Storm Financial Group

[Jifromoz]

Hi Everyone,

I have had a reply from the Deputy CEO of the Financial PLanners Association in reagrd to some questions I put to them. The questions were in one of my previous comments. At least the assocoiation was quick to reply and offer some support. I doubt whether another planner would be able to assist my in-laws especially as they no longer have any trust in people who purport to be professional and experts in their field. (I know that only some planners need be tarred with this particular brush but the honest and professional ones will need to get in and sort this mess out and organise an overseeing authorirty that has the balls and ability to find and get rid of the cowboys) For your information and comment I have added to this thread.

The battle goes on.

Cheers
Jifromoz

Dear **********

Thanks for your email relating to Storm Financial.

We are very worried about distressed clients just like your In-Laws who find themselves in a difficult financial situation and as you know we have put in place referral services to accommodate where we can. If you like we would happily provide them with access to professional financial planners from our membership, many of whom didn’t take holidays as a consequence of these events and worked through Christmas assisting people just like your In-Laws to get some control or guidance on the options available to them. I am unable to offer specific solutions to your questions but one of our members on the referral list may be able to offer objective advice to help them resolve the specific queries you raise.

I want to assure you that the FPA is genuinely concerned at the personal impacts this situation has had on clients and in the last few weeks we have dealt first hand with hundreds of calls from distressed, tearful and angry clients. We also appreciate that you are angry that this situation has arisen at all and whilst we share your concerns about inappropriate advice being given to unsophisticated investors we are still working through investigations to get to the bottom of those concerns and at this stage are unable to discuss the details or pre-judge the results of those investigations. If you or your In-Laws would like to make a formal complaint we would happily progress that through our Investigation processes for consideration by the Conduct Review Commission and I assure you we act on every breach of our rules triggered by a complaint.

On the question of avenues for redress – we too are looking at the consequences of their voluntary administration but in your In-Law’s case I would recommend legal advice as the first port of call. I am not sure where your In-Laws are located but if they are in the Townsville/Cairns areas we understand there are a number of local legal advisers familiar with the circumstances and no doubt able to offer immediate advice.

 

[Julia]

The real problem here was the blind faith by Cassimatis that the market would not drop significantly and did they care? They had those commissions coming in and fobbed people off who wanted to get out.

Certainly seems they had their own retirement plan way ahead of that of any of their clients. Hard to believe they could be simply ignorant about what was happening in the market, so the only other option for their behaviour seems to be pure self interest.

After all we go to experts for our health (doctors), for legal matters (lawyers), etc but I will never go to a financial planner again. I am not losig my house but in my 60s I now have a large mortgage for house that was paid for 3 years ago.

That must be simply awful, Smiley. I'm really sorry.

Well said Monario, we were stalled and blocked by our Storm advisors all the way down. They would'nt let us get out. For people on this forum that haven't dealt with Storm to be crictical of the victims is unfair. Only Storm clients know how CONTROLLING they were. As i said we tried to bail about 5 times and the answer was allways NO NO AND NO!!!!

I think someone suggested earlier in the thread that the whole Storm culture seemed to have elements of a cult. "Controlling" is what comes across from many of you.

Back in 2000 and 2001 Howard and Costello were carrying on about how we would all have to look after ourselves in retirement because the pension just wasn’t going to cut it. There was story after story about how much money you would need to have in your kitty so you could retire and maintain your current standard of living. Who doesn’t want to do that? If that’s greed then we are all guilty.

Not greed to want to be self sufficient in retirement.

We owned our house but with only five or six years to go before my husband retired we didn’t have enough money for what everyone was saying.
We asked our accountant for advice and he tried to sell us a master fund. There were so many fees our money was better off in the bank. So we started doing the rounds of financial planners. I knew NOTHING. I was so financially naive that I didn’t even know that managed funds were used to buy shares. I didn’t know where the money went. I had never thought about it.

You were clearly not alone in this.

