Storm Financial Group

[bunyip]

Doobsy

If a prospective client came to you and said he had two million dollars that he wanted to invest in index funds....I’m guessing that in the first instance you’d advise him against sinking the entire amount into the same investment. But if he was insistent that he only wanted index funds, could you organize that business on his behalf?
If so, what would your approximate charges be?

 

[doobsy]

Doobsy

If a prospective client came to you and said he had two million dollars that he wanted to invest in index funds....I’m guessing that in the first instance you’d advise him against sinking the entire amount into the same investment. But if he was insistent that he only wanted index funds, could you organize that business on his behalf?
If so, what would your approximate charges be?

Bunyip

Yes, organising index funds would be simple. Any number or providers, using either direct or probably cheaper to use a platform and access wholesale funds.

Our fee would depend on the service.

To prepare and implement the advice - somewhere around $1500 + GST which covers our time completing the fact finding, writing the Statement of Advice etc.

If the client was wanting us to provide our full service then the annual fee would be somewhere between $7-9,000. If the client wanted less than the full service then the fee drops to somewhere around $5,000. The level of service depends on life stage, level of technical and strategic advice we expect to give over time etc. For instance a retiree, fully set up and just wants us to invest and monitor things doesn't need to pay high fees. Index funds don't require research on our part, there is no manager risk etc so it is pretty simple.

Even at $9,000, that is only 0.45%pa. It would take us a long time to get to $140,000 (7% upfront) especially if you take into account the fact they get it immediately (we would take 15 years).

 

[Judd]

Or the client could simply use Exchange Traded Funds, such as STW, IOO, IEM and the like, just pay the relevant brokerage and be done with it.

 

[doobsy]

Or the client could simply use Exchange Traded Funds, such as STW, IOO, IEM and the like, just pay the relevant brokerage and be done with it.

Yep

But they don't get me. Like I said, depends what they want. Cost is the same. ETF's have an internal cost inline with the MER of the managed fund version.

 

[bunyip]

Bunyip

Yes, organising index funds would be simple. Any number or providers, using either direct or probably cheaper to use a platform and access wholesale funds.

Our fee would depend on the service.

To prepare and implement the advice - somewhere around $1500 + GST which covers our time completing the fact finding, writing the Statement of Advice etc.

If the client was wanting us to provide our full service then the annual fee would be somewhere between $7-9,000. If the client wanted less than the full service then the fee drops to somewhere around $5,000. The level of service depends on life stage, level of technical and strategic advice we expect to give over time etc. For instance a retiree, fully set up and just wants us to invest and monitor things doesn't need to pay high fees. Index funds don't require research on our part, there is no manager risk etc so it is pretty simple.

Even at $9,000, that is only 0.45%pa. It would take us a long time to get to $140,000 (7% upfront) especially if you take into account the fact they get it immediately (we would take 15 years).

Fair enough.
Why I asked is that I’m pretty sure Frank said he paid Storm 145 grand in fees. So I’m guessing that he would have invested a little over $2 million, minus the 145 grand that Storm whacked him.
Sounds downright criminal doesn’t it, to charge someone so much money compared to what opposition firms would have charged him for a similar service!
No wonder Cassamatis made Queensland's top 100 rich list with an estimated worth of more than 400 million dollars, before it all came crashing down around him.
You wonder why someone with that kind of wealth didn’t simply take his chips off the table and walk away, instead of constantly expanding and borrowing to the hilt in an effort to rake in even more loot. Greed and ego are irresistible forces for some people.

 

[doobsy]

Fair enough.
Why I asked is that I’m pretty sure Frank said he paid Storm 145 grand in fees. So I’m guessing that he would have invested a little over $2 million, minus the 145 grand that Storm whacked him.
Sounds downright criminal doesn’t it, to charge someone so much money compared to what opposition firms would have charged him for a similar service!
No wonder Cassamatis made Queensland's top 100 rich list with an estimated worth of more than 400 million dollars, before it all came crashing down around him.
You wonder why someone with that kind of wealth didn’t simply take his chips off the table and walk away, instead of constantly expanding and borrowing to the hilt in an effort to rake in even more loot. Greed and ego are irresistible forces for some people.

Yep

Mind you the valuation on him was based on the share float getting away at similar prices and PE ratios to other listed planning firms like Count.

Dig up that list, there were a number in that year that were sitting on houses of cards with way too much debt involved and no longer exist. Cassimatis - gone, Hedley - gone, Jattke - gone.

 

[Igetit]

Hi Doobsy,

I have a question regarding the example you gave of how one borrows money against an asset, then takes out a margin loan using this borrowing as "equity" and how then everything goes south in the event of a margin loan.

Just say, that a person had done all of the above in June of 2008 and prepaid the interest on their Margin Loan. Could not, in the event of a margin call, the person simply convert their portfolio to cash and place it in the CASH FUND that all Margin Lenders have associated with their product? Then sit it out until the market begins to recover and repatriate the money progressively back into the market - maintaining appropriate buffers as they go.

Its just, the example you give where the margin loan is paid out, has the effect of crytstallizing all the losses that have occurred during a market downturn. In which case, I agree, you would be screwed. But with the interest prepaid on your margin loan it is your money to do with as you like until June the following year. Why would you recommend fully paying down the margin loan. Especially given that a margin call at 90% would leave you in a cash positive position and the money could be placed in a Cash Fund (making 4% I think in 2008) - improving your buffers by the day.

 

[Igetit]

Hi SJG - 1974,

Read your thoughts on the likely scenario with the failure of the Banks to make margin calls to Storm Clients when every other client of every other financial planning institution did receive a margin call.

Good summary. Spot on. But, how would that have worked? Clearly the Banks systems were working because all the other clients of all the other planning firms got their calls as per the Margin Loan Agreement Terms and Conditions.

Surely Manny, all powerful though he was, didn't have the authority to instruct the Banks not to make margin calls to his clients. I mean the Margin Loan Agreements were between the client and the BANK, the BANK, the BANK - did I mention the Bank. The name Storm Financial is not mentioned in any of the Margin Loan Agreements related to this matter that I have seen.

So that got me thinking. Manny must have had to ask the Bank for a bit of slack so he could keep his clients in "the game" and ensure the continued flow of the all important fees - as you correctly point out. So the Bank would have had to say : "Ummm, Oh OK Manny old mate. After all you have been great for us over the years. Sending us all your business. Generating all those loans for us and all the wonderful interest on them that we've been feasting on. Sure we will "let it ride" for a while with the Margin Calls - no worries mate!"

However, if as a result of this agreed "way forward" the clients of the BANK, the BANK, the BANK - did I mention the BANK - were NOT advised by the BANK, the BANK, the BANK of this wonderful new arrangement and as a result of this failure to advise (BY THE BANK etc, etc - you're getting the idea) their Margin Loans not only breached Margin Call but went into this exciting new land of NEGATIVE EQUITY - and as a result of this the client suffered losses and DAMAGES - I am not sure how easily a defensible position this will be for the BANK. Indeed, the Court may even say - "dear Bank, your agreement was with the client NOT Storm; if you fundamentally changed the manner in which you were going to deal with a client's Margin Loan and not advise them of this fact and give them an opportunity to decline to be party to your intended change - and that action resulted in DAMAGE to the client - well, you might be guilty of - what's that word now.....

Just another slant on the same issue. Any thoughts? I may be on to something you know. Indeed, there may be all manner of documentation floating around out there that strongly points to this being the case.

 

[bunyip]

Yep

Mind you the valuation on him was based on the share float getting away at similar prices and PE ratios to other listed planning firms like Count.

Dig up that list, there were a number in that year that were sitting on houses of cards with way too much debt involved and no longer exist. Cassimatis - gone, Hedley - gone, Jattke - gone.

I do sometimes wonder at the accuracy of those figures I see published in the rich 100 list about who's worth how much money. I don't see how the publishers of the figures could know how much money is owed by whom. And in the absence of such information, surely it's difficult to make an accurate assessment of someone's true net worth.

 

[doobsy]

Hi Doobsy,

I have a question regarding the example you gave of how one borrows money against an asset, then takes out a margin loan using this borrowing as "equity" and how then everything goes south in the event of a margin loan.

Just say, that a person had done all of the above in June of 2008 and prepaid the interest on their Margin Loan. Could not, in the event of a margin call, the person simply convert their portfolio to cash and place it in the CASH FUND that all Margin Lenders have associated with their product? Then sit it out until the market begins to recover and repatriate the money progressively back into the market - maintaining appropriate buffers as they go.

Its just, the example you give where the margin loan is paid out, has the effect of crytstallizing all the losses that have occurred during a market downturn. In which case, I agree, you would be screwed. But with the interest prepaid on your margin loan it is your money to do with as you like until June the following year. Why would you recommend fully paying down the margin loan. Especially given that a margin call at 90% would leave you in a cash positive position and the money could be placed in a Cash Fund (making 4% I think in 2008) - improving your buffers by the day.

Igetit

Hmm do I smell an ex storm employee?

Your suggestion is pretty much word for word what clients were being told would happen when they were all cashed out. So lets look into that strategy.

Lets be generous and take the money to cash at the 80% mark (70% borrowing limit = 80% to trigger a margin call) via the margin call but leave the accounts open. Lets be generous and say it happened on 2 July, just after prepaying the interest so we have a full 12 months.

To invest back into the market after a margin call you need to take the LVR back below the base LVR, in this case 70%.

You are correct the $1,000,000 would earn 4%. In the following 12 months that = $40,000

So now the maths are: Loan ($800,000) / Value (1,040,000) = 76.92%. Sorry we can’t invest.

Lets be extra generous and say they find some way to get back to 70%($1,142,857). Can we invest then? Not really. The margin loan will lend against cash to 100%. It will only lend against the index fund at 80%.

So lets drop $100K into the market. The margin lender will only value that at $80,000 which means we are at $800,000 /($1042,857 + $80,000) = 71.24% and are back in the buffer.

The more you try to get back in the worse it gets and the smaller a fall you need before you are back at a margin call.

Even if you are lucky enough to pick the market bottom as your day to get back in, we are up about 35%. And lets say you were brave enough to drop in $500,000 in on that day (taking the LVR back to 76.7%). That is now $675,000. Add that to your cash of $642,857 and you get $1,317,857 an LVR or 67.6%. Great, back in the game. Except we still owe $400,000 on the house. So we have turned the $400,000 drawn from super into $117,857.

To get back to even we need our $1,142,857 to turn back into $1,600,000. This is a run of 40%, on $500,000 invested a run of 80%. An 80% run is 5760 points on the market. Pretty sure that didn’t happen in your 12 month window before the next lot of interest is charged. Add the $100K fee and the Prepaid interest on $1.2M of $140,000 to our breakeven and it gets worse.

This is why the product should never have been sold to retail investors.....if the planners selling it don’t get it how the hell is the client going to work it out.

Still screwed.

 

[Julia]

Yep

But they don't get me.

 

[Judd]

..Your suggestion is pretty much word for word what clients were being told would happen when they were all cashed out. So lets look into that strategy.

Still screwed.

If my memory has not been totally destroyed by three glasses of red, the difficulty of the hypothetical scenario proposed by Igetit is that, much earlier in this thread, Storm clients stated that when requesting to be cashed out, were informed by Storm staff that although the staff had been cashed out they were told not to cash out the client.

Pretty hard to implement the "Igetit arrangement" when the adviser refuses to follow the clients instructions.

And, Yep, they may not be for everybody but on the upside at least I have an additional $4 to $9k pa for investment purposes. Divvies rule, KO?

 

[Igetit]

Hi Doobsy,

Thanks for that reply.

But, just say for example, the client had $647,000 cash reserves; a second home worth 1 million dollars (not borrowed against) and had an income of 2.4million AUD gross in the financial year 2008-09.

Could that person have remained in the market? Or would he still be screwed also?

Not all Storm clients were retirees who had dipped into their Superannuation. I know you know that. Some were quite well heeled; however, failed to receive a margin call.

 

[bunyip]

Hi Doobsy,

Thanks for that reply.

But, just say for example, the client had $647,000 cash reserves; a second home worth 1 million dollars (not borrowed against) and had an income of 2.4million AUD gross in the financial year 2008-09.

Could that person have remained in the market? Or would he still be screwed also?

Not all Storm clients were retirees who had dipped into their Superannuation. I know you know that. Some were quite well heeled; however, failed to receive a margin call.

If some Storm clients were in fact as well-heeled as the one you describe above, then why the hell would they get involved in a high risky strategy such as Storm proposed? Surely greed comes into play in that situation.

If they were smart and capable enough to get themselves into that sort of financial position then why would they leave all their brains and ability behind when they went to visit the Storm office?
I just don’t get it....wealthy people don’t become wealthy by being gullible or imprudent or naïve or careless, or by accepting everything they’re told at face value. Most of them don’t become wealthy by taking crazy risks either. They’re usually very astute and switched on – they could never have become wealthy if they weren’t.
So how come they stopped being astute and switched on once Storm got hold of them?

 

[doobsy]

Hi Doobsy,

Thanks for that reply.

But, just say for example, the client had $647,000 cash reserves; a second home worth 1 million dollars (not borrowed against) and had an income of 2.4million AUD gross in the financial year 2008-09.

Could that person have remained in the market? Or would he still be screwed also?

Not all Storm clients were retirees who had dipped into their Superannuation. I know you know that. Some were quite well heeled; however, failed to receive a margin call.

OK, on the new hypothetical, then yes they could stay in the market and be trying to recover their losses. Long way to go because of costs along the way but completely plausible. When the storm fiasco hit and the margin lenders sold everyone out after it was decided the borrowing ratio on the badged index funds would be taken from 80% to 0%, there was nothing stopping clients investing straight back into another non storm index fund the next day. I have seen cases where this happened.

My point throughout this was the fact that the Storm advice was seriously flawed, did not take into account the chance markets would/could drop by the amounts they did and therefore put clients in this position. If they had borrowed against the house and taken out the margin loan but only geared the margin loan to 25% we wouldn't have the forum because everyone would still be fully invested. Their modelling was crap and based on assumptions from a 25 year bull market. Surely if you are recommending a model that involves double gearing you put your safety net in place based on the worst corrections ever, not the "average correction over the past 25 years" (best 25 years ever).

That aside we first hit this level on the market in late 2005. That is 7 years of no growth for anyone that invested around then. Anyone who borrowed then has the interest costs - tax savings to add to their cost base. That doesn't sound like much of a strategy for making money to me. Assumptions on average growth in markets are dangerous things. The poor buggers that got in October 2007 and are lucky enough to still be in the market might be looking at 10+ years before they see any growth.

The other point I would like to note is that Storm kept topping people up. This can only be seen as a fee grab. If you start someone at the 50% gearing ratio and the market runs 25%, why not let the LVR drop? Why take that as an automatic to borrow more? Possibly plenty of clients who invested with them prior to probably 2006 would not have received a margin call if they got in when markets were only 5000 points, ran it up but didn't "step up" and instead let their LVR dop to 40% or lower. They would not have had the problem when it ran back down. Again, this was a storm strategy and a fee grab.

 

[Judd]

Frank I think it's important that we don't let whoever created this storm to 'get away with it'. I enjoyed reading all of your posts and agree with you one hundred percent. The word 'assumptions' keeps coming to mind and understandable that other forum members have to assume what they know as they didn't walk in our shoes.

I'm trying to think how to explain storms fees and I'm struggling so here goes, hope I succeed. A storm advisors spiel would make far more sense of this than I possibly can. Let me say firstly, that in hindsight, I agree with you, storms fees were outrageous.

At the time the advisor explained their fee structure in such a way that it made sense to us. I asked a couple who we know with a financial plan and they said that they paid ten thousand dollars a year, another fellow we know said that he paid somewhere between two and three thousand a year. I have no idea if this is 'normal' or not.

With storm their spiel was that this was a one off cost for the life of the plan, and they quickly rattled off lots of figures to support this. At the time it certainly made good sense to us. There was a lot that they didn't tell us and granted we didn't ask, our fault, we accepted their word for this.

We're since finding out about extra fees, trailing commissions etc which were obviously and for 'good reason' as far as they were concerned, never mentioned. An expensive lesson learned and I'm sorry but I really don't know how to explain it any better than this. No doubt it was part of the 'con', lets hope that all of this comes out in the courts.

Documents will prove that storm and the major banks were allies in an unregistered scheme. I'm not prepared to comment further on this at this stage however.

Harleyquin,

Thank you for trying to explain this issue from your point of view. The sales pitch by Storm must have been very, very slick to gloss over the position that quite a number of its clients were entering the sharemarket with fewer funds than the amount in loans supporting that equity yet the adviser was pocketing a nice not-so-little sum at zero risk. I still have trouble understanding how that was sold to clients.

While none of this impacts on me either emotionally or financially, I would not wish the situation on my best enemy or my worst friend.

All the best.

 

[Igetit]

Hi Doobsy,

Igetit!!

Agree with your observations. You see with keen eyes both deep and far. Except for the bit about me "smelling like a storm adviser."

