I've been following this thread from the beginning, but haven't posted as I have no interest in being labelled by some of the posters who quite often leap to conclusions. My main source of irritation is being called "greedy" for investing via Storm in the first place.
We are in our mid-forties, are self-employed, have worked hard all of our lives and paid our taxes, and those of the staff we employ. We stupidly decided to use the equity tied up in our home to provide future capital growth that we intended to use for our children's education, some much-needed home improvements, and to be independant upon retirement. It seems there are some on this forum that regard anyone who tries to better their situation as "greedy". We don't take lavish holidays, we live frugally, we earn modest salaries from our business, but we "greedily" wanted to acheive financial security by investing in what we thought was a moderately risky investment - an index fund. We were aware that borrowing against our home added to the risk, and we were prepared to take that risk - we have another 15 to 20 years of working lives ahead of us. We don't blame anyone for that decision, and it is one that many people our age have made - not just those invested through Storm. I understand that it is common for financial advisers to recommend borrowing against equity in the family home - for clients of our age. Our level of gearing on our margin loan was 35% prior to the market turning down, and never exceeded 70%. We did not receive a margin call, and had cash reserves available to reduce our margin loan in the event it was necessary. We don't "blame" Storm or the banks for our losses in the market - hopefully there will be a future recovery and our remaining investment will grow in time.
We do however lay blame where we feel it is deserved. Firstly at ourselves for trusting in financial planners to have our best interests at heart. Hindsight is a wonderful thing, and we were guilty of being gullible and naive. It is clear now that we were paying way too much for what was basically a simple product, and being used as "cash cows" for the benefit of Storm's directors and advisors. Dollar cost averaging is a strategy put forward by some and criticised by others, and making further small investments as the market dropped was portrayed to us as a way of recouping losses faster when the market eventually turned upwards again, than if we just sat and held. Smart choice? Again - hindsight tells the story, but neither our advisor (clearly) or ourselves thought the market would drop as much as it did. Where we did do the right thing though, was in ensuring our margin loan lvr remained below 50% - that's probably all that saved us. I feel for those that tried to cash out and were prevented. We are computer "savvy" and were checking on our margin loan status daily (although the investment values from Challenger were always a few days behind) but I don't think it's unreasonable that a lot of the older, less computer-literate people trusted in their highly paid advisors to do this for them.
Secondly, I do lay some blame on the CBA. Yes we were aware that we willingly borrowed from them and would have to pay them back. I'm not sure if our financial position was "enhanced" by Storm employees along the way - and don't really feel that it matters as we were happy to accept the loan made to us. However, our initial loan was based upon a valuation carried out by a licenced valuer and we were comfortable at the level of equity we retained in our home. Had we known that the CBA carried out a desk-top valuation on our home from several thousand km away and then provided that information to Storm with the sole purpose of enabling both organisations to profit from further borrowings - we would not have increased our loan when we did. No doubt some posters will say we should have conducted our own valuation on our home, we had no idea that the CBA had not conducted a proper valuation and accepted that the increased value stated was realistic. Our area had been growing in value and as we had no intention of selling we weren't up-to-the-minute on house values in our suburb. We do feel that the CBA and Storm were putting their own interests ahead of their clients and were quite clearly operating as a joint venture in this regard - and it was not made known to us. As already stated, it must be clear to the CBA's legal people that they have a case to answer or the deals being offered would not be forthcoming. Nothing will convince me that a bank really cares about any hardship endured by its clients - and I don't really know that it should (I'm still a shareholder too!) Banks do care about PR though, and it's now obvious that shoddy lending practices were occurring.
Thirdly, not particularly happpy the Macquarie insisted that their margin loan be repaid, even though it was well within acceptable lvr. This necessitated breaking a pre-paid interest period and consequent break costs.
A very valuable lesson has been learned - although at a fairly high price. Unfortunately the whole experience has left us cynical and distrustful of almost everyone - not the type of person I wanted to be. There are some posters who pride themselves on being much more financially knowledgeable than a lot of the retired clients of Storm, and are quick to disparage them for being so uneducated about their own finances. I think it's a shame that some of our older Aussies who have lived their lives honestly have had to learn the hard way not to expect the same treatment from others. How much research is reasonable? Can I accept the word of my doctor and dentist but not by financial planner? Should I get a degree in accountancy so I can double-check the work my accountant does on our tax returns? Yes, we are all responsible for our own decisions, and again hind-sight proves that you trust others at your own peril - but a lot of Storm's ex-clients (not all) did not just blindly trust - but thought the research they had done was adequate. It seems that sometimes the "safe" thing to do is nothing - and no doubt once we'd retired on a government pension there would be those quick to accuse us of being "lazy" for not providing for ourselves - probably those so quick to accuse us all of being "greedy" now!
Rant over
We are in our mid-forties, are self-employed, have worked hard all of our lives and paid our taxes, and those of the staff we employ. We stupidly decided to use the equity tied up in our home to provide future capital growth that we intended to use for our children's education, some much-needed home improvements, and to be independant upon retirement. It seems there are some on this forum that regard anyone who tries to better their situation as "greedy". We don't take lavish holidays, we live frugally, we earn modest salaries from our business, but we "greedily" wanted to acheive financial security by investing in what we thought was a moderately risky investment - an index fund. We were aware that borrowing against our home added to the risk, and we were prepared to take that risk - we have another 15 to 20 years of working lives ahead of us. We don't blame anyone for that decision, and it is one that many people our age have made - not just those invested through Storm. I understand that it is common for financial advisers to recommend borrowing against equity in the family home - for clients of our age. Our level of gearing on our margin loan was 35% prior to the market turning down, and never exceeded 70%. We did not receive a margin call, and had cash reserves available to reduce our margin loan in the event it was necessary. We don't "blame" Storm or the banks for our losses in the market - hopefully there will be a future recovery and our remaining investment will grow in time.
We do however lay blame where we feel it is deserved. Firstly at ourselves for trusting in financial planners to have our best interests at heart. Hindsight is a wonderful thing, and we were guilty of being gullible and naive. It is clear now that we were paying way too much for what was basically a simple product, and being used as "cash cows" for the benefit of Storm's directors and advisors. Dollar cost averaging is a strategy put forward by some and criticised by others, and making further small investments as the market dropped was portrayed to us as a way of recouping losses faster when the market eventually turned upwards again, than if we just sat and held. Smart choice? Again - hindsight tells the story, but neither our advisor (clearly) or ourselves thought the market would drop as much as it did. Where we did do the right thing though, was in ensuring our margin loan lvr remained below 50% - that's probably all that saved us. I feel for those that tried to cash out and were prevented. We are computer "savvy" and were checking on our margin loan status daily (although the investment values from Challenger were always a few days behind) but I don't think it's unreasonable that a lot of the older, less computer-literate people trusted in their highly paid advisors to do this for them.
Secondly, I do lay some blame on the CBA. Yes we were aware that we willingly borrowed from them and would have to pay them back. I'm not sure if our financial position was "enhanced" by Storm employees along the way - and don't really feel that it matters as we were happy to accept the loan made to us. However, our initial loan was based upon a valuation carried out by a licenced valuer and we were comfortable at the level of equity we retained in our home. Had we known that the CBA carried out a desk-top valuation on our home from several thousand km away and then provided that information to Storm with the sole purpose of enabling both organisations to profit from further borrowings - we would not have increased our loan when we did. No doubt some posters will say we should have conducted our own valuation on our home, we had no idea that the CBA had not conducted a proper valuation and accepted that the increased value stated was realistic. Our area had been growing in value and as we had no intention of selling we weren't up-to-the-minute on house values in our suburb. We do feel that the CBA and Storm were putting their own interests ahead of their clients and were quite clearly operating as a joint venture in this regard - and it was not made known to us. As already stated, it must be clear to the CBA's legal people that they have a case to answer or the deals being offered would not be forthcoming. Nothing will convince me that a bank really cares about any hardship endured by its clients - and I don't really know that it should (I'm still a shareholder too!) Banks do care about PR though, and it's now obvious that shoddy lending practices were occurring.
Thirdly, not particularly happpy the Macquarie insisted that their margin loan be repaid, even though it was well within acceptable lvr. This necessitated breaking a pre-paid interest period and consequent break costs.
A very valuable lesson has been learned - although at a fairly high price. Unfortunately the whole experience has left us cynical and distrustful of almost everyone - not the type of person I wanted to be. There are some posters who pride themselves on being much more financially knowledgeable than a lot of the retired clients of Storm, and are quick to disparage them for being so uneducated about their own finances. I think it's a shame that some of our older Aussies who have lived their lives honestly have had to learn the hard way not to expect the same treatment from others. How much research is reasonable? Can I accept the word of my doctor and dentist but not by financial planner? Should I get a degree in accountancy so I can double-check the work my accountant does on our tax returns? Yes, we are all responsible for our own decisions, and again hind-sight proves that you trust others at your own peril - but a lot of Storm's ex-clients (not all) did not just blindly trust - but thought the research they had done was adequate. It seems that sometimes the "safe" thing to do is nothing - and no doubt once we'd retired on a government pension there would be those quick to accuse us of being "lazy" for not providing for ourselves - probably those so quick to accuse us all of being "greedy" now!
Rant over
