Storm Financial Group

[SJG1974]

Your subsequent revelation that the fee was charged on the geared up amount and again when that gearing was increased blows me away. I'd imagined it was charged just the once on the initial amount the client brought in

Thats the bit that gets me too Julia.

From what I read in the PJC submissions, every time Storm went to the client to increase the gearing, whether that be due to the LVR on the margin loan getting "too low" when the market was rising, to revaluing the house and taking more debt against it, they charged their 7% on the new gearing. Increase the house loan by $100,000, charge the client $7,000.

If that isn't an inducement for the Storm advisers to gear clients up as far as they possibly can, I don't know what is!

And the reality with the fees is that the clients invested in perhaps 3 products- all index funds. There was nothing really to manage, other than when to get in and out of the market. And as we have seen via the "research" commentary, they painted this bright picture of the world based on statistical gobbledegook to support their decision to keep investors in the market right till the very end.

There was no management of the clients' asset allocation, no ongoing strategic advice (other than recommending to gear up more). They even admitted they didn't look at clients' portfolios and their LVRs outside of the client reviews.

These people weren't financial advisers, they were ticket clippers, just looking at any way they could go the client for more fees.

Thats why the fees were ludicrous- they were charged on a geared up amount, they locked the client into the strategy over the long term, and basically the advisers did next to nothing to manage the clients portfolios.

Its like anything, its not the money itself, its what you get for it. And the strategy was very simple in reality. Storm may have compared their fees to others and said over time they are cheaper, but others wouldn't have kept clipping the tickets all the way through, others wouldn't have geared clients up to the hilt, thereby increasing fees, and others would have actually provided some financial advice for the fees they paid. Any way you look at it, it was a massive fee grab.

 

[doobsy]

Good point. But if the sales pitch from Storm had already persuaded clients to take up the proposed ultra risky strategy, and have them accept that they're in it for an extended time, it's hardly a stretch to persuade them that it's cheaper to pay one fee up front rather than ongoing annual fees.

Your subsequent revelation that the fee was charged on the geared up amount and again when that gearing was increased blows me away. I'd imagined it was charged just the once on the initial amount the client brought in

I wouldn't either, for anything. But, as above, if clients had been inspired to place so much trust in Storm that they accepted the strategy, I can see that such trust could extend to paying fees in advance (well, if it were just on the initial amount anyway).



I've already asked this and Doobsy hasn't divulged same. That's fair enough.
I expect it varies considerably according to individual circumstances.
I'd still be interested in a ball park figure, though, Doobsy.

Happy to divulge. $275. That covers us for the 2-3 hours of face to face time and the 4-5 hours behind the scenes research. We also feel that any advice is done for the right reasons. I understand that this might mean it is an expensive process to see a few planners but if we can't help someone beyond that initial point then we have been re-imbursed.

As a follow on - when might that be? When someone is paying off their home, wanted to check they are doing the right thing and they are - no advice needed. When someone comes in with debts and there is no need to add extra fees to their situation is another scenario. They just need to be told they are on the right track.

On the free quote - we tried it and found people were doing 2 things - 1 trolling advisers hoping to get enough information that they could then do it themselves and 2, people looking to waste your time by not being serious about providing good information so we could actually assess them properly. It is amazing how much more information and how much earlier we get that back before the appointment when there is a fee involved. People take it more seriously. As a result we aren't wasting time and that time can be spent on clients who are paying us.

 

[Mash]

"Your subsequent revelation that the fee was charged on the geared up amount and again when that gearing was increased blows me away. I'd imagined it was charged just the once on the initial amount the client brought in"

This is where the UMIS comes into it...... the banks knew they had easy access to the punters to continually gear up ..... that is why the banks were falling over themselves to do whatever it took join in the venture with Storm...great for their bottom line.... Do you get it yet !!!!
This was not just a crappy advisor: this was the banks rubbing their hands together and jumping into bed with the crappy advisor and backing the crap advice all the way.

 

[Igetit]

"Your subsequent revelation that the fee was charged on the geared up amount and again when that gearing was increased blows me away. I'd imagined it was charged just the once on the initial amount the client brought in"

This is where the UMIS comes into it...... the banks knew they had easy access to the punters to continually gear up ..... that is why the banks were falling over themselves to do whatever it took join in the venture with Storm...great for their bottom line.... Do you get it yet !!!!
This was not just a crappy advisor: this was the banks rubbing their hands together and jumping into bed with the crappy advisor and backing the crap advice all the way.

You are on to something there Mash. There are a variety of other connections between the two relevant parties; they require a little research to discover. They will be though. Slowly the penny falls. Rest assured, it will hit the ground. Sooner than you may think.

 

[SJG1974]

"Your subsequent revelation that the fee was charged on the geared up amount and again when that gearing was increased blows me away. I'd imagined it was charged just the once on the initial amount the client brought in"

This is where the UMIS comes into it...... the banks knew they had easy access to the punters to continually gear up ..... that is why the banks were falling over themselves to do whatever it took join in the venture with Storm...great for their bottom line.... Do you get it yet !!!!
This was not just a crappy advisor: this was the banks rubbing their hands together and jumping into bed with the crappy advisor and backing the crap advice all the way.

And a crappy adviser being backed by the banks requires clients who will go along for the ride to make it all work. No clients = no crappy advice.

Forget the legal stuff for a moment- that will sort itself out in court. Some around here, such as me, are interested in more than just the legalities.

You have been asked this question by Solly but didn't respond, so I would like to ask again in a different way- when presented with this strategy which you were prepared to pay through the nose for, how risky did you think it was?

And secondly, when Storm kept coming back and asking you to gear up further, did you ever question it, or consider the risk, or did you just do whatever it was that they told you and believe everything they said?

This isn't a witch hunt, or a criticism. I am just interested in people's mindsets when they agreed to take on this strategy.

Because at the end of the day, none of this would have happened if there weren't willing participants (i.e. people like you) to follow the advice. I am interested in how they sold this to you, and how anyone could think that double gearing, and doing it over and over and over and over again is not highly risky?

 

[Mash]

NO . I have no intentions of being subjected to your interrogations. I have answered these questions in Federal Court and am not prepared to be grilled on this forum again. I am not under investigation. You may be happy to forget the legal stuff but I am not. Not a witch hunt. BS

 

[SJG1974]

NO . I have no intentions of being subjected to your interrogations. I have answered these questions in Federal Court and am not prepared to be grilled on this forum again. I am not under investigation. You may be happy to forget the legal stuff but I am not. Not a witch hunt. BS

Interrogations? Simple questions they were. Still, no skin off my nose if you can't bring yourself to answer them.

Not the first time you have overreacted to a post on the forum, and I am sure it won't be the last.

 

[Mash]

Can't handle a knock back hey SJG.. suck it up sunshine !

 

[Frank Ainslie]

Bad financial advice and misleading and deceptive conduct are not one and the same thing!

There are some posters on this forum that still cannot differentiate between “bad advice” and “misleading and deceptive conduct” and, as a consequence, they are failing to understand what lies at the heart of our case against Storm and the Banks.

From time to time it is understandable that some financial advisers will give advice that turns out to be bad advice in hindsight. After all, the share market is prone to be unpredictable and financial advisers cannot be expected to be fortune tellers. If the investors concerned knowingly accepted the risks and the financial advisers acted in good faith, then there can be no argument.

However, the way some of the Storm financial advisers acted at the behest of the Cassimatises could in no way be described as acting in good faith or aboveboard. That’s why Cassimatis has been fined and thrown out of the FPA and ASIC (and our lawyers) are now pursuing him through the Courts.

Certainly, the advice that Storm gave its clients was legitimate advice in the sense that it was permitted under the regulations. Where it changed from straight-out financial advice to dishonest advice was when it became misleading and deceptive, and was contrary to the wishes of Storm’s clients. Storm is now in the dock because the advice it gave to many investors was dishonest and harmful to those clients. The Banks are in the dock because they operated a co-operative in conjunction with Storm that gave support to Storm’s underhanded strategy of using investors’ assets to further its own ends. Such a policy suited the Banks because it promoted their bottom lines as well.

This is therefore not about “bad advice” but rather about “deception” which is just another name for fraud.

What is misleading & deceptive advice or conduct if you like?

“There is a very broad provision in the Australian Consumer Law that prohibits conduct by a corporation that is misleading or deceptive, or would be likely to mislead or deceive you.

It makes no difference whether the business intended to mislead or deceive you””it is how the conduct of the business affected your thoughts and beliefs that matter.

If the overall impression left by an advertisement, promotion, quotation, statement or other representation made by a business creates a misleading impression in your mind””such as to the price, value or the quality of any goods and services””then the conduct is likely to breach the law.

Whether or not conduct is considered misleading or deceptive will depend on the particular circumstances of each case.

The Australian Securities and Investment Commission (ASIC) is the consumer protection regulator for financial products and services. ASIC has powers to protect consumers against misleading or deceptive and unconscionable conduct affecting all financial products and services.”

If the actions now brought by ASIC against Storm and the Banks, the ‘Worrells’ enquiry outcome, the PJ-C hearings, the FPA findings and the revelations in the Media is not proof of their complicity and wrongdoing, what will it take to convince some people that many of Storm’s investors were well and truly shafted?

Our Storm financial adviser, Stuart Drummond, has already been charged with misleading and deceptive conduct as well as other charges under the Corporations Act. The Cassimatises have been charged with the same thing. Therefore, it should be obvious even to the most obtuse members of this forum that “bad advice” is not the issue here – misrepresentation by Storm that deceived it clientele into believing their assets were safe and had been invested as they requested at “low risk” with safe-guards in place is what this is really all about. Storm lied to us and therefore any advice it gave to many of its clients was tainted and deceptive.

The members on this forum that harp on about the ‘Stormies’ accepting bad advice in the beginning and, by so doing, contributing to their own downfall later are missing the essential truth. Remember what I said in my previous posting, “A person receiving financial advice is justified in his or her reliance on the expertise of that adviser.” The onus is not on the person who receives the advice and relies on such, but rather the person giving it.

The proposition (labored on this forum infinitum) that people not schooled in investing should still be able to discern good advice from bad is not the issue here and never has been. The Storm investors were quite entitled to place reliance on the advice their Storm financial advisers gave them. Their state of mind when so doing is immaterial. They placed their trust in people that professed to be financial advisers, and Storm’s clients therefore had no reason to doubt that the advice they were given was sound financial advice. After all, that’s what they were paying for! However, more importantly, that advice needed to be honest and it wasn't! In other words, "Storm put their own interests first!"That is enough to satisfy any Court so it should also be good enough for anyone else! If it isn’t, that’s your problem. We don’t intend to make it ours!

So, I say, let some common-sense prevail and get off the topic of “bad advice” because it really is a non-issue where Storm and the Banks are concerned. This case is about conduct unbecoming both by Storm and the Banks involved with that advisory firm who formed an alliance to churn money out of Storm’s clients (who just so happened to be the Banks’ customers as well).

As I have stated previously, there is nothing clear-cut about this case. It has moved beyond the simple concept of poor advice and the impact of the global financial crisis into the realm of double-dealing (rather than double-gearing), and the sucking of money out of Storm’s clients for the benefit of Storm and the Banks.

Why the Banks, some have asked when Storm misled us in the first place? There are two reasons for this:

(1) Because the Banks became partners with Storm (ASIC has accused them of being linked creditors among other things) and they dangled the carrots, they must now suffer the consequences. The Banks’ relationships with Storm were no “arm’s length” affairs but rather full-blown love affairs where their mutual attraction was one of greed. This will be borne out when all the facts are known. When one partner in a business relationship goes out of business, the other partner becomes liable. That’s the way the Law works! When it works, that is!

