Storm Financial Group

[Stan 101]

Dodgy is not illegal. Ethically immoral maybe. Yes I said it's madness to go into hock and I would never recommend it but 1. I'm not a FP and 2. I wasn't privy to the client - FP conversations.

Ever thought that to lose the pension for the above chap was part of the plan to reap greater gains? Forego a government handout and use a great leverage capacity. Again. I can spend all night coming up with fantastic scenarios and so can you. Neither of us have the facts.

How do you know the man above didn't walk in and say he wanted to leave his kids $2 million because he is seeing all the "wealth" in Townsville?

I typed on this site about 12 months ago that people of Townsville were living in a fantasy land with unsustainable real estate values. The people on the street were telling me I was a fool not to be buying in Townsville when I lived there. It was an explosion waiting to happen. The Townsville I know is a city of greed and fantasy. The quantity of people driving around in the Holden Special Vehicles and the like is lunacy. It seems Storm and the Townsville population worked well together until that damn ASX got in the way and ruined it for everyone.


I suppose I'll be classed as an evil person feeding off the unfortunate when I wander in to Townsville in the coming months - year and start picking the eyes out of the real estate being liquidated. The real estate that is leveraged to the hilt just so the locals can boast about their portfolios containing 5 properties to the rest of the "latte" set at the 4 cafes in Gregory St.


I've said my piece on this now. I can not add to what I've already typed and I'm happy to disagree with you and leave it at that. I doubt we will ever see eye to eye on this matter.


Cheers,

 

[ShareGuy]

I've said my piece on this now. I can not add to what I've already typed and I'm happy to disagree with you and leave it at that. I doubt we will ever see eye to eye on this matter.

Agreed, but gee what did Townsville ever do to you? Property prics here are so high for two reasons the army base and the mining boom. Now that the mining boom is coming off it will be interesting to see what happens to prices but they haven't budged a bit yet (not like NSW where they are already in recession) but they will just a matter of how far.

ps; who doesn't need a HSV!!!!!!! lol

 

[Solly]

"QUT (Queensland University of Technology http://www.qut.edu.au/) currently delivers a Master of Business (Applied Finance) to 20 financial advisors within the Storm Financial Group. This program is delivered in four intensive sessions per year over a period of three years. This program, including assessment, is tailored to fit in with participants’ business commitments."

It's from this link here:

http://www.corped.bus.qut.edu.au/programs/ourclients.jsp#Storm

Didn't an endorsement about this course appear somewhere on the Storm website at sometime...?

As they say......."Only in Queensland"...........

I beleive that this is the course referred to above;
http://www.courses.qut.edu.au/cgi-bin/WebObjects/Courses.woa/wa/selectMajorFromMain?courseID=7108


I note there is one Unit, EFN505.

Financial Risk Management
http://www.courses.qut.edu.au/cgi-bin/WebObjects/Courses.woa/wa/selectUnitFromCourseDetails?structureID=18528&courseID=7108&idunit=18513

Where the synopsis states in part...
"The unit covers the main areas of modern risk management. The focus is on measuring and managing risks in financial institutions........"

"Topics covered include ....prudential regulation of financial institutions, measurement and management of market risks, hedging strategies....."


Interesting.........

 

[pilots]

People here are crying about how they have been miss lead, you was all told by a sales man you will make loads off money, had that come off you all would be happy. Well it did not come off, it was only ever going to go, two ways, up or down, you had a 50/50 chance, you lost, DON'T WASTE YOUR TIME trying to get it back, only the lawyers will win.

 

[bunyip]

People here are crying about how they have been miss lead, you was all told by a sales man you will make loads off money, had that come off you all would be happy. Well it did not come off, it was only ever going to go, two ways, up or down, you had a 50/50 chance, you lost, DON'T WASTE YOUR TIME trying to get it back, only the lawyers will win.

I'm inclined to agree. But don't let our friend Carey Ramm hear you say that, or he'll accuse you of being a Storm plant or a bank troll.

Yesterday I was talking to a relative who has a business degree and is employed in an executive position with Telstra. He's a pretty switched on bloke who usually has his finger on the pulse, and knows plenty about the dealings in the corporate world. He reckons those big law firms take on those class action cases by setting up a trust account for clients, with say a $1000 entry fee. All the clients put in a grand each, which most of them can get hold of even if the have to get donations from family members. So the law firm might have 400 clients put in a combined total of 400 grand. The firm goes to work on a hefty hourly rate which is paid from the trust account. When the account is getting a little depleted, they tell clients they're making solid progress, and ask them to put in another grand to continue the fight. It can go on almost forever, with the law firm having one opportunity after another to keep asking clients to inject further funds. No more funds, no more representation from the law firm.
He says they'll even take on cases they consider a long shot with limited chance of winning, but if they do win they get a very generous cut of the compensation won, and if they don't, well, they've been very well paid for their efforts anyway.

 

[Trevor_S]

it's storms advise that is to blame not the banks!

These guys would disagree with you

Penniless couple blame bank for loss of $5.2m

Once again I am mystified at why they had a highly leveraged margin loan at that stage of their life for (mine, in mid December was at 44% and I am in my early 40's!)... (and that doesn't mean I am not interested to find out why the bank lent them funds with such a crappy income stream ie where there falsehoods on the submitted documentation or was the bank lax in their lending practice ?)

I (and surely everyone) knows why the FP's got them to adopt that investment model, to make money for the FP, one just had to look at the office in Townsville to see that. It will be interesting to see if the Court thinks that advise conflicts with the Law, I doubt that it will but who knows.

I hope they find some solace in blaming all and sundry and can get on with things but I doubt the revenge they are seeking will be the salve for the pain they feel.

 

[Judd]

The online Townsville Bulletin has an article today regarding an retired elderly couple who have done about $4.6m and still owe the banks $630k. Very sad indeed.

What they were doing by having debts when retired, ie limited cash flow and vunerable when/if a down turn arrived, which it did, it totally beyond my understanding and against anything I have read previously. Certainly you can have a margin loan when retired just make sure it is very conservatively geared (15% to no more than 25%), that you have the certain cash flow to pay off the interest plus a bit more and that the LVR for each share held is 70% or greater. But don't use your home for the punt. Never, never, never put the roof over your head at risk if retired unless you love the thrill of speculating and wish to increase the odds. Simple common sense.

In any event, this couple:

1. don't blame Storm but blame the banks for selling the investments too soon [What before they got to zero value?];
   
2. pooled their superannuation [You gotta be kidding me. Even the suggestion is a big warning bell] and invested with Storm.

The gentleman in question is 73. Now I would have thought that: he was around for the 1960's credit squeeze with the resultant collapse of a number of corporations and the tanking share market, the tanking in the early 1970's of the share market; the 1987 tanking of the share market; the 1994 tanking of the share market; the 2001 tanking of the share market. I remember them or have read about them and I'm just 50 and well aware of what can happen to share based investments, including superannuation.

Well, he now aware of the tanking of the share market 2007 to Date Unknown.

I just cannot understand the blind faith displayed by this couple and others likewise affected.

Edit: Sorry Trevor_S, you got in before me.

 

[Junior]

I don't see how all the blame can be placed on Storm FPs. The major banks knew about the advice, ASIC knew about the advice and no one had any issue with it. We have experienced a massive stock market crash and the bursting of a huge credit bubble, lots of people lost a lot of money. Yeah, the advice was aggressive, but the body regulating the industry was well aware that this advice was being given, and all these individual investors made a conscious decision to follow the advice in pursuit of huge gains.

 

[ROE]

GREED play a big part, one of the seven deadly sins

People these day don't want to settle for 4%-6% return they want all double digit returns.. History teach you that any return higher than government bonds bear risk and that risk including losing your capital...and if you leverage with your capital well double the lost.

 

[Julia]

He reckons those big law firms take on those class action cases by setting up a trust account for clients, with say a $1000 entry fee. All the clients put in a grand each, which most of them can get hold of even if the have to get donations from family members. So the law firm might have 400 clients put in a combined total of 400 grand. The firm goes to work on a hefty hourly rate which is paid from the trust account. When the account is getting a little depleted, they tell clients they're making solid progress, and ask them to put in another grand to continue the fight. It can go on almost forever, with the law firm having one opportunity after another to keep asking clients to inject further funds. No more funds, no more representation from the law firm.
He says they'll even take on cases they consider a long shot with limited chance of winning, but if they do win they get a very generous cut of the compensation won, and if they don't, well, they've been very well paid for their efforts anyway.

I mentioned a while back that I'd had a minor association with a failed private mortgage scheme where Worrels were appointed liquidators.

What you've described above is exactly how Worrells worked. When they were called in there was considerable value remaining in the properties. Then Worrells strung out their investigations over several years, their fees absorbing the cash from the property sales. Then they said "well, folks, we're doing just fine here, making real progress, but guess what, we need a bit more money from you to continue." I don't know if anyone fell for it.

So this raises another question: in the Storm case, who will be paying Worrells? The Cassimatis? And Korda Mentha are acting for CBA.
Will they be paid by the CBA or will they also ultimately bill the Storm principals?

 

[asproboy]

I don't see how all the blame can be placed on Storm FPs. The major banks knew about the advice, ASIC knew about the advice and no one had any issue with it. We have experienced a massive stock market crash and the bursting of a huge credit bubble, lots of people lost a lot of money. Yeah, the advice was aggressive, but the body regulating the industry was well aware that this advice was being given, and all these individual investors made a conscious decision to follow the advice in pursuit of huge gains.

As I understand it, Storm is accountable - under the terms of their licence - for providing advice to clients that considers their personal circumstances, attitudes to financial matters and their own financial objectives. In "selling" a 'one-size-fits-all' strategy (and an aggressive, high-risk one at that) to all the clients they could fails their obligations under their license. To continue to leverage up these clients in a way that allowed little margin for market volatility is a complete failure to the clients themselves.

There is no doubt the C's were very charismatic, had an answer for everything, and engendered a following amongst their clients that bordered on cult-like.

Let's not let our bank-bashing culture divert from the truth of the matter here. Only one firm purported to offer advice that was designed to deliver outcomes according to their clients' wishes. Storm Financial operated an 'independent' license and the banks would have no visibility of the advice for obvious privacy reasons.

From what I see, the banks merely provided products that allowed the adviser to implement that advice. If there is evidence of collusion or avoiding safeguards that should have been in place, then let's get it all out and assign the appropriate level of blame.

I currently think it's an extreme link to blame the bullet manufacturer when someone seduces you with the idea of freedom and empowerment, hands you a loaded gun, and tells you that nothing can go wrong.

 

[Julia]

ABC Radio News states there will be an interview with Storm principal this evening on the 7.30 Report.

 

[Solly]

ABC Radio News states there will be an interview with Storm principal this evening on the 7.30 Report.

Thanks for the heