Storm Financial Group

Frank Ainslie said:

Hi Solly,

The question really isn't about how many accepted Storm's advice and how many didn't but rather what's the norm? How many people walk away after being given financial advice and how many accept such? What's the industry standard? Did more people walk away from Storm than is normally the case or is this just another issue that has been distorted?

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Yes Frank that was also on my mind.
What is the average conversion rate of "inquiries" to "sales"?
In the past I have attended info sessions conducted by financial advisers and the like. I wonder what the win rate is.

It would be interesting to know what the strike rate is on walk-ins, tyre kickers, targeted marketing campaigns, prompted seminars and the like. I wonder if there are any advisers or industry professionals willing to share these stats on this forum.

Solly said:

Yes Frank that was also on my mind.
What is the average conversion rate of "inquiries" to "sales"?
In the past I have attended info sessions conducted by financial advisers and the like. I wonder what the win rate is.

It would be interesting to know what the strike rate is on walk-ins, tyre kickers, targeted marketing campaigns, prompted seminars and the like. I wonder if there are any advisers or industry professionals willing to share these stats on this forum.

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I think the problem Solly is that you would be comparing apples with oranges....different advice practices offer different services to different people, and would market them differently. Storm benefited from a big presence in Townsville, they benefited from having clients who rode the bull market referring their friends, a large network of advisers and some high profile clients who made comments on what was a professionally presented website. Other than bank advisers, I dare say there would be few firms who could have benefited from the above.

Storm in their last few years probably operated in ideal advice conditions. But since then, the landscape has changed significantly.

Its fair to assume that the public would be much more wary about paying for advice now (given the publicity of Storm and other financial disasters) than they were back in the days of the bull market. I have spoken to a number of advisers and they are struggling to attract new clients now, where it was much easier for them to sell the value in their advice when the market was roaring and financial disasters weren't taking centre stage in the financial press. Much harder to get clients to pay for advice when times are tough I would imagine.

During the latter part of the bull market, there was almost an expectation amongst people who weren't financially savvy that shares were a sure fire winner and almost a guaranteed path to riches...that is basically what Storm based their advice on. We know that people don't think that way now and I would say the advice industry would be suffering a result.

And I would dare say that Storm's education process, which we have heard could take up to 180 days, would be much more thorough than 90% of advisers out there. Storm could probably afford to take so much time, in the knowledge that those they signed up in the end would pay such huge fees.

Again, I find it difficult to believe that after a 180 day education process, the Frank Ainslie's of this world did not understand what they were getting themselves into, when so many apparently did and chose to walk away.

SJG1974 said:

I think the problem Solly is that you would be comparing apples with oranges....different advice practices offer different services to different people, and would market them differently. Storm benefited from a big presence in Townsville, they benefited from having clients who rode the bull market referring their friends, a large network of advisers and some high profile clients who made comments on what was a professionally presented website. Other than bank advisers, I dare say there would be few firms who could have benefited from the above.

Storm in their last few years probably operated in ideal advice conditions. But since then, the landscape has changed significantly.

Its fair to assume that the public would be much more wary about paying for advice now (given the publicity of Storm and other financial disasters) than they were back in the days of the bull market. I have spoken to a number of advisers and they are struggling to attract new clients now, where it was much easier for them to sell the value in their advice when the market was roaring and financial disasters weren't taking centre stage in the financial press. Much harder to get clients to pay for advice when times are tough I would imagine.

During the latter part of the bull market, there was almost an expectation amongst people who weren't financially savvy that shares were a sure fire winner and almost a guaranteed path to riches...that is basically what Storm based their advice on. We know that people don't think that way now and I would say the advice industry would be suffering a result.

And I would dare say that Storm's education process, which we have heard could take up to 180 days, would be much more thorough than 90% of advisers out there. Storm could probably afford to take so much time, in the knowledge that those they signed up in the end would pay such huge fees.

