Storm Financial Group

[Julia]

What I want to know is how someone can get to retirement age, and have witnessed numerous downturns, corporate collapses and other such stuff over the course of their lives, and STILL decide its a good idea to borrow against their home and put their money in complete and total trust with someone and not think its risky.

Borrowing against a home to buy assets is risky. They knowingly took this risk.

Its a terrible situation to be in but people need to take some responsibility for themselves being in this situation.

I have to agree.

Unless you are telling me that Storm clients were unaware they'd mortgaged/borrowed against their home and were unaware they had margin loans.

Could that be possible? Wouldn't the clients have to be issued with all the financial documentation, sign documents showing amounts involved etc?
I've never had a margin loan so don't know what's involved.

 

[Stormin_Norman]

they would have been advised in those documents to seek solicitor's advice, and may very well have been required to do so.

 

[Smiley]

Good points - but Storm was very slick. They adamantly claimed the approach was safe and glossed over the risks. Clients were told over and over that the investment was safe as they had factored in for all falls, margins were reasonable. I know from personal experience clents were also told that if the market fell their equity would be used to cover mortgages and Storm would not let them end up with any major losses.

Now it all seems very obvious but to people wanting someone to help them improve their financial position and who were naive about the stock market, it was easy to be fooled by their repeated statements of "trust us" as we have been doing this for 35 years (actually much less - 14 years). Supposedly there are support groups of Storm clients who are still behind them. Awhile ago someone commented about the Storm religious/cultish zeal and adamant statements of faith that have fooled many and I have seen it with my own eyes.

 

[-Bevo-]

Remember "The greatest risk is not to do anything" its actually posted on their website, and was a common theme for there TV ads.

 

[awg]

I have to agree.


Could that be possible? Wouldn't the clients have to be issued with all the financial documentation, sign documents showing amounts involved etc?
I've never had a margin loan so don't know what's involved.

No-one has said yet if the margin was managed by Storm. ( in pooled funds)

It seems to me 99% certain it must have been

so you would just have read a Storm PDS and signed on the dotted line.

Seems certain to me that when the **** really hit the fan XAO wise in NOV-DEC, the principles of Storm dropped the ball completely.

However if you read the supposed letter sent by Storm to their customers on 8/10/08, quoted back about post#100, then they have legally covered themselves. ( It advised them to review their position re Margin)

 

[Ijustnewit]

I wonder what the numbers trully are, asic say only 200.... I know personally of 10 people/families affected, friends of mine, and have read about 20 articles of others, surely that must mean the numbers out there we dont know about must be much more..

I mean, if its just these people, bugger me we must have been an unlucky group of friends....

Would anyone be interested in starting a list? no need for names, just initials... I am sure the law firms would be interested to get more accurate numbers...

Great idea !! We are another Storm victim that has lost our life savings after being told the same stories everyone else is posting ... The "WE HAVE BEEN DOING THIS 30 YEARS !YOU CAN'T LOOSE ALL YOUR MONEY ONLY MAKE MONEY SEMINARS" The glossing over of all risks when questioned time after time and being told that we couldn't get out earlier and it was the wrong thing to do and just go away and don't worry it will be allright. Paying through the nose at every step for the fees and advice . Just for those very advisors just to sit on their hands and watch it all go down the shute. As said, we were in constant communication with this lot asking to be moved to safer ground at every drop in the market and the answer was alway "NO!NO!!NO!!! YOU CAN"T LOOSE YOUR MONEY IF THAT HAPPENED THE WHOLE WORLDS STOCK MARKETS WOULD HAVE TO DISAPEAR ect ect"""We'll, were bust and the markets are still there. I hope they locke'm up

 

[basilio]

Good points - but Storm was very slick. They adamantly claimed the approach was safe and glossed over the risks. Clients were told over and over that the investment was safe as they had factored in for all falls, margins were reasonable. I know from personal experience clents were also told that if the market fell their equity would be used to cover mortgages and Storm would not let them end up with any major losses.

Now it all seems very obvious but to people wanting someone to help them improve their financial position and who were naive about the stock market, it was easy to be fooled by their repeated statements of "trust us" as we have been doing this for 35 years (actually much less - 14 years). Supposedly there are support groups of Storm clients who are still behind them. Awhile ago someone commented about the Storm religious/cultish zeal and adamant statements of faith that have fooled many and I have seen it with my own eyes.

Remember "The greatest risk is not to do anything" its actually posted on their website, and was a common theme for there TV ads.