(2) People tend to forget that we had separate contracts with Banks that were significantly affected by the arrangements between Storm and the Banks. This led to breaches of contract that are now the subject of our lawsuits. Storm was not a party to any contracts we had with Banks so it had no right to interfere in those contractual arrangements. The Banks will, of course, argue otherwise – we expect that!

So this whole issue is not about “bad avice” but rather about fraud. If people understand this, then they will be able to see the big picture rather than be confined to watching the trailers.

 

[doobsy]

Frank

You make many valid points in there but I still do not agree that you should be allowed possibly the biggest handball of responsibility I have ever seen.

Storm SOA's fully disclosed the advice they were giving and the products.

CML margin loan statements fully disclosed current and allowable LVR's on at least a quarterly basis.

It was all there but it was sold differently, glossed over, whatever. If everyone took that approach to life that you can just claim "i didn't know", "I wasn't told", "I didn't understand", "I thought that meant something else" then where would we be?

If I buy a car that can go 200km/h and the saleman tells me it is safe to go that fast in that car, he might truly believe that based on testing provided by the manufacturer. Does that mean I should drive that fast? If I do drive that fast and crash, who's fault is that?

I see the deception as how Storm downplayed the risk involved. I wonder whether if markets had experienced a 10% correction before heading on to 7500 points, would you be on here telling everyone what a wonderful caring firm they are and how well the strategy has done? How the extra LVR meant you were even better protected than the average margin loan customer. I guess context is everything.

 

[Solly]

Doco looks at collapse of Storm Financial

Audio and transcript from ABC AM with Tony Eastley.

http://www.abc.net.au/am/content/2011/s3386283.htm
(Audio begins at minus 08:11)


Doco details Storm Financial collapse

http://www.abc.net.au/news/2011-12-08/doco-details-storm-financial-collapse/3719568?section=qld

 

[Tyler Durden]

Anyone know where we can watch this?

 

[Frank Ainslie]

Frank

You make many valid points in there but I still do not agree that you should be allowed possibly the biggest handball of responsibility I have ever seen.

Storm SOA's fully disclosed the advice they were giving and the products.

CML margin loan statements fully disclosed current and allowable LVR's on at least a quarterly basis.

It was all there but it was sold differently, glossed over, whatever. If everyone took that approach to life that you can just claim "i didn't know", "I wasn't told", "I didn't understand", "I thought that meant something else" then where would we be?

If I buy a car that can go 200km/h and the saleman tells me it is safe to go that fast in that car, he might truly believe that based on testing provided by the manufacturer. Does that mean I should drive that fast? If I do drive that fast and crash, who's fault is that?

I see the deception as how Storm downplayed the risk involved. I wonder whether if markets had experienced a 10% correction before heading on to 7500 points, would you be on here telling everyone what a wonderful caring firm they are and how well the strategy has done? How the extra LVR meant you were even better protected than the average margin loan customer. I guess context is everything.

Doobsy,

What part of the following statement do you still not understand?

“A former authorised representative of Storm Financial Ltd has been banned from providing financial services for four years after an ASIC investigation found he made false and misleading statements and provided inappropriate advice to a number of his clients.

ASIC’s investigation found that:

* Mr Drummond failed to comply with financial services laws in relation to advice he provided to a number of his clients between October 2004 and July 2008.
* Mr Drummond: made false and misleading statements in breach of s1041E of the Corporations Act 2001,
* engaged in misleading and deceptive conduct under s1041H of the Corporations Act 2001,
*promoted the Storm strategy without considering the suitability of the strategy for individual clients,
* provided Statements of Advice and Statements of Additional Advice containing misleading and deceptive information in order to induce them to invest using the Storm strategy,
* and didn’t have an understanding of the nature and risks of financial products recommended on the basis of the Storm strategy.”

Yet, you now state that, “I see the deception as how Storm downplayed the risk involved.” Are you kidding me or what? Are you trying to tell me that this type of behaviour is the norm for a financial adviser? If so, God help anyone that decides to employ a financial adviser in the future because no one else will!

You ended by saying, "I guess context is everything!" No, context is not everything – truth is! You are now trying to defend the indefensible when the facts are undeniable.

Drummond was just one of a number of Storm advisers that promoted the Cassimatis philosophy for all it was worth. In so doing, they crossed the line between advice and deception and they will be paying the price. Drummond already has!

As I have already spelled out, the law is very clear on this issue and I suggest you read up on it.

You have consistently adopted a stance on these issues based on normal conduct. What Storm did was malpractice in anyone’s book. To now try and justify it as you are doing is incomprehensible. I suggest you have another think about this because your line of thinking at the moment has no bearing on what actually occurred.

 

[Solly]

Hi Frank

Are you aware of any actions against any other former Storm advisers ?

I wonder if there are any others who it could be proven also provided Statements of Advice and Statements of Additional Advice containing misleading and deceptive information ?

S

 

[SJG1974]

I still can't get my head around just how people went into this without thinking it was risky. It blows me away quite frankly. I can sort of understand the elderly and frail being sucked in, but we have had people post on this forum who have been very very successful (and have taken delight in letting us know this) and obviously still have their wits about them who should have known better.

Successful business people who I am sure had used debt previously suddenly for whatever reason thought that loading up on debt and plunging it on the stockmarket was safe? Safer than an allocated pension? How could this be?

The strategy was so ridiculously simple. It was easy to follow, particularly for these successful people. And people were happy to follow it until the **** inevitably hit the fan. Like continually loading up on red on the roulette wheel, black was going to come up eventually and the good times would end.

So because Storm said it was safe, that made it so? Misrepresentation, fraud or not, where the hell was common sense in all of this...did Stuart Drummond strip these people of that too?

If I say it is safe to jump out of a plane without a parachute, do people do it, or will they only do it if I am backed by the PJA (Plane Jumpers Association)?

If there is anything positive to come out of this then perhaps it is that more people weren't sucked in, given 8 out of every 10 people who went to Storm did have common sense and used it to walk away. Thank god these people didn't hand that over to Storm as well as their life savings.

 

[DocK]

I still can't get my head around .......

We get it already! You don't get it, you can't believe it, you can't comprehend it, etc etc etc.

You've been posting more or less the same comments for a couple of years now - I think we all know your views, although I do wonder about your agenda? Whenever some decorum starts to appear in this thread, or some genuine discussion, along comes one of your repetitive, inflammatory posts. Seems you joined ASF only to post the same comments endlessly on one thread. Personally, I'm getting bored by your posts - by all means continue to beat the same drum, but in the interests of entertainment - could you try some variety? Please??? Otherwise, maybe save yourself some time and just copy and paste your prior posts

 

[SJG1974]

We get it already! You don't get it, you can't believe it, you can't comprehend it, etc etc etc.

You've been posting more or less the same comments for a couple of years now - I think we all know your views, although I do wonder about your agenda? Whenever some decorum starts to appear in this thread, or some genuine discussion, along comes one of your repetitive, inflammatory posts. Seems you joined ASF only to post the same comments endlessly on one thread. Personally, I'm getting bored by your posts - by all means continue to beat the same drum, but in the interests of entertainment - could you try some variety? Please??? Otherwise, maybe save yourself some time and just copy and paste your prior posts

Fair enough.

I have no agenda, that I can guarantee you. Interested onlooker, nothing more. No ties to anyone even remotely involved in this. I am an investor, and interested in the psychology of investing, amongst other things.

This topic for some reason is fascinating to me. The whole sorry saga. And it clearly has divided people. It provides a good look into the human psyche...how people can be taken in by the words and representations of another even though logic would suggest that the risks were too high. And of course the legalities of it all. And greed by different parties. And passing the buck by different parties. And then the way people do and don't take responsibility for their choices. And people from all sides of the fence throwing their two bob's worth in.

It has it all.

 

[doobsy]

Frank, I am not trying to justify anything Storm or it's advisers did. Myself and others have been vocal in our criticism at a local level well before they got their grubby hands on your money.

What I am not willing to accept is that any client can wipe their hands of all responsibility.

Stuart Drummond provided inappropriate advice - we all agree. Lets put that to bed. So logically he should pay a price. And he has - he is no longer able to work in the industry. I am not sure on the situation with PI cover but I would expect that they should pay something to cover this fact.

I can't for the life of me see how you have managed to get from my OPINION on the deception to "Are you trying to tell me that this type of behaviour is the norm for a financial adviser? If so, God help anyone that decides to employ a financial adviser in the future because no one else will!"

WTF? I read and I read again and I don't see where you have found the connection.

My point was from a person walking into a financial planning firm, Storm undertook a good fact finding process so therefore that wasn't the problem. The problem was the blatent - what is it - false and misleading statements and inapporpriate advice.

Now I am on record on my opinion on the inappropriateness of the strategy so I don't need to justify myself there, the false and misleading statements I am guessing was about how safe the investment strategy was - is that NOT WHAT I SAID? They downplayed risk!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

My other point was that maybe they truly believed. Line up 10 economists and you get 10 different opinions. CommSec had a target for the all ord at the start of the year of 5400 points. They look like missing that by almost 25%. People would have read that newsletter and made decisions based on that becuase they are supposed "experts" Should they all be in jail?

Maybe Stuart Drummond looked at the world economy, looked at China, looked at India, looked at the mining boom, looked at low unemployment and made a decision that markets wouldn't tank, that they might correct but not tank. Truly believing that he made decisions for his clients and offered advice that he thought would provide the best possible outcome over a reasonable time period. I personally know ex Storm planners, one or two I think did believe they were doing the right thing. They just believed too much in the information from Storm HQ - along with everyone else. You mention Jellich a while back, he is a good example of someone who is gutted that his decisions have cost his clients and himself so much.

Then again, maybe he took one look, saw a chance to make over $100K in feesd for Storm which would result in a nice monthly bonus of over $10K for him and screwed you Frank.

I am just adding a bit of devil's advocate to the forum with opinions from the darkside. We can't all just listen to the ranting of someone who has had their future happiness taken away.

 

[Frank Ainslie]

Hi Frank

Are you aware of any actions against any other former Storm advisers ?

I wonder if there are any others who it could be proven also provided Statements of Advice and Statements of Additional Advice containing misleading and deceptive information ?

S

Hi Solly,

I believe the FPA has ousted a few but I haven’t heard about ASIC acting against anyone else at this stage!

I made it a personal thing to go after Drummond because he lied to us at the outset. I believe that it was my endeavours together with others that submitted evidence against him that led to ASIC taking the action it did. I also believe that ASIC will only act against other Storm advisers if it has received enough complaints about any one Storm adviser from the Stormies themselves. I do not believe ASIC has either the resources or the will to look at each individual Storm adviser unless a 'prima facie' case has been presented to ASIC.

Actually your question is an interesting one in terms of the 'Statements of Advice' and 'Statements of Additional Advice' containing misleading and deceptive information. Who ultimately should be responsible for this deception because most Storm financial advisers were working off a Storm template? If you look at the charges against Drummond, you could equally apply them to most of Storm's financial advisers. If Drummond has now been drummed out (there’s a pun there somewhere) why should the rest escape the net? Then, is it fair to condemn them all for the sins of some? I guess it will probably come down to the degree of culpability in the end and the weight of evidence against any one individual.

Drummond acted at times in an unconscionable way which may not be the case with many of the other Storm financial advisers. One that springs to mind is Ron Jelich whom, I believe, genuinely thought he was acting in the best interests of his clients when he joined Storm. His actions ever since to obtain restitution for the people that he brought to Storm has been commendable. Therefore, I think a line needs to be drawn between those that openly deceived their Storm clients and those that thought they were doing the right thing. How one differentiates, however, is beyond me.

 

[Solly]

"Storm clients have last laugh

YOU may have seen the Smash Me Manny doll. Now the destitute former investors of Emmanuel Cassimatis's Storm Financial have produced the "Piggy Banks" Christmas card and a soon to be released Piggy Banks television documentary."

More from Tony Raggatt @ townsvillebulletin.com.au