Again, I find it difficult to believe that after a 180 day education process, the Frank Ainslie's of this world did not understand what they were getting themselves into, when so many apparently did and chose to walk away.

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To be fair to Frank, you are looking at it with hindsight.

Many Storm investors were so taken with the "message" that they tried to beam their good fortune to friends and families. It had all the characteristics of a cult, really.

I know families who were divided, even before it all went **** up.

Who knows where we would be if the market had not crashed.

gg

Frank Ainslie said:

Based on consumer and commercial law principles, not your own subjective views, on what basis do you maintain that the ‘Stormies’ are partly responsible? In your response, you will need to back this up with legal argument. You will also need to mitigate the case we and ASIC have against Storm and the Banks because only by so doing can you place us alongside them. You will also have to deal with misleading and deceptive conduct which is central to our case.

I think we Stormies can take it as read that if those in the other camp cannot make a case for themselves, then we should treat anything else they have to say on Storm and the Banks as meaningless humbug.

HERE”S YOUR CHANCE TO PROVE ME WRONG!

Remember that we Stormies are not in the dock and you have to state your reasons why we should be based on the Law, not on supposition or your own personal opinions but rather on the facts. In other words, prove to me that you know what you are talking about!

However, YOU MUST STICK WITH THE FACTS And RESPOND WITH LEGAL PRINCIPLES. I have done so in stating our case and I expect nothing less from any of you.

If no one is prepared to accept my challenge, I (and I hope, other Stormies) will assume that you and your supporters cannot make a case! Everything you have stated so far has no bearing on the legalities of our case. Establish a case or get out of the kitchen!

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So you have now assumed the role of deciding who may say what on this forum.
What on earth gave you the idea that you are in any position to dictate the terms of how other members post?
Don't be so ridiculous.

Garpal Gumnut said:

How much did the FJ go for, or is that a secret only known to aviation insiders.

I myself am a Qantas Platinum and when with appropriate ALP or LP, ACTU or AICD contacts sup in the Chairmans Lounge.

So your secret is safe with me.

gg

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Solly said:

GG

Good question, I'll see if the guys in research can shed some light. I guess the Red Book would have had $2-3 Mill on it. I wonder how the ownership was structured.

The 1A is a nice tidy airframe not a bad little taxi, it is wider and has more cabin space than the Citation CJ2+. I suppose that's handy for larger people or for carrying around money sacks. Although I'm not personally fussed with the Collins avionics, I'm more of a Garmin guy myself.

S

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I realise Solly that you must be very busy with the imminent arrival of the Dreamliner to Eagle Farm, but I need a ball park figure on Manny's loss on his jet.

My contacts in low finance tell me it was leased, but he would have still had to pay out the residual.

I have only ten fingers and am counting the assets that may be available to ASIC and am unsure whether to use a pinkie or a forefinger for the 1A.

I also have toes but prefer to use those with boots.

gg

It's 'interesting' to read the discussion on education seminars and percentages of clients being sucked in or walking away. What about the majority who went to storm asking for low risk individual advice and were told that's what they were getting. Get some figures on the ones who were cheated and lied to and we might see some different scenarios.

Gg

Does my memory serve me right that the jet was part of ignite and storm then paid that IT shell company when they wanted to use it.

Frank, did you see the inside of it?

doobsy said:

Gg

Does my memory serve me right that the jet was part of ignite and storm then paid that IT shell company when they wanted to use it.

Frank, did you see the inside of it?

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doobsy... you have a good memory !

http://www.townsvillebulletin.com.au/article/2009/11/05/91781_print.html

Frank, i don't have the energy or legal knowledge to argue so i will assume you are correct. Saying that i would like you to acknowledge this point for me

Are you saying we should become like America where McDonalds puts "Hot coffee -do not apply to lap as it may burn" after being sued or should society expect a reasonable amount of implied knowledge?

By this i mean everyone over 21 will remember or have heard about the 87 crash or more recently the tech boom and bust. So is there an implied knowledge that shares can be volatile. 6 months of Storm education surely touched on it, it was definitely a risk in their Soa disclosures.