I don't smell at all actually. A little distressed about the Bank not providing margin calls to their Storm clients because of some "special arrangement" they had with Storm. It appears now that if such a special arrangement was put in place the Margin Lender had a duty of care to advise their client of this and give them an opportunity to decline to be party to "the arrangement" if it did not suit them. This of course did not happen because the relationship (dare I say PARTNERSHIP) between the BANK and STORM, became so cozy in the end that STORM appears to have morphed into the BANK'S margin loan client. That was a mistake it seems. Which may be why the Bank finds itself sitting in court - soon to answer some prickly questions. Wonder what they will say. Something along the lines of: "It was all Storm's fault. We done nofin', we done nofin'." A bit like what Storm says. Somebody is not telling the truth I think. Or perhaps, both parties are trying to equally deflect blame to the other. Makes sense. I was a little boy with a brother and always blamed him when something went wrong in the house. Did not want to get into trouble - you know how it goes. Not sure we change that much as we get older.

 

[Frank Ainslie]

The CBA and ASIC

From the start there has been something odd about the way ASIC has played along with the CBA. In December 2008 when Storm’s clients had a need to contact their Storm advisors, ASIC slapped a ban on Storm and would not let anyone from that firm converse with customers who were anxious for news. ASIC denied this at the time but it was confirmed by one of it’s officers some weeks later. ASIC’s excuse for acting in this way was, it claims, because Storm was advising its clients not to pay their negative equity debt to Colonial and it was ASIC's considered opinion that this could be of further detriment to some Storm clients' circumstances through having interest accrue on the debt. Was this a valid reason or did the CBA have some ulterior purpose for wanting this because that Bank was certainly behind it.

On 8th of January as a direct result of the action taken by the CBA, Storm was forced into voluntary liquidation. This forced Storm to abort all present and future court matters. It just so happened that at that time there was a hearing going on in the Federal Court of Australia between Storm and the CBA. Judge J Greenwood in his summation (dated 24th of December 2008) was critical of the CBA for publicly stating that Storm was solely responsible for the management of the margin loan accounts.

Page 14 Point 43 "For present purposes, I am satisfied by the weight of the applicant's material that had the financial adviser assumed a management responsibility for the margin loan transaction in each case and more particularly a "sole" responsibility for the management of the margin loan account through the period, the documents between the Bank and Storm and in particular the letter (agreement) of 18 May 2007 would have said so in clear and transparent terms.

Secondly, the documents between the financial advisor and the client would have reflected that position.

I am satisfied that solely for interlocutory purpose, Storm has demonstrated a sufficient likelihood of success in terms of 'Australian Broadcasting Corporation v O'Neill' demonstrating that a statement as to the sole management of the margin loan accounts and instructions allegedly given in the meeting on 4th December 2008 are capable of being misleading or deceptive or likely to mislead or deceive".

Page 15 Point 44 of the summary, His Honour says:

"The Bank's position on the application for interlocutory relief is that this has nothing to do with the Bank. It is entirely a matter for Storm. That seems unlikely as the letter (agreement) of 18th of May 2007 talked about the working partnership to clear margin calls and the Bank’s letter of 17th December 2008 seems to acknowledge that the position is that Storm had primary responsibility for the loan. It seems unlikely as a matter of prudential bank management that the Commonwealth Bank of Australia would have displaced all responsibility for its loan portfolio with these borrowers and investors entirely to a third party, Storm.

Page 18 Point 52 His Honour proposed to list the matter for directions on 9th of January 2009 for review.

On the 8th of January as a direct result of the action taken by the Commonwealth Bank of Australia[/U], Storm was forced into voluntary liquidation and as a direct consequence forced to abort all present and future court matters. Coincidence perhaps or a way of shutting this hearing down? After all, the CBA was one of the main players, and it had much to lose if Justice Greenwood’s findings were upheld. ASIC permitted this to happen without questioning the CBA’s motivation behind it.

The chairman of the parliamentary inquiry into the financial services industry in 2009, Labor MP Bernie Ripoll, stated that, "ASIC needed to follow through when it came to finding those guilty of wrongdoing where Storm Financial clients are concerned - regardless of the agreed compensation deals.” He was, of course, referring at the time to the CBA. He said that, "ASIC must play its part as the Regulator, rather than as a middle man. ASIC must follow through with litigation and penalties where it is required. It has always been my view that the full force of the law should be applied to resolve all of the matters in the Storm Financial collapse, " Ripoll said.

The PJ-C Committee stated in its report that, "there were deeply troubling' claims that the banks were unable to provide accurate information about the status of margin loan accounts during the period of extreme market volatility, and that there had been an inappropriate and ultimately devastating delay or failure, particularly by the CBA, to make direct contact with margin loan clients when it became apparent that Storm was not successfully acting as an intermediary to clear margin calls. The Committee expressed the 'clear view' that "Storm's aggressive leveraged strategy, in combination with the failure of multiple parties (Banks) to appropriately monitor and manage margin calls at the height of the market volatility, were of disastrous effect for Storm's investment clients".

The CBA, with its fingers in dodgy housing loans and dubious margin loan practices, was the worst of these offenders and yet ASIC is only charging the CBA for operating an 'unregistered managed investment scheme'? The other two banks, BOQ and the Macquarie Bank, are additionally being charged with: (1) breach of contract (breach of Banking Codes of Practice); (2) contravention of the statutory prohibitions against unconscionable conduct; (3) liability as linked credit providers of Storm - section 73 of the TPA Act1974. Why is the CBA any different?

Mr. Ralph Norris, the then CEO and its Board decided in 2009 that the "game was up" and put forward a resolution scheme on the pretext that it wanted to be fair to its Storm customers. “I think we did end up with a situation where some of our people lost sight of who the customer was!” Mr. Norris said at the time. The CBA/Storm connection generated $198 million for the CBA in the fiscal year 2007-2008 alone. It pays to be myopic sometimes and its pays to have connections in Government.

The CBA resolution scheme, controlled by the CBA from the start, was based on the premise that Storm had the right to act as agents for its Storm clients where margin loan contracts were concerned. This is a highly contentious issue and has not been tested in Law. Certainly, Storm had its clients’ permission to liase with Banks but it had no implied authority to act in any other capacity. Storm was not a party to the margin loan contracts and did not provide "consideration" for being so involved.

Needless to say, many agreed to the terms offered under the resolution scheme because they had no choice. You cannot have a fair and equitable agreement where one party is putting a gun to the head of the other party. “Sign here or keep paying what you owe!”

The resolution scheme concept was sold to people on the understanding (carve out clause) that participants could obtain additional compensation if ASIC was able to prove its case under Section 50 of the Corporations Act. Guess what! ASIC is not pursuing the CBA under Section 50! This effectively locks out people that settled under the R/S from additional compensation. ASIC has effectively closed off that avenue for anyone in the R/S.

This year alone I’ve written five letters to ASIC on this subject. Finally, after 6 months, I received a reply informing me that “ASIC cannot comment because litigation has started.” I have put many hard questions to ASIC since the Storm collapse and it has failed to respond satisfactorily to any of them.

If we are being honest, ASIC should be in the dock with the rest for failing in its role as the Regulator. As late as January 2008 ASIC carried out a compliance audit of Storm and found nothing wrong. It has done everything since to cover up its part in this mess. ASIC took until December 2010 (2 years after the event) before it decided to prosecute even though the evidence of wrongdoing is overwhelming. Even then, it is not treating all three Banks the same way.

Fortunately, we have our own solicitors because if we had to rely on ASIC alone, its more than likely that the wrongs of these Banks will be glossed over. A full investigation of ASIC's role in all this should have been conducted at the time because ASIC is the public watchdog and it failed in its duty of care to the Australian public.

 

[Igetit]

If some Storm clients were in fact as well-heeled as the one you describe above, then why the hell would they get involved in a high risky strategy such as Storm proposed? Surely greed comes into play in that situation.

If they were smart and capable enough to get themselves into that sort of financial position then why would they leave all their brains and ability behind when they went to visit the Storm office?
I just don’t get it....wealthy people don’t become wealthy by being gullible or imprudent or naïve or careless, or by accepting everything they’re told at face value. Most of them don’t become wealthy by taking crazy risks either. They’re usually very astute and switched on – they could never have become wealthy if they weren’t.
So how come they stopped being astute and switched on once Storm got hold of them?

Hi Bunyip,

I don't know why common sense ceased to prevail. I think others have given you their various takes on why. I guess another question might be in the faces of myriad responses you've received: "why do you keep asking the same question?" Just can't help yourself. Build a bridge. Take up a hobby. Or just wander around in a constant state of consternation. Up to you.

Incidentally, some former Storm clients lost some of their assets with Storm, but - indeed - were "astute, wise, clever, greedy" enough to have limited their exposure to Storm from the outset. However, a loss is a loss, and if it occurred for reasons other than bad advice (and it seems on the material I've seen, there were a variety of reasons that can be traced back to the BANKS) - well, those folk are looking to have that put right. Might be why the BANKS are sitting in Court these days. They haven't ended up there by accident.

