Storm Financial Group

SJG1974 · 14 February 2012

Harleyquin said:
SJG you need to direct those questions to the financial planner who Frank went to. Frank was the client, and he like so many others, were told that this was a safe genuine investment strategy...by people who have already done the big R word ie RESEARCH. ASIC thought this advice was OK. The FPA thought this advice was OK. The entire Aussie banking industry thought this advice was OK. What's your problem!!!! She asked..very tongue-in-cheek???!!!???

DoK and Maccka love all of those quotes.

Oh and DoK don't take my use of the term 'wish' tii literally...I don't.

Sorry HQ, I know what you are selling but I am not buying it.

Frank knew the risks that debt brings. Frank knew the risks in the investment strategy, hence his request for written statements by Stuart Drummond about how the risks would be managed. Frank knew that borrowing against his home served no benefit to him and was not necessary. Frank was a business man who had worked with debt before (anyone who had a home mortgage had worked with debt before). Frank lived through the 1987 stock market crash and saw the affect it had on the global economy. Frank lived through the high interest rates of the early 1990s which saw companies go out of business and homeowners struggle to pay their mortgages.

And Frank expects us to believe that despite all of the above, he thought that he was committing to a conservative strategy? Why…because Stuart Drummond told him so?

Step back and think about that for a minute and tell me whether you think Frank knew he was taking a risk when he proceeded with the strategy of DOUBLE GEARING INTO THE SHAREMARKET in light of the above?

I think of all of the posts on this forum, his claim that he thought this was a conservative strategy takes the cake. I mean please, give me a break.

In answer to your question, the only problem I have is the claim by almost every Stormer on this site that their financial ruin is 100% the fault of the banks and/or Storm. Yes the actions of the banks and Storm led you to where you are now and yes if laws have been broken they will rightly pay a price for that. But are their actions the only reasons why you are in your current situation?? No. Your actions also contributed to it- those being your choice to believe everything you were told and commit to the strategy and not even do a small amount of digging before committing your life savings.

HQ, do you not find it ironic that now people have lost their money they are prepared to dig hard and find out just what the banks and Storm did to bring upon this financial ruin, yet people like you claim that you had absolutely no reason to do any digging before you committed your life savings to a strategy you obviously did not understand?

bunyip · 14 February 2012

Harleyquin said:
A licensed financial advisor told us that this type of investment strategy was perfectly safe and gave a perfectly reasonable explanation why.

HQ

Can you elaborate on this 'perfectly reasonable explanation' that Storm used to convince you their strategy was 'perfectly safe'?

What exactly did they say in their 'perfectly reasonable explanation'?

maccka · 14 February 2012

doobsy said:
I do however want to clarify a couple of points. The Storm strategy was legal. It was a legitimate investment strategy.

Hi Doobsy,

You can try to clarify those points but you may wish to wait until the courts make that decision. It would seem to me that the legality of the scheme offered by Storm Financial and the related banks is very much in doubt. Hence the UMIS court action.

Also, I often wonder whether ASIC would have had a problem with Storm Financial and the banks if it had the volume of evidence about the scheme that it now has when it was making its original decisions?

cheers
Maccka

doobsy · 14 February 2012

maccka said:
Hi Doobsy,

You can try to clarify those points but you may wish to wait until the courts make that decision. It would seem to me that the legality of the scheme offered by Storm Financial and the related banks is very much in doubt. Hence the UMIS court action.

Also, I often wonder whether ASIC would have had a problem with Storm Financial and the banks if it had the volume of evidence about the scheme that it now has when it was making its original decisions?

cheers
Maccka

This should take about 10 seconds.

I could have run the same strategy for my clients. No relationship with a particular bank, no special LVR deals. But let me be clear the strategy was to turn a client upside down, shake them until every drop of equity fell out and then take that equity and gear it at 50% into the share market.

Some clients had existing equity. Some clients had equity in their homes which meant double gearing. Some had super they could access. Some had a conbination of all of the above.

Again. The strategy in it's most simple form was to access every last cent of equity if possible and then gear that at 50% or thereabouts.

Nothing illegal, nothing untoward, nothing to set off flags with ASIC or the FPA.

The strategy was legitimate. What was not was the way it was sold and the people it was sold to.

UMIS, the relationship with BOQ and CBA mortgage lending, the relationship with Colonial and Macquarie Margin Lending are all external influences that had impacts but they are not the strategy.

There are still plenty of advisers pushing this strategy right now, most probably being a bit more careful on LVR levels. Are they operating illegally? No. As long as it is for the right clients and they are disclosing the real risks involved.

Happy Macca?

bunyip · 14 February 2012

SJG1974 said:
Sorry HQ, I know what you are selling but I am not buying it.