Anyone who has borrowed any money knows to be careful because you are spending what is not yours and must be paid back? Implied knowledge?

Add these together and is there not a certain level of risk people should have been expected to know they were taking on?

Garpal Gumnut said:

I realise Solly that you must be very busy with the imminent arrival of the Dreamliner to Eagle Farm, but I need a ball park figure on Manny's loss on his jet.

My contacts in low finance tell me it was leased, but he would have still had to pay out the residual.

I have only ten fingers and am counting the assets that may be available to ASIC and am unsure whether to use a pinkie or a forefinger for the 1A.

I also have toes but prefer to use those with boots.

gg

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GG

I'm still waiting for a response from my mate Frankie, he's been a bit distracted lately since the new work experience girl, Natashenka, started in research.
Speaking about fingers, I'm believe that there's a hazy pic floating around somewhere, showing someone flipping an extended middle finger from a port window on one of the final taxis to the piano keys.

S

doobsy said:

Gg

Does my memory serve me right that the jet was part of ignite and storm then paid that IT shell company when they wanted to use it.

Frank, did you see the inside of it?

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Solly said:

doobsy... you have a good memory !

http://www.townsvillebulletin.com.au/article/2009/11/05/91781_print.html

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Thanks doobsy,

The yardie at an hotel where I spend matins confirms your hunch.

It makes me wonder who the titles on Belmont and Melton Tce were assigned to.

I did hear some scuttlebutt that Julie Cassimatis was a buyer at auction of some of the Storm bling from the headquarters of Storm at the Storm Central Headquarters at the Sturt St. Taj Mahal in Townsville.

Perhaps there may be accounts that will enable Julie and Manny Cassimatis to set up another cutting edge Financial Advice Service without the inconvenience of bankruptcy.

It is so inconvenient to be broke.

So I think we would agree that the jet should be considered to be worth zilch.

It would be interesting to know the title names on other assets.

Where are investigative reporters when you need them?

I shall instruct the yardie to pursue this conundrum.

gg

Harleyquin said:

It's 'interesting' to read the discussion on education seminars and percentages of clients being sucked in or walking away. What about the majority who went to storm asking for low risk individual advice and were told that's what they were getting. Get some figures on the ones who were cheated and lied to and we might see some different scenarios.

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It would be fair to assume that everyone who walked through their doors was fed the same line, whether that line was truthful or lies. So if you are saying you were lied to, then you could probably assume that 100% of attendees at Storm's education sessions were as well.

However, as we have seen, not all of those people believed the lies, or they at least had enough doubt in their mind (and common sense) to realise that borrowing over and over again and investing the whole lot in shares was not a low risk strategy, despite what they may have heard form Storm. Perhaps they could see the forest for the trees?

Julia said:

So you have now assumed the role of deciding who may say what on this forum.
What on earth gave you the idea that you are in any position to dictate the terms of how other members post?
Don't be so ridiculous.

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Do I sense an air of defensiveness in your response?

People have every right to say what they want on this forum but such views needs to be based on the facts or they have no substance. You and others have consistently insisted that we are partly to blame. I have now presented you and those others with an opportunity to provide your reasons for doing so that are based on the legalities involved. If you cannot back up your views with legal argument, your views are somewhat pointless, don't you think?

Julia said:

So you have now assumed the role of deciding who may say what on this forum.
What on earth gave you the idea that you are in any position to dictate the terms of how other members post?
Don't be so ridiculous.

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???????

Frank - to further the knowledge on the forum - you outline in your previous post

* making false and misleading statements in breach of s1041E of the Corporations Act 2001,

Can you elaborate on what Drummond told you that ASIC found to be false and misleading.

* engaging in misleading and deceptive conduct under s1041H of the Corporations Act 2001,

Happy to hear more about what was found here.

* promoting the Storm strategy without considering the suitability of the strategy for individual clients,

Think everyone on the forum agrees that the strategy was suitable for about 1% of the client base.

