for years and had no intention of doing so as they were "tapped out". Seems dishonest to me to earn income year after year for a one-off service. Charging a fee for the time spent doing a review of the plan and investments, at mutually agreed upon intervals, seems much fairer imo - much like the mid-year tax planning you pay your accountant for.
For myself, I'd like to see the entire industry move to a "fee for service" basis, and get rid of the commission system entirely. Same for real estate actually. It has always seemed unfair to me that if investor A has 20K and investor B has 500K, and they wind up with basically the same plan and investments, that investor B ends up paying so much more if both cop the same yearly management fee when in reality the amount of work done on each plan wouldn't differ by much. Same with selling properties - there may be more advertising etc on the more upmarket properties, but not enough to warrant the difference in commission most times. I'd love to see a move to a negotiated fee for the service to be offered. IMO it would lead to a much more honest industry as it would remove a lot of the impetus for directing funds to the products that pay a higher commission, or the continual ramping up that storm carried out, and would see planners paid for the service they provide, rather than the product, much the same as accountants. If my tax work takes 10 hours that's what I pay for - not the amount of the refund obtained, or a % of my turnover for the year. You get the point.... To me it denotes the difference between a salesman and a professional. Many years ago I worked for a little while for an insurance salesman, and I was gobsmacked by the trail commission he continued to earn on policies written years before, although he hadn't spoken to the client for years and had no intention of doing so as they were "tapped out". Seems dishonest to me to earn income year after year for a one-off service. Charging a fee for the time spent doing a review of the plan and investments, at mutually agreed upon intervals, seems much fairer imo - much like the mid-year tax planning you pay your accountant for.
Frank
I will answer the lengthy post mainly because I still think you are misleading the forum in a way. I will explain as we go. I will probably also have to do this in a couple of parts.
Why are the circumstances different in the shop example? All through our daily lives we purchase products (in FP the product is advice – pls remember that). Yet in very few industries are their rules that require a breakdown and disclosure of who is getting paid and how they are getting paid. I would like to see any other industry sit back and accept the government telling them how they can charge for their services or at what level is considered acceptable. Would you have accepted the Govt sticking their nose in telling you what level of rent is to be charged on your shopping centre? – or do you feel that free market means that rents will find a level that tenants are willing to pay by comparing to other centres. I worked in retail for many years and know the kind of kickbacks bigger players get from the likes of Coke, Cadbury etc, I can only assume it is the same in clothing. Where is the disclosure that the $70 nike shorts I buy costs the retailer $15 since he bought up extra when the distributor was trying to run the stock out and after costs of running the store he is making bucketloads of money on each transaction.
We already have a stupid amount of disclosures about markets and returns. I know having seen Storm plans they were all there. We sell advice. We don’t control markets or returns. Should the Storm advice had massive flashing red lights on top saying “danger – very high risk”? Absolutely. Since no one else was running this strategy and no one else wiped out their clients I think it can be seen that the bulk of advisers don’t and didn’t consider that strategy low risk.
No advice can be ironclad when markets are involved at any level. I can go and purchase advice from an accountant or a solicitor should I want to buy a business and they can look at the numbers, previous years figures, debt needed to buy it, long term historical interest rates, etc etc and give me advice. Does that guarantee the business will make money? Should they not have “This advice could be toxic” on the front?
RE the warranty paragraph. Again I come back to advice. We sell advice. You were sold bad advice. I don’t know how you get a warranty for bad advice. I have seen shocking advice provided by professionals. Accountants recommending SMSF for clients that don’t understand them and don’t have adequate super balances, business structures that don’t protect the clients and their families, bad estate advice from solicitors, horrible advice from Centrelink professionals. Again I ask why not blanket everyone?
You use the term “full disclosure” , I don’t get what you mean. Do you mean storm should have told you that they looked into the crystal ball saw markets were going to fall and still went ahead with the advice? Markets and economics in general are almost impossible to predict. We say that recently with the treasury (who have the best data available) getting it wrong enough to create a $20 billion hole in the budget estimates in under 12 months. You want a laugh, google market forecasts for any year and see how many “experts” get anywhere near it.
I will split into a new one to save those who don’t care.
I will answer the lengthy post mainly because I still think you are misleading the forum in a way. I will explain as we go. I will probably also have to do this in a couple of parts.
Why are the circumstances different in the shop example? All through our daily lives we purchase products (in FP the product is advice – pls remember that). Yet in very few industries are their rules that require a breakdown and disclosure of who is getting paid and how they are getting paid. I would like to see any other industry sit back and accept the government telling them how they can charge for their services or at what level is considered acceptable. Would you have accepted the Govt sticking their nose in telling you what level of rent is to be charged on your shopping centre? – or do you feel that free market means that rents will find a level that tenants are willing to pay by comparing to other centres. I worked in retail for many years and know the kind of kickbacks bigger players get from the likes of Coke, Cadbury etc, I can only assume it is the same in clothing. Where is the disclosure that the $70 nike shorts I buy costs the retailer $15 since he bought up extra when the distributor was trying to run the stock out and after costs of running the store he is making bucketloads of money on each transaction.
We already have a stupid amount of disclosures about markets and returns. I know having seen Storm plans they were all there. We sell advice. We don’t control markets or returns. Should the Storm advice had massive flashing red lights on top saying “danger – very high risk”? Absolutely. Since no one else was running this strategy and no one else wiped out their clients I think it can be seen that the bulk of advisers don’t and didn’t consider that strategy low risk.
No advice can be ironclad when markets are involved at any level. I can go and purchase advice from an accountant or a solicitor should I want to buy a business and they can look at the numbers, previous years figures, debt needed to buy it, long term historical interest rates, etc etc and give me advice. Does that guarantee the business will make money? Should they not have “This advice could be toxic” on the front?
RE the warranty paragraph. Again I come back to advice. We sell advice. You were sold bad advice. I don’t know how you get a warranty for bad advice. I have seen shocking advice provided by professionals. Accountants recommending SMSF for clients that don’t understand them and don’t have adequate super balances, business structures that don’t protect the clients and their families, bad estate advice from solicitors, horrible advice from Centrelink professionals. Again I ask why not blanket everyone?
You use the term “full disclosure” , I don’t get what you mean. Do you mean storm should have told you that they looked into the crystal ball saw markets were going to fall and still went ahead with the advice? Markets and economics in general are almost impossible to predict. We say that recently with the treasury (who have the best data available) getting it wrong enough to create a $20 billion hole in the budget estimates in under 12 months. You want a laugh, google market forecasts for any year and see how many “experts” get anywhere near it.
I will split into a new one to save those who don’t care.