Frank knew the risks that debt brings. Frank knew the risks in the investment strategy, hence his request for written statements by Stuart Drummond about how the risks would be managed. Frank knew that borrowing against his home served no benefit to him and was not necessary. Frank was a business man who had worked with debt before (anyone who had a home mortgage had worked with debt before). Frank lived through the 1987 stock market crash and saw the affect it had on the global economy. Frank lived through the high interest rates of the early 1990s which saw companies go out of business and homeowners struggle to pay their mortgages.

And Frank expects us to believe that despite all of the above, he thought that he was committing to a conservative strategy? Why…because Stuart Drummond told him so?

Step back and think about that for a minute and tell me whether you think Frank knew he was taking a risk when he proceeded with the strategy of DOUBLE GEARING INTO THE SHAREMARKET in light of the above?

I think of all of the posts on this forum, his claim that he thought this was a conservative strategy takes the cake. I mean please, give me a break.

In answer to your question, the only problem I have is the claim by almost every Stormer on this site that their financial ruin is 100% the fault of the banks and/or Storm. Yes the actions of the banks and Storm led you to where you are now and yes if laws have been broken they will rightly pay a price for that. But are their actions the only reasons why you are in your current situation?? No. Your actions also contributed to it- those being your choice to believe everything you were told and commit to the strategy and not even do a small amount of digging before committing your life savings.

HQ, do you not find it ironic that now people have lost their money they are prepared to dig hard and find out just what the banks and Storm did to bring upon this financial ruin, yet people like you claim that you had absolutely no reason to do any digging before you committed your life savings to a strategy you obviously did not understand?

What do you reckon Frank?
Is there any truth in what SJG is saying here?
Or is the lad talking through his hat?

bunyip · 14 February 2012

Solly said:
bunyip,

Are you able to share with us what this 'personal experience' was ? Have you suffered that same magnitude of personal loss and circumstance as the Stormers and have you since recovered ?

S

Suffice to say it was an investment that didn't work out. I've been investing since I was in my twenties and I've done well enough overall, but that was one that didn't perform to expectations. I did my research and assessed the risks to the best of my ability, but I still went down a few hundred grand - a considerable amount of money more than 20 years ago when I was a youngster.
The loss was largely due to circumstances beyond my control, but not entirely.
It would have been pointless to become sour and bitter and blame everyone but myself.
I accepted responsibility for my decisions and actions, learnt from my mistakes and moved on to the next challenge.
I'm pretty happy with where I am at present.

Harleyquin · 14 February 2012

The lads talking through his hat.

I know what you're selling too SG and I'm not buying it.

No Bunyip I can't elaborate, because I simply can't remember everything we were told. How I wish we had a recording of our conversation.

You almost convinced me for five minutes that I bear an enormous responsibility for believing our financial planners advice. I will never ever accept this level of criminality as being OK, these financial people, and that include the banking fraternity, are the ones who need to do all that research that you conveniently and consistently bring up.

Doobsy you may believe it was all storms fault. Personally after much research on the subject, I feel quite confident in saying you are wrong, very wrong.

Good move to open a new site Frank I approve. Some of us still need to vent.

Judd · 14 February 2012

When I first read this thread way, way back I was of the view that ex-Storm clients were greedy, stupid, naive and all that stuff.

After reading the majority of submissions to the Parliamentary Inquiry and the comments of some posters to this thread my view has moderated to a degree. Not a complete 180 mind you as I still have certain views and biases as to an individual accepting at least a level of responsibility for their actions.

Having said that, as a person who is not directly affected by this financial disaster, and a disaster it surely is, I am not entirely sure that it is proper to infer that former Storm clients were or are irrational as that could be projecting my biases and beliefs on to them. So only those who made the decision to follow Storm's advice know if they were acting rationally or not.

All the best to those former clients of Storm. I wish you well.

SJG1974 · 14 February 2012

Harleyquin said:
The lads talking through his hat.

I know what you're selling too SG and I'm not buying it.

Well there’s a surprise!

Frank has time and again through his posts shown that he knew there were risks in the strategy. He was so concerned about the risks, that he made repeated requests for Stuart Drummond to tell him in writing how those risks would be managed. He has gone to great lengths to prove to us just how worldly and clever he is. He has admitted that he had no need to borrow against his house, yet he did so anyway.

And yet he has also claimed that he thought borrowing against his house, borrowing again and sinking the whole lot into the sharemarket was a conservative strategy...that his desired outcome from double gearing was not to build capital, but to preserve it! He claimed that he knew shares can go up and down, yet he invested the whole lot in shares (actually more than the whole lot due to double gearing) and he expects us to believe that the purpose of this was to preserve his already more than adequate investment capital. :bs:

And none of these contradictions seem at all odd to you HQ? Good lord.

Frank is a man who with one post makes a claim then contradicts it a few posts later. Now I am not calling Frank a fibber, but....