However, the point of my question to Doobsy was well answered by him. I hope you find some peace.

 

[Harleyquin]

Thanks Judd I didn't feel confident trying to explain the fee structure, and you're right the whole storm process was just that , very slick. In hindsight I can see things far more clearly and wonder how we were conned by this. The word greed keeps being thrown at us and I don't remember this ever being a factor. Obviously we wanted to be financially secure and wanted someone to help us achieve that so a financial plan that helped us stay abreast of inflation was paramount in my mind.

Hindsight would be a really great thing to have before the event!!! I think, and wonder if this applies to other stormies, if the fear of being unfinancial in retirement , really did have an impact on why we believed storms spiel and allowed our normal common sense approach to fly out the window during this time. Guess I'll never really know. I have never been conned by anything before but approaching retirement was a scary time and I think storm knew this and they came at us from this angle.

At the end of the day some of you could probably call me a lazy investor, from my point of view I was busy working and had no interest or time in learning about financial planning, I just wanted to go in and pay someone who knew what they were doing to do it all for us, I had no experience and had read how 'stupid our age group was, they only know how to put their money in the bank and in ten years time their money will not keep pace with the rate of inflation and they'll struggle in old age' I think others would have read this spiel and storm compounded this line of thought.

I thought that it was possible to just go into a financial planners office, ask them to look after you and they would. I didn't realise that we couldn't do that.

Today we have no financial plan, have no idea what the future holds financially and will never approach another financial planner for help. I can see a time in the not too distant future when we'll have nothing left and I feel very disappointed in the whole financial industry.

I have one huge problem with this whole disaster and that is, all of the educated investors on this forum and everywhere else all knew exactly what storm were doing and how super risky it was. Yet the whole Australian Banking system maintain that they had no idea what storm were doing. It just doesn't ring true to me.

Was interested to read this item yesterday

The Association of Financial Advisers (AFA) will step up its push for a delayed start date to the federal government's financial advice reforms to ensure consumers are not lost amid the changes.

Concerns have been growing over the piecemeal release of Financial Services and Superannuation Minister Bill Shorten's Future of Financial Advice (FOFA) reforms, with advisers increasingly worried about meeting the requirements of deep legislative changes that have not yet been finalised.

According to draft laws before Parliament, the financial advice industry must comply with FOFA requirements from 1 July 2012.

AFA chief executive Richard Klipin said the association would push for a FOFA start date of one year from the date the final legislation was unveiled.

Klipin said a delayed start date would prevent poor implementation of the reforms and disadvantage to consumers.

"The last thing anyone would want is to have an unsuccessful implementation of FOFA; a really clunky implementation of FOFA that disadvantages consumers," he told InvestorDaily.

"The danger is if it's not handled effectively and well, people will be operating almost in a vacuum as systems come into play, new documents come into play, new client processes come into play.

"It's more about the government understanding that this is not just a tick-and-flick piece of legislation; it is fundamental reform and change of the industry and they need to give people across the industry time to get set and time to get it right."

He said the member body would involve all players in the political process, but would focus on specific quarters.

"Certainly, it's the conversation directly with the government, in particular with the Minister and the Minister's office, and Treasury, and it's very definitely ASIC. They are the key touchpoints," he said.

"Clearly, the opposition and the independents need to understand the size of the change and the impact that it will have, so all involved in the political process are key.

"It will come down to Treasury and then ASIC to implement across the industry, so that's the tiering that we have to go through in terms of getting the understanding and making people aware of what's really involved."

Meanwhile, the FOFA legislation looks set to be delayed.

Shorten's office has said it was aiming to have final legislation through Parliament early next year, however, the first tranche of the FOFA legislation has been referred to the Parliamentary Joint Committee for review.

The PJC has no deadline for completion of its assessment, but the government is hoping to have the review finished by the end of the year.

This would put the first part of FOFA on track to be finalised by February or March 2012.

The second tranche of FOFA has yet to be introduced in Parliament, making it unlikely a debate would be held over its contents before the end of the year.

"The policy debate and the political campaign we've been running - it's game on," Klipin said.

"Arguably, it needs to step up and has stepped up. We've now just seen the first tranche of legislation, and there are enough major concerns about it that advisers now have a message to take to their local MPs because we've now got the black and white proposals on the table."