* providing Statements of Advice and Statements of Additional Advice containing misleading and deceptive information in order to induce them to invest using the Storm strategy,

Was this the old data about property returns etc?

and
* didn’t have an understanding of the nature and risks of financial products recommended on the basis of the Storm strategy.

Think that just makes him a dud adviser doesn't it?


If you can expand on what ASIC found for the forum that would assist others in their understanding.

SJG1974 said:

It would be fair to assume that everyone who walked through their doors was fed the same line, whether that line was truthful or lies. So if you are saying you were lied to, then you could probably assume that 100% of attendees at Storm's education sessions were as well.

However, as we have seen, not all of those people believed the lies, or they at least had enough doubt in their mind (and common sense) to realise that borrowing over and over again and investing the whole lot in shares was not a low risk strategy, despite what they may have heard form Storm. Perhaps they could see the forest for the trees?

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My experience with storm is possibly not a typical one, but the "education" process for me was certainly not 6 months. Good friends of ours had been investing with storm for many years and had done very well (yes, yes, I now know it was a raging bull market and most people in the market were doing very well, but they seemed to be getting better returns than other friends of ours with a different FP. Incidentally, the other couple with the more conservative planner were also left in the market and had to meet a margin call - they just didn't have the extreme level of debt.)

Another friend and I went to a seminar they held at the Gold Coast - I'd say there were a couple of hundred people there. This session consisted entirely of numerous graphs, charts etc all based around the perils of inflation eroding your $'s spending power if it's not put to work, the real cost of goods given differing tax rates and the poor performance of property vs shares using historical data. Some discussion was also held on the benefits of investing in the market as a whole, rather than individual shares, with some emphasis on how this was a very low risk approach to investing in shares. I do not recall any discussion re borrowing to invest. For me, this was not covered until our subsequent private consultation.

Then we all trooped out to the balcony for lunch, where the storm salesmen did their thing. I'd assume this would be standard industry practice - no point going to the expense of putting on a seminar if you're not going to use it to 'suss out the most likely targets. And no, GG, I'm pretty sure I was only breathing the Marriott's air, undiluted with additional oxygen I have no idea what % of the audience went further with storm - but I do know that as is common with any seminar on the Gold Coast there were the usual seniors there for the free lunch and aircon and nothing more.

My friend and I had already grilled our mutual friends who had been with storm for years, and this was the only seminar or group "education session" we ever went to. We both arranged private appointments with the local storm planner, and went from there. For me, the entire timeframe from seminar to being in the market was about 1 month - but I do have to repeat that I was probably not typical of the "average storm investor" as I had a pretty good grasp on how the process worked and was already predisposed to going ahead with them based on the information obtained from my friends. Actually, maybe I'm quite typical as a lot of their business was via referral??

Luckily for the friend who went to the seminar with me, she and her husband had other business plans they were considering so only invested a very small amount via storm without any margin loan. Maybe if I'd been less impulsive and impatient to get into the market and had actually sat through 6 months of "education" I would have had second thoughs myself - impossible to answer honestly in hindsight and an exercise probably best avoided for my own peace of mind's sake

Garpal Gumnut said:

To be fair to Frank, you are looking at it with hindsight.

Many Storm investors were so taken with the "message" that they tried to beam their good fortune to friends and families. It had all the characteristics of a cult, really.

I know families who were divided, even before it all went **** up.

Who knows where we would be if the market had not crashed.

gg

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Hi gg!

Yes, hindsight is a wonderful thing but aren’t the detractors also looking at everything in hindsight?

It's true that if the market hadn’t crashed none of us would have been aware of what was going on. There’s no denying that! Indeed, many of us were not aware of what was happening behind the scenes in late 2008. How could we?

Does that however make Storm or the Banks less culpable in their behaviour? Consumer laws and common law principles have evolved over the course of time to protect consumers from this type of behaviour. Stormies' "rights" under these laws have been violated by both Storm and the Banks involved. Therefore, it’s immaterial whether the global financial crisis occurred or not. The fact is that it did and by so doing, it exposed the malpractices that were taking place. If such malpractices did not occur, Storm and the Banks wouldn't now have a case to answer today!

This issue is not about what may have been but rather about what actually took place that contributed greatly to Stormies’ losses.

Misleading and deceptive conduct cannot be excused under any circumstances, nor can the Corporations Act breaches that relate to this matter.

Again I will repeat that the “mindset” of those that invested using the services of Storm Financial is not an issue here – malpractice is the overriding consideration. ASIC, the ‘Worrells’ enquiry, the PJ-C findings and the new regulations that have been put in place bear testimony to this.

The law is very clear! Any one party cannot contract with another by using deception because the other party is not then freely agreeing to the terms of the contract. Further if that agreement is a financial one, it is subject to any consumer laws that are in place. In law “misrepresentation” arises when deception is used and anyone so deceived has a legal recourse. They also have recourse through the Regulator where breach of consumer laws are concerned. That’s exactly where we Stormies now find ourselves. It is senseless therefore for people to maintain that we freely entered into agreements with Storm. Their failure to see this highlights their lack of knowledge where the law is concerned.

Dock - great post filling in some of the mindset at the time. Tough to stay away from the herd when it is stampeading.

Frank - again with the agenda - you have a go at others about saying the same thing ad nauseaum but for me I am reading the same thing from you written in a different way over and over again.

A question for you - including the first monies put into the market - how many times did you then invest further? I would have to expect in 2008 they would have been tapping your 'cash dam' to keep the balooning LVR under some sort of control. Each time would have involved an advice doc saying "we are putting more into the market" would it not?

Could you not have said "NO MORE" I will sell investments now to lower my LVR rather than risk more of my dwindling cash?

Thanks for the insight DocK.

Frank Ainslie said:

Hi gg!

Yes, hindsight is a wonderful thing but aren’t the detractors also looking at everything in hindsight?

It's true that if the market hadn’t crashed none of us would have been aware of what was going on. There’s no denying that! Indeed, many of us were not aware of what was happening behind the scenes in late 2008. How could we?

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Unless you didn't have access to a television, radio or newspapers during 2008, then you would have realised that we were suffering from a major financial event that was affecting the sharemarket terribly.

The All Ords fell from 6,853 on 1 November 2007 to 5,052 on 31 July 2008, a fall of 26%. This wasn't some secret that only the financial professionals knew, it was everywhere. The news every night quotes the All Ords. It is in the papers. It was on the front page, and yet you weren't aware????? Were you living in a cave during all of this?

Now I assume at that time, with your portfolio having fallen in value by much more than 26% due to the level of gearing, you still didn't see any risk? This conservative strategy you agreed to was still conservative?

The market then dropped like a stone between then and when you were sold out, falling by a further 26% or so. The Black Swan even that Manny called it.

So Frank, When did you realise that this "low risk" strategy was anything but?

- When you first borrowed against your home?
- When you borrowed further as part of a margin loan?
- When all of your borrowed money and investment capital was invested 100% into shares?
- During the bull market when your investments were growing faster than everyone else's?
- When you saw that the market was falling and the value of your geared portfolio was falling faster?
- When the media coverage of the GFC and the financial meltdown reached its peak?
- When Storm came to you and told you to pump more borrowed money into your portfolio when the value was so greatly depressed?
- when the final margin call was made which saw you in negative equity?

It seems to me the warning signs were coming thick and fast that this "conservative" strategy wasn't anything of the sort. We know Storm ignored the warning signs. But it was your money they were playing with Frank, you could have stepped in and said "enough". But for whatever reason you chose not to, and now you claim ignorance and blame the contractual arrangements between the banks and Storm 100% for your loss!

With this mentality, I am truly amazed you walked into Storm with over $1,000,000 in assets in the first place.