The name of the game in the past 10 years has always been borrowing to build equity. Whether it was buying property (it never goes down...) shares ( the stock market always goes up in the longer term ) or just lifestyle ( get it now).

If enough people are convinced to borrow and "invest" then shares and property will increase - and richly reward the bankers,financial advisors, real estate agents and spiel merchants. In fact there doesn't have to be a real product market or property market in existence as long as enough people are convinced to feed the system. Just ask Madoff.

But it is almost always a bubble. And when it is pricked the most tangible item left is physically real assets that are practically useful (ie live in them, eat them, get energy from them). And of course a mountain of debts.

Storm is just one of the more "successful" operations that convinced people of the certainty of continually rising stock prices and their own credibility. And there are many others.....

Judging by the amount of personal, national and international debt, I fear this bust has a long way to go.

 

[Monario]

Judging by the amount of personal, national and international debt, I fear this bust has a long way to go.

Could not agree more basilio, we are still living well compared to the rest of the world... But it is about to come crumbling down, people who lost their jobs leading up to christmas will be coming to the end of saving by feb. march. People are still losing jobs, so there is simply no work out there..

I know of close to 500 jobs in the engineering consulting game that have vaporised since mid november in brisbane CBD alone, and these jobs were all highly paid positions 175K plus... it wont be long before this trickles down

 

[Jifromoz]

Re: Ignorance

Storm has 13500 clients with only 200 affected.
Not a bad % in this sub prime mess dont you think? Which is quoted from the Asic website and they still have found no problems with storms model.
You guys realy have no idea do you?
Its called fear of the unknown & you dont know nothing about Storm do you?

Mrfmad, you have been quite for a couple of days. Not so happy with Storm now???
The number of affected would be virtually ALL customers that have been stormified. My In-Laws were what I would call unsophisticated investors. They were told by Storm up until mid December that everything was fine. They were always told that they were in a low risk product as that is what they asked for. Then on the 19/12 they came to me with all of their paperwork and asked my opinion (I’m not an FP but am involved in the Finance industry). A $1.1M Margin Loan debt and $1.1M in a CMT. Offset each other and now red but what isn't discussed by some people (Mrfmad included) is that Storm has also arranged for people’s houses to be mortgaged and they still have this debt ($250K) and no income. I can assist my In laws but what about those that are either too embarrassed or don't have someone to help. I feel for them as well. I have done the following to date :

1) Paid out the margin loan (8.5% on margin loan & earning 4% on CMT, didn't take a brain surgeon to work it out - My apologies to brain surgeons) It did take two weeks for them to do it. Asked them to backdate interest and if not then will go to Ombudsman.
2) Organised with CES for Pensions.
3) Sent complaint to ASIC
4) Spoke to the bank involved - not very helpful initially. see later
5) Scanned all of their documentation and burnt to disc ready for whoever needs it (Solicitors, ASIC etc)
6)Spoke to a representative of Storm. Little help and no advice or assistance. Did say that I was very proactive and was doing the right thing.
7) Spoke to Financial Ombudsman Service who said that as amount was above their limit, Storm has to agree. You now have to go via Worrels in this regard. Good luck. They also can't act if Storm are no longer a member and the liquidation may mean this is the case.
8) Spoke to both Firms of solicitors in regard to class action. One won't make a decision at this stage and the other will get back in a day or so.
9) Phoned the bank that has the mortgage and asked for a copy of the documentation signed including the application and Low Doc Declaration.
10) Emailed our Local & Federal Members seeking assistance.
11) Sent a message to FCA Asking :
1) Do you intend taking action against all of the planners that
recommended "Stormifying" retired customers.
2) Now that Storm is in Administration how can affected people get
redress/compensation
3) What should I tell my In-Laws. They were 1st time
unsophisticated investors, They were left a debt of $1+M (Until I
got involved and had the Margin lender payout their margin loan
of $1+M from the $1+ M in a Cash Mgmt Trust - which by the
way was paying significantly less interest than what they were
paying on the loan) with no contact from Storm other than they
were working on it and promptly all went on holidays. They are
left with a house that has a significant mortgage and no income.
I would be interested in your suggestions.
4) The majority of FP's I have spoken to recently have all stated
that they knew of Storm and their practices involving retirees in
particular. Surely some of this would have been leaking back to
your head quarters and starting alarm bells ringing.
5) In my opinion your association and industry has a lot to answer
for in the circumstances.
12) Battle on and make sure the In-laws keep their house safe.

A few areas I will be concentrating on will be :

a) Why hasn’t FPA done anything in the lead up to this.
b) The use of Low Doc Loans for aged pensioners and lodged by Storm direct to the lender (No direct customer contact with the banker).
c) The extraordinarily high Margin loan lending margins AND buffers. The docs I have seen mentioned 85% with 10% buffer!!!! All is just about gone by then.
d) Will Professional Indemnity Insurance cover this and will it be sufficient?

Sorry for the length of the post everyone but it has been building for a couple of weeks now.

 

[Glen48]

I wonder how much this will cost the taxpayer for these victims to be getting a pension for the rest of their days?

If Mr. & Mrs. storm had to put their assets on the line as some sort of security would they have been pushing the same barrow?
Why don't these schemes have to be approved under the trades practice act to make sure every thing claimed is not over the top and is achievable.?
How soon for the next one to show up?

 

[awg]

It is likely there are some satisfied Storm customers.

They would have used this strategy from 2003-Late 08.

Then cashed out!

You would need b*lls of steel or timing, or luck, (like you wanted the money for something else)

or maybe your FP ( or someone else), advised you

I imagine it was not company policy to advise or facilitate exit

Unfortunately many individuals and companies with high leverage are at risk of deficit in the present climate

 

[cuttlefish]

Re: Ignorance

A $1.1M Margin Loan debt and $1.1M in a CMT. Offset each other and now red but what isn't discussed by some people (Mrfmad included) is that Storm has also arranged for people’s houses to be mortgaged and they still have this debt ($250K) and no income.

I'm just curious - what and who switched them from equities to cash and why? Was it Storm reacting to market conditions, or was it the margin lender saying sell the stock now and pay down your margin? (i.e. was the move to cash forced by the margin lender or was it part of Storms 'strategy'?).

 

[drsmith]

Re: Ignorance

A $1.1M Margin Loan debt and $1.1M in a CMT.

I can remember an investment advisor trying to flog this sort of structure back in 1991.

 

[Duckman#72]

Re: Ignorance

I'm just curious - what and who switched them from equities to cash and why? Was it Storm reacting to market conditions, or was it the margin lender saying sell the stock now and pay down your margin? (i.e. was the move to cash forced by the margin lender or was it part of Storms 'strategy'?).

Hi Cuttlefish

This is part of the problem. The people I know that were involved with Storm were comfortable with the level of debt and also the concept of investing in the sharemarket. Unfortunately they were given "assurances", rather unrealistically, that they had a special arrangements with the underlying financiers (CBA and Macquarie) and the investments wouldn't be sold.

As it turned out Storm is now saying that CBA and Macquarie reniged on the deal and sold out the investments regardless.

Someone asked why clients didn't sell when they were in front. Three reasons. Firstly - Storm don't make money from clients holding cash!!! They wouldn't advise that (problem with a lot of financial planners). Secondly - greed. When things are going well, it is hard to sell. Thirdly, the whole basis of the Storm methodology was to NOT PAY OFF DEBT. I have been to a presentation and heard Storm planners say "Just because you retire, why should your money? Make it keep working for you."

Duckman

 

[Smiley]

Re: Ignorance

Mrfmad, you have been quite for a couple of days. Not so happy with Storm now???
The number of affected would be virtually ALL customers that have been stormified.
You are spot on . . . Storm talked anyone out of leaving who tried - I wanted to get equity out to dover home mortgage and they would not do. They steam roll you if you try.
Thanks for the list of your actions as am doing many of the same myself.
Many investors were called up or written to about turning equity into cash - up to 100% (in other words selling your stocks). I got rid of all of the margin loan practically though have a small amount in the market. I had paid ahead at 9.19% and was earning 4% less on hundreds of thousands.
I repeat they were adamant that it was safe and that no one could lose money!
Yes where is ASIC and the FPA - latter have just brought in a code of ethics - I think the first edict is something about the clients's interests coming first - oh yes!

 

[Monario]

Re: Ignorance

Hi Cuttlefish

This is part of the problem. The people I know that were involved with Storm were comfortable with the level of debt and also the concept of investing in the sharemarket. Unfortunately they were given "assurances", rather unrealistically, that they had a special arrangements with the underlying financiers (CBA and Macquarie) and the investments wouldn't be sold.

As it turned out Storm is now saying that CBA and Macquarie reniged on the deal and sold out the investments regardless.