We live in Townsville, Cassimatis advertised on T.V. and we ended up at his seminars. I learnt a lot from those seminars but when Cassimatis told us we needed to take out a 450K margin loan (at the time our house was worth 130K)

This is the sort of loan amount that has many onlookers with their jaws on the floor! Especially with people close to retirement. Holy ****!

we baulked but only because we had already had financial problems over a failed business and had lived under the sickening stress that brings. We had recovered by selling our big beautiful Queenslander and buying a smaller cheaper cottage and we had made a resolution that we would never put our house on the line again. We didn’t know about risk, bull and bear markets, margin loans and LVRs. It was just a simple matter of been there- done that, not going to do it again.

So Storm didn't explain to you that there was any risk involved? They suggested the market would always go up and by borrowing that huge amount you still would be entirely safe? Would you have believed this?

So I learnt about the market myself, rolled our super over into a DIY, got an online broker and went for it. We also changed our accountant. It just so happened that our timing into the market was impeccable. Beginners’ luck. But I had a lot of learning to do and it was that learning that got us out before the end of 2007.

Good for you for taking responsibility. Your efforts to educate yourself have obviously paid off.

We did well out of the market and will get back in when the time is right but there were times over those bull years when we looked at each other and said if we had done what Cassimatis told us we would have been laughing. But if we’d gone with Cassimatis we would have left it all up to him, done whatever he said, and we wouldn’t have known to get out.
I am so sick of hearing the word greed being associated with the poor people who have lost everything because of Storm. Retirees who were only trying to set themselves up for self sufficiency and a comfortable retirement have lost everything. Don’t people think they are already going through enough mental anguish without heaping more coals on their heads? Whenever someone does that they betray their own lack of compassion and empathy. All these poor people are guilty of is the fear that the politicians created back then, naivety and lack of experience.

Not sure it's fair to suggest that politicians 'created fear'. They rightly pointed out that living on the age pension was a poor option. Their primary motive may have been to keep the welfare budget under control, given the ageing population, but I don't think they were doing anything unreasonable in urging people to save for their retirement. Australia has a very poor record of personal savings.

"Greed" seems to be a term applicable to the Cassimatis.
To be fair to others posting on this thread, I don't think there has been a suggestion that people were greedy for "trying to provide for their retirement" but rather just astonishment at some of the leverage involved. You've made this clear with the figures you've quoted above. To imagine that there wouldn't be potential problems with that sort of ratio is to most of us pretty incomprehensible.

Word is that ASIC won't even chastise them.

ASIC's record isn't great in this regard. It would do no harm to be on ASIC's back. If you have lawyers doing this so much the better.

And for those smarter amongst us where does one who does not have the time, drive or training to predict the markets invest one's super savings if not in property, money market or shares through a financial adviser?
My opinion; your call.

"The time, drive or training": Daisy has answered this.
No one is saying not to invest super savings in property, money market or shares. All anyone is saying is using leverage to the extent that has occurred with at least some of Storm's clients has to be unbelievably risky especially when the market clearly was falling over the last year and more.

 

[daisy]

Julia,To be perfectly honest I really don't remember much of what was said after they proposed a 450K loan. The room started spinning and there was a buzzing in my head.

 

[daisy]

And Julia and others on this thread I wasn't saying that the greed thing was necessarily coming from here. I apologise if that's how it read. I've seen all kinds of smug little letters in our Townsville papers implying that people have lost everything because they were greedy. As I said what saved us was because after having lost one house we are not prepared to put our house on the line for anything.
The focus of the seminars was there was no risk because the investment was an index fund and how the market always rises higher than the last peak after a crash, and there were lots of powerpoint screens to prove it.
So provided you hang in there all will be well.

 

[sqwark7600]

No one is saying not to invest super savings in property, money market or shares. All anyone is saying is using leverage to the extent that has occurred with at least some of Storm's clients has to be unbelievably risky especially when the market clearly was falling over the last year and more.

And for those smarter amongst us where does one who does not have the time, drive or training to predict the markets invest one's super savings if not in property, money market or shares through a financial adviser?
My opinion; your call.

Full context please. My point is simply that the punter must rely on an adviser and this adviser (Storm) had no bear market strategy.
ASIC won't help and the FPA won't help, they have no track record in this regard. What will help is (1) identify the points of law involved when licenced advisors provide advice that is flawed and consequently results in the loss of all their clients investment funds on something as simple (for the average hands-on investor) as a forseeable margin call in a down market, (2) take a class action against the advisor(s).
My opinion; your call

 

[daisy]

My point is simply that the punter must rely on an adviser and this adviser (Storm) had no bear market strategy.