SJG1974 · 14 February 2012

Now I am not sure if this has been provided previously, but I have stumbled across the Storm prospectus for their proposed listing. This will be good reading.

http://207.210.106.29/pdf/STORM%20Prospectus%20131107%20_%2010.00pm_Web.pdf

Cascade · 15 February 2012

There seems to be again some misunderstanding of the VAS system that CBA used and other comments in regards to the relationship between Storm and CBA in NQ.

I would like to clarify again the VAS system that was used by the CBA. In my last post #4826 (long time between drinks) I explained the VAS system and how it worked.

- It was used by all staff in the CBA nationwide
- It was designed to save the Bank money given they no longer needed to pay an external valuer for a valuation
- Storm did not have access to it in any way

In regards to a 'rogue branch' again referring to my original post #4769 a large majority of loans were audited and passed (over 700 loan files) so this rogue branch is far from being true.

This is purely something the Spin Doctors at CBA have made up to keep the heat of them.

There is no doubt that the CEO knew about the relationship on Storm and CBA, you can not aware that Area the top performing Area nationwide for a number of years and not understand why they are doing so well. Incidentally though, the Storm connection was only one contributing factor to the Areas success, and was not the only reason why it achieved what it did.

Solly · 15 February 2012

bunyip said:
Suffice to say it was an investment that didn't work out. I've been investing since I was in my twenties and I've done well enough overall, but that was one that didn't perform to expectations. I did my research and assessed the risks to the best of my ability, but I still went down a few hundred grand - a considerable amount of money more than 20 years ago when I was a youngster.
The loss was largely due to circumstances beyond my control, but not entirely.
It would have been pointless to become sour and bitter and blame everyone but myself.
I accepted responsibility for my decisions and actions, learnt from my mistakes and moved on to the next challenge.
I'm pretty happy with where I am at present.

Thanks bunyip,
It was good that you had time on your side to recover. I have never had any large financial disasters and have always invested plenty time to fully research my ventures. Plus I have always had good solid mentors. But in retrospect there has also been just a "smidgen" of good luck that assisted me as well, against some unforeseen less than desirable factors.

bunyip · 15 February 2012

SJG1974 said:
Now I am not sure if this has been provided previously, but I have stumbled across the Storm prospectus for their proposed listing. This will be good reading.

http://207.210.106.29/pdf/STORM%20Prospectus%20131107%20_%2010.00pm_Web.pdf

Good work SJ.

I wonder what the butterfly on the front page was all about?
Maybe Cassamatis borrowed Mohammed Ali's motto - 'Float like a butterfly, sting like a bee'!
EC certainly stung pretty hard with his 7% upfront fees!

SJG1974 · 15 February 2012

bunyip said:
Good work SJ.

I wonder what the butterfly on the front page was all about?
Maybe Cassamatis borrowed Mohammed Ali's motto - 'Float like a butterfly, sting like a bee'!
EC certainly stung pretty hard with his 7% upfront fees!

Yep having scanned over it last night it is an interesting read....and certainly there seem to be some contradictions to what clients actually say they experienced when they saw Storm. For example:

Storm talk about the long lead time and education process to ensure clients understand Storm's differentiated model and the associated risks and benefits. Based on what Stormers have said around here, they still had no understanding of what they were doing by the time education finished and they signed up to the strategy.

They also make it clear that gearing is the staple service of the business and that their goal is to maximise return on equity, not return on investment. Yet we have had Storm clients tell us they weren't trying to maximise their wealth, just protect it (with gearing).

As a further point, one look at their website and two paragraphs on their home page spell out what Storm is about...

"Our prime objective is to assist you to make money to achieve wealth so you are free to spend on the things you want"

"Part of our vision is putting within reach of the average Australian the wealth creation instruments that are traditionally the domain of the rich" Now these statements don't suggest to me that Storm's aim is to preserve capital....it tells me that they expect to make me wealthy.

There is no reference to it being a conservative strategy, the only time the words conservative are used are in relation to the margin loan LVRs, yet Storm clients have claimed that the strategy sold to them was conservative.

It certainly shows that there is a huge difference between what Storm publicly said they do and what clients have said they actually did.....and that is even before we get to the role the banks played in the whole mess and the failure of the high risk strategy itself.

Solly · 15 February 2012

SJG1974 said:
Yep having scanned over it last night it is an interesting read....and certainly there seem to be some contradictions to what clients actually say they experienced when they saw Storm. For example:

Storm talk about the long lead time and education process to ensure clients understand Storm's differentiated model and the associated risks and benefits. Based on what Stormers have said around here, they still had no understanding of what they were doing by the time education finished and they signed up to the strategy.

They also make it clear that gearing is the staple service of the business and that their goal is to maximise return on equity, not return on investment. Yet we have had Storm clients tell us they weren't trying to maximise their wealth, just protect it (with gearing).

