I am not sure what you mean exactly, I guess in initial consultations by asking financial positions.Is that what you mean?. risk assements however should be done regularly.. how can it possibly be an acceptable risk for an advisor to go about taking out a 600k mortgage on a 700k home for 2 retirees?
No, a risk assessment, or rather a risk profile is to look at the current life stage the client is in and his/her sensitive to risk. It's definitely mandatory and subject to audits.
A rule of thumb (based on study materials) is younger people with few debt will be able to take on more risk than those who are in retirement already. Of course, this rule may not necessary apply if the client's personal risk adversity is too low to accept the standard level of risk that he/she should take. i.e. he is young, can take a bigger risk, but refuse to do so because he prefer things to be safe, thus, take a balanced portfolio instead of full 100% share on margin. Or of course, it can go the other way. The retiree is asking to take on more risk against the advisor's advices.
Anyone know how much the market had dropped when it was at 4,200?
This is a good explanation. In my view what the financial planning industry needs to do is make these risk assessments mandatory and have standardised 'risk levels' (e.g. minimum risk, low risk, medium risk, high risk, kamikaze) with an accepted, industry wide description of what each risk level means. They then should get both the adviser and client to sign the risk assessment with the adviser incidating that they acknowledge the clients desired risk level and the client acknowledging they've accepted that risk level. It should be a standard form in large bold font - a bit like some of the documents used in real estate - and include an independant witness signing it.
A lot of us saw problems with Storm in 2007 and tried to get some $ out and questioned but they did just smiled and said trust us and have something to eat and a coffee. Challenger returned us to the adviser who stalled.
What no one has mentioned on this forum is that clients were in trouble long before the market got down to 3,500 or lower. Most clients were taken out when the market was at 4,200+ . So there goes their argument about this being the worst case scenario in history. Anyone know how much the market had dropped when it was at 4,200?
Does anyone have any idea who to contact now storm is really dead in the water. We have only lost fees, a lot of tho, in the last month. What is the best way to learn about investing without an fp. We are beginners.
There has been some speculation that Storm's business model wasn't that flash to begin with, did anyone see the collapse of Storm coming?
The regulations already exist to cover this with the exception of the witness and, sorry for the length of post, but hopefully this example may shed some light.
Sadly the industry already has too much regulation. Don’t believe me?
I am a qualified Financial Adviser (please hold the boos until the end) – In the 3rd week of September 2007 I moved my entire superannuation balance to cash (from a highly geared 100% equity position) and unwound my non-super gearing.
The best I could do for my retired clients was to advise them to hold 2 years income in cash and a back up of 2 years income in a capital stable fund (approximately 30% exposure to growth assets)within their account based (allocated) pensions, which I did (mind you not all of them took that advice).
For those still working all I could do was re-visit their risk profile and recommend the minimum exposure to growth assets that their risk profile suggested was appropriate.
If I had recommended that they moved 100% of their investments to cash I would have: 1) failed my next compliance audit; 2) faced the very real risk of being dismissed by my dealer group; 3) faced being reported to ASIC and 4) potentially been banned by ASIC from giving advice.
The reason behind the 3 points above is that according to ASIC I must have a reasonable basis for my advice. To do this I must have a fully completed (and current) “fact find” including a Risk Profile questionnaire for each client. If, in that questionnaire you are determined to be a “balanced” investor I have to recommend a portfolio that fits within my dealer groups definition of “balanced”.
Please don’t get me wrong, I am not (and will not) defending the Storm model (I have clients who fled in terror from the Storm proposal to borrow heavily just prior to retirement) and I feel for every Storm client who has been caught in this mess (I understand that around 20% of the total Storm client base was ‘Stormified”) and I detest underhanded, deceptive and misleading behaviour regardless of the industry in which it occurs, but the financial advice industry is already one of the most heavily regulated industries we have and no amount of regulation will ever prevent the “sharpies” from finding a new angle.
Hopefully the solicitors now circling will find a way to recoup some money for the most affected.
Does anyone have any idea who to contact now storm is really dead in the water. We have only lost fees, a lot of tho, in the last month. What is the best way to learn about investing without an fp. We are beginners.
I spoke to one of the people at Slater & Gordon today. They are still looking at helping people affected by Storm. We may hear next week which way they intend to proceed.
Who would they sue though? It doesn't sound likely that there would be any money left in Storm after secured creditors are paid out.
I guess they'd have to try to sue someone for professional indemnity (who though - the company? the individuals?) and hope that the indemnity insurance covered it. I guess the indemnity insurance should still stand if it was paid up at the time that the professional misconduct occurred - even if the company doesn't exist any more.
Who would they sue though? It doesn't sound likely that there would be any money left in Storm after secured creditors are paid out.
I guess they'd have to try to sue someone for professional indemnity (who though - the company? the individuals?) and hope that the indemnity insurance covered it. I guess the indemnity insurance should still stand if it was paid up at the time that the professional misconduct occurred - even if the company doesn't exist any more.
I think a Storm client earlier in this thread said Storm recorded the value of their property as considerably in excess of the true market value.Cuttlefish, If I was the Lawyer (Or affected customer) I would also be inclined to look closely at the Banks that gave pensioners large equity against their houses.
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