Someone asked why clients didn't sell when they were in front. Three reasons. Firstly - Storm don't make money from clients holding cash!!! They wouldn't advise that (problem with a lot of financial planners). Secondly - greed. When things are going well, it is hard to sell. Thirdly, the whole basis of the Storm methodology was to NOT PAY OFF DEBT. I have been to a presentation and heard Storm planners say "Just because you retire, why should your money? Make it keep working for you."

Duckman

Spot on Duckman, not sure when you attended seminars but perhaps you heard such statements as, DEBT CREATES WEALTH, and, PAYING THE PRINCIPAL REDUCES YOUR CAPITAL POOL.

I am a young investor, started with storm when I was 23, now 30, and have nothing to show for all those years except a debt....

Sadly it has only been in recent years I have begun to get an understanding of when,where,how and why to invest.. I along with my parents had very little knoweldge, actually none, when I started with storm... I guess it is my fault for not knowing what I was getting into, but I was paying good money to have them manage my portfolio, as were all the others who have been stung...

The majority of people I know who were with them, were also like myself, had very little if no knowledge of investments..

I now feel as though I could self manage my own investments from what I have learned, sure I may not make gains as I did with storm but I certainly wont make losses like I had with them, and my fees will be minimal by comparison, I just feel sorry for the retirees, time is on my side, not so for them...

 

[Gerkin]

Re: Ignorance

Yes where is ASIC and the FPA - latter have just brought in a code of ethics - I think the first edict is something about the clients's interests coming first - oh yes![/QUOTE]

The FPA job is not to enforce legislation, thats the role of ASIC, APRA and FICS, Remember the Adviser and the AFLS holder Storm are resposible, ironically its also upto Storm to audit there advisers each year, no independence there.

 

[Monario]

Hey GG what is your opinion on what service a financial advisor should offer clients? And do you use an advisor?

I asked on many occasions for advice on buying a house, to which the only reply I recieved is we will not support you in that endevour, buying a house will be bad for your financial future.

I also asked about any advice on starting a business or who to talk to.

About the ways to diversify my portfolio to minimise the impact of potential falls in stocks..

The only advice I recieved was on the products they offered, should'nt a advisor give advice on all asepcts of finance?

P.S..... I bought my house, thank christ I did, I went against their advice, it was the only thing I did while invested with strom that actually worked!

 

[Solly]

Here's a story by Michael West from The Age

http://business.theage.com.au/business/legal-storm-brewing-20090113-7fv1.html

" Steve Reynolds is a war veteran on a pension, ''totally and permanently incapacitated as a result of the Vietnam War'', yet Storm Financial Group managed to provide him with a large mortgage over his home to punt on the stock market.

Before acting on Storm's advice to ''optimise'' his personal balance sheet, Reynolds owned a home in Townsville valued at $600,000, a car, some furniture and $250,000 in investments.

He took a mortgage over his home via Bank of Queensland and a margin loan via Macquarie and now he owes $420,000 to the Bank of Queensland and is likely to go on the road and live in his van......."

And...

"If there is evidence of wrongdoing on the part of Storm and its advisors then plaintiff lawyers, such as Slater & Gordon (which has interest in an action from 230 Storm clients), will endeavour to join the banks in a lawsuit as Storm's insurers will claim their contracts are void."

Read the whole story, it has scared the hell out of me .......

Many questions.... How could this ever happen? :dunno:

 

[cuttlefish]

From the article:

Even more intriguing is how the Bank of Queensland could sign off on his $360,000 loan whose documentation recorded Reynolds' income as $100,000 ... etc ....

"His credit applications, recording a false income, were handled by Storm."


It would be interesting to see what went on here. My view is that unless Storm committed actual fraud by signing documents for him, Mr Reynolds is likely to have signed a statutory declaration stating that he earnt $100k a year.

The article also states he got $800/week from a disability pension and $30k a year from a service pension, and also owned his home and $250k of other assets - which would likely have been producing additional income as well. It is more than possible he actually was earning close to $100k a year based on those figures. But we can't know the truth of it.

(sometimes the media just irritates me doing the heartstrings BS).


What this does show is we are starting to see the evidence of an Australian 'sub prime' type of scenario - where low doc loans were used to give equity loans to people based on questionable valuations and misleading income statements to invest in 'get rich quick' investment schemes.


But what a cr*pper for the bloke (Steve Reynolds) regardless.
"and Townsville lined the footpaths as we marched down to the quay.
the clipping from the paper shows us young and strong and clean
and there's me in me slouch hat with me SLR and a green's ..."