As a further point, one look at their website and two paragraphs on their home page spell out what Storm is about...

"Our prime objective is to assist you to make money to achieve wealth so you are free to spend on the things you want"

"Part of our vision is putting within reach of the average Australian the wealth creation instruments that are traditionally the domain of the rich" Now these statements don't suggest to me that Storm's aim is to preserve capital....it tells me that they expect to make me wealthy.

There is no reference to it being a conservative strategy, the only time the words conservative are used are in relation to the margin loan LVRs, yet Storm clients have claimed that the strategy sold to them was conservative.

It certainly shows that there is a huge difference between what Storm publicly said they do and what clients have said they actually did.....and that is even before we get to the role the banks played in the whole mess and the failure of the high risk strategy itself.

SJG1974
I have previously posted extracts from this prospectus where page 37 is an area of interest to me.

Section 4
4.3 Storm’s differentiated and
innovative business model
4.3.2 Optimising the client’s personal
balance sheet;....

Et cetera.

Where it mentions MLVRs set to a conservative level.

I still do not have clarity of what the Ignite supplied Phormula actually did,
how it interfaced, what routines it performed and its output methods.

S

SJG1974 · 15 February 2012

Solly said:
SJG1974
I have previously posted extracts from this prospectus where page 37 is an area of interest to me.

Section 4
4.3 Storm’s differentiated and
innovative business model
4.3.2 Optimising the client’s personal
balance sheet;....

Et cetera.

Where it mentions MLVRs set to a conservative level.

I still do not have clarity of what the Ignite supplied Phormula actually did,
how it interfaced, what routines it performed and its output methods.

S

Solly,

It would appear from the page in the Prospectus you refer to that Phormula's "role" was to actively manage the client's debt position, and reduce the risks associated with leverage, including avoiding margin call events. Obviously, it failed big time in this area.

And secondly it seems to have been used to identify times where the LVRs decline, thus providing the opportunity for clients to make Step investments. The prospectus was pretty clear that the fees for step investments were an important source of revenue for the business. It would seem that on this score, the Phormula software worked, as evidenced by the 2,000 or so SoAAs sent to clients in July and August 2007 which resulted in an additional $93 million invested.

On page 36 of the prospectus it states the avergae fee on a step investment was 6.4%...so on the $93million invested in Septmber 2007, they earned almost $6 million. Not bad money that for a months work.

So it was able to detect when LVRs were too low, and quickly get SoAA out to clients getting them to ramp up their borrowings, and generate more fees for Storm, yet was unable to detect when the LVRs got too high and clients approached margin call, when they should have been pulled out of the market which would have cost Storm money.

And of course, the home loan debt seems to have been completely ignored.

Like journalist Michael West said early in the piece, their strategy was like betting against winter.

Solly · 15 February 2012

SJG1974 said:
Solly,

It would appear from the page in the Prospectus you refer to that Phormula's "role" was to actively manage the client's debt position, and reduce the risks associated with leverage, including avoiding margin call events. Obviously, it failed big time in this area.

And secondly it seems to have been used to identify times where the LVRs decline, thus providing the opportunity for clients to make Step investments. The prospectus was pretty clear that the fees for step investments were an important source of revenue for the business. It would seem that on this score, the Phormula software worked, as evidenced by the 2,000 or so SoAAs sent to clients in July and August 2007 which resulted in an additional $93 million invested.

On page 36 of the prospectus it states the avergae fee on a step investment was 6.4%...so on the $93million invested in Septmber 2007, they earned almost $6 million. Not bad money that for a months work.

So it was able to detect when LVRs were too low, and quickly get SoAA out to clients getting them to ramp up their borrowings, and generate more fees for Storm, yet was unable to detect when the LVRs got too high and clients approached margin call, when they should have been pulled out of the market which would have cost Storm money.

And of course, the home loan debt seems to have been completely ignored.

Like journalist Michael West said early in the piece, their strategy was like betting against winter.

Yes thanks SJG1974,
I understand the intent of the system, I am looking for clarity on the platform or environment it was running in and the software architecture of the system.
This has always been somewhat of a mystery to me.
S

Solly · 15 February 2012

Ping: Frank are you still an active contributor to this forum ?

I have noticed you have been rather subdued since I noticed a recent post of yours disappeared.

My colleagues and I are eager to know if your new forum is active.

S

SJG1974 · 15 February 2012

Solly said:
Yes thanks SJG1974,
I understand the intent of the system, I am looking for clarity on the platform or environment it was running in and the software architecture of the system.
This has always been somewhat of a mystery to me.
S

A black box it seems. It would be good to know what those speedometers were supposed to show.

maccka · 16 February 2012

Myth : Borrowers could work out their own security values

cheers
Maccka

Storm Financial Group

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