Apart from the legal forms of regulation and redress which I know nothing about the problem is that most people who are as naive as I was assume that a financial planner is someone they can get advice from. Real, valid advice relating to their personal needs and profile. When we were looking for advice, even our accountant who we paid big bucks to every year, tried to sell us a master trust which would have given him great commissions etc but was useless for us.
We even went to see an "independant financial adviser" thinking we would pay him for his time. What a crock. All independent meant was that he worked for himself and wasn't part of a group like Dallecourt.
We got so sick of feeling like a lamb going to slaughter every time we tried to get advice that I stopped trusting the entire industry which is why I got it together got into the market by ourselves.
The term financial adviser is actually an oxymoron.

 

[ShareGuy]

I am suprised none of storms clients posting here have mentioned the upfront fee they charged and by this I mean that the reason the intial fees were so high is that they included brokerage for when you buy and sell the units you purchased (no 4% fee in & out etc) for a period of time (I've been told ten yrs by a client). However if you investigated a bit further you still had to pay brokerage if they didn't "advise you" to sell (which of course they rarely did!)

So now that storm looks to be headed for liquidation investors have lost this too! Maybe clients could try and get this back? (unlikely)

All this is not inculding the trail of course. And another note i'm pritty sure the macquarie a/c's also pay a trail to storm so if you don't want to give them any more money take it out.

Was anyone else told the same thing?

 

[Julia]

Full context please. My point is simply that the punter must rely on an adviser and this adviser (Storm) had no bear market strategy.
ASIC won't help and the FPA won't help, they have no track record in this regard. What will help is (1) identify the points of law involved when licenced advisors provide advice that is flawed and consequently results in the loss of all their clients investment funds on something as simple (for the average hands-on investor) as a forseeable margin call in a down market, (2) take a class action against the advisor(s).
My opinion; your call

I understand your viewpoint. But I don't think consulting any 'professional' in any field completely removes the need for personal decision making.

If you went to a doctor because you had a sore foot, would you without question accept his advice to cut your foot off? No, of course you wouldn't. You'd think about it and figure his advice was questionable.

All I'm saying is that anyone advised to get involved in leverage of the magnitude Daisy has described would surely have to take some personal responsibility as to whether they thought through whether this was a reasonable suggestion or not.
I can't think of any professional advice I'd blindly accept without seriously considering whether it put me at risk if implemented. And imo borrowing so heavily when my home was at stake if it all went wrong is risky in the extreme.

Look, I'm really very sorry indeed for the people whose lives have been devastated by Storm's so called advice. If it were me, I'd be furious, and very, very depressed.

And I understand that many investors, being inexperienced, thought they could rely on so called professional advice, especially with a firm which appeared so glossily successful. And then there appears to have been an almost cult-like control exercised over investors by the Storm principals.

I wish I could think of something reasonable to say that would offer some comfort, but I can't, frankly.

I think we need to add this thread to the Brisconnections thread and make them both compulsory reading for any new ASF members.

What legal advice has anyone had? Does it appear likely that you will have a case against Storm?
Please don't say you haven't sought legal advice.

 

[Julia]

Julia,To be perfectly honest I really don't remember much of what was said after they proposed a 450K loan. The room started spinning and there was a buzzing in my head.

Hi Daisy, I'm not at all surprised. You must be very thankful now for that room spinning and head buzzing.

And Julia and others on this thread I wasn't saying that the greed thing was necessarily coming from here. I apologise if that's how it read. I've seen all kinds of smug little letters in our Townsville papers implying that people have lost everything because they were greedy. As I said what saved us was because after having lost one house we are not prepared to put our house on the line for anything.
The focus of the seminars was there was no risk because the investment was an index fund and how the market always rises higher than the last peak after a crash, and there were lots of powerpoint screens to prove it.
So provided you hang in there all will be well.

Sure. Just that they apparently conveniently omitted discussion of the effect of leverage if the market fell.

 

[Solly]

The Comm Bank are going to be ruthless with this. I wish Storm luck they will really need it.
QCs at 5 paces, let the games begin....

 

[bunyip]

Well said Monario, we were stalled and blocked by our Storm advisors all the way down. They would'nt let us get out. For people on this forum that haven't dealt with Storm to be crictical of the victims is unfair. Only Storm clients know how CONTROLLING they were. As i said we tried to bail about 5 times and the answer was allways NO NO AND NO!!!!

They stalled you and blocked you and wouldn't let you get out?
In what way wouldn't they let you get out? How could they stop you?
I think what you mean is, they talked you out of it.
But when it was all said and done, it was your decision whether to get out or stay in. Correct?
Did it occur to you that it was in their best interests to keep you in there so they could continue charging you ongoing management fees?
Given that you were sufficiently concerned to approach them with a view to pulling the plug, did you consider overriding their advice to stay in?
Did you consider adopting a middle of the road approach by quitting at least part of your investment, and retaining the rest?

 

[bunyip]

The sad thing is, I like many other people will never work through an advisor again, the repercussions for the financial industry that this will create will hit hard, and be felt throughout the country. And on a moral level, I am trying to reach as big a part of the community as I can to make them aware of such problems with advisors.

So why will it be sad that you and many others will never again work through a financial advisor?
Won't investors be better off if they stop relying on financial advisors, and instead learn some basic investment strategies, including risk control? Then they can 'row their own boats' in future, rather than rely on incompetent clowns who masquerade as investment advisors and financial planning experts, but in reality are little more than glorified commission salesmen.

 

[Monario]

So why will it be sad that you and many others will never again work through a financial advisor?
Won't investors be better off if they stop relying on financial advisors, and instead learn some basic investment strategies, including risk control? Then they can 'row their own boats' in future, rather than rely on incompetent clowns who masquerade as investment advisors and financial planning experts, but in reality are little more than glorified commission salesmen.

Your rite Bunyip, it wont be, and I think I will be better off, as i wont have hefty fees

 

[Monario]

They stalled you and blocked you and wouldn't let you get out?
In what way wouldn't they let you get out? How could they stop you?
I think what you mean is, they talked you out of it.
But when it was all said and done, it was your decision whether to get out or stay in. Correct?
Did it occur to you that it was in their best interests to keep you in there so they could continue charging you ongoing management fees?
Given that you were sufficiently concerned to approach them with a view to pulling the plug, did you consider overriding their advice to stay in?
Did you consider adopting a middle of the road approach by quitting at least part of your investment, and retaining the rest?

I spoke to them to get out and they explained that it was notin my best interests, I did go over their heads to challenger, however they directed me back to storm as they were not authorised to deal direct with me.
I also suggested the middle road....


FYI, when it came to the crunch with my parents paying out there margin loan(post to selling out of market) storm would not assist, in the end, after trying to deal through storm, Emanuel himdelf told them face to face, if you wish to clear the margin loan, do, and that you dont need storm help to do so, go home and fax a letter to the lender explaining your wishes..

Nice to see him/storm been helpful after my parents lost everything, including their house........

 

[Monario]

My parents have been trying to get copies of some statements and a copy of the loan proposal from storm..

They have said the administrators have denied them the right to pass this on to clients, could this be true? I thought under the new freedom of nfo act, that any document relating to personal information had to be made available?

 

[Jifromoz]

My parents have been trying to get copies of some statements and a copy of the loan proposal from storm..

They have said the administrators have denied them the right to pass this on to clients, could this be true? I thought under the new freedom of nfo act, that any document relating to personal information had to be made available?

Hi Monario, You can approach the lenders or banks to get copies of applications. I would also ask for copies of the Low Doc Declarations from the Institutions that provided the loans against the houses. I have requested copies of my In-Laws documents be sent to their address (As they quite rightly would not send them to me). No hassle and about 15 minutes on the phone.

Cheers
Jifromoz

 

[daisy]

Julia.
With knowledge and hindsight your comments are valid but it must not be under estimated just how financially unsophisticated some of the people who bought into Cassimatis’s plan were.
1. At the time I went along, his T.V. ads went along the lines of “you have to look your future....and even if you don’t do it with me that’s fine....(and I quote) ”JUST DO IT”
So he created the impression that he was actually more concerned that you did something rather than he was after your custom. It was a very clever ad.
2. There were 4 seminars over 2 weeks which ran along the lines I said. Again and again we were presented with information comparing the stock market with properly and showing that the market was by far the better vehicle. Cycles were never mentioned. Gearing was introduced along the way but very subtly and as far as I can recall only vaguely touched on.
3. If you chose to carry on, then after the seminars there was a private interview when you produce all your financial details and tell him what you are hoping to achieve. For us it was a 50k a year income as retirees.
4. Then you are called back a week or so later and the plan that has been especially designed for you, to achieve your aim, is unveiled. This was the point when they dropped the 450K margin loan proposal. I remember that of that 45 or 50k was fees but as my head was spinning I can’t recall what for.
So basically, we told him what we wanted and he told us how to get it.
I’d been trying to read a bit about things as well and had got hold of a book by Donnelly about different ways you could invest. In there I had read about LICs. Had even got a shareholders’ glossy from AFIC. Cassimatis’s process functioned so differently than any other financial planner that I had visited that up until point 4 I actually thought I was dealing with a stock broker who was going to help me find out about the market and advise me as to what to do. It was only at this point that the investment product was an index fund was revealed.

As far as getting a second opinion so to speak. My question is from where? Any financial planner that you go to just wants your business so that’s not a reliable source of advice regarding another financial planner. Even our ex-accountant (which was a big multinational firm) tried to take advantage of us when we asked for advice.
As far as the size of leverage, the overriding atmosphere was that you are in the big league now and this is what the big boys do so step up to the plate or not ...the choice is up to you. But if you want to achieve your goal then this is what you need to do. Desperate times call for desperate measures and while it wasn’t the politicians intention to engender fear among soon to be retirees I can assure you it was exactly what they did.There would have been many people who were so unsophisticated that they wouldn’t have even begun to know that more experienced people would be appalled at the amount of leverage.

 

[daisy]

" There would have been many people who were so unsophisticated that they wouldn’t have even begun to know that more experienced people would be appalled at the amount of leverage."

That group of peolpe included me.

 

[Ijustnewit]

They stalled you and blocked you and wouldn't let you get out?
In what way wouldn't they let you get out? How could they stop you?
I think what you mean is, they talked you out of it.
But when it was all said and done, it was your decision whether to get out or stay in. Correct?
Did it occur to you that it was in their best interests to keep you in there so they could continue charging you ongoing management fees?
Given that you were sufficiently concerned to approach them with a view to pulling the plug, did you consider overriding their advice to stay in?
Did you consider adopting a middle of the road approach by quitting at least part of your investment, and retaining the rest?

They could stop us for your info...It is only since the fall of their company that we are able to access information on how to shut everything down and find out what really was going on. They employed the mushroom principle to trusting people .. keep e'm in the dark and feed'em S....! We tried to get around them like Monario but got the same story. If you haven't dealt with these people you couldn't possibly understand how much control they had over peoples lives. Yes now we can clearly see that we could have done a better job ourselves and certainly no worse, but being inexperienced and just wanting some financial advice (for the first time) to better our retirement funds (not being greedy) and paying for that advice where else could we turn ? You'll probably say ... why didn't we get a second opinion ect.. As you have seen on this forum and on Storms website their business was from 75% word of mouth ,mostly families as also posted on here.The point is everyone has paid to have their finances managed by somebody that has been entrusted and paid to do the job properly . It is a simple matter of employment you pay somebody and you expect the job to be done correctly.
Sorry Bunyip, but if you think that you could have got yourself out in time dealing with this company you would have been very sadly mistaken.

 

[pilots]

So why will it be sad that you and many others will never again work through a financial advisor?
Won't investors be better off if they stop relying on financial advisors, and instead learn some basic investment strategies, including risk control? Then they can 'row their own boats' in future, rather than rely on incompetent clowns who masquerade as investment advisors and financial planning experts, but in reality are little more than glorified commission salesmen.

The best advice we ever got was in Singapore from a old Chinese man, If you want advice about money you should first make sure the the person you are talking to HAS MORE MONEY THAN YOU, if he has less money than you he should Listen to you.
ALL financial advisor's are only SALESMEN, no different than car salesmen, would you give your life savings to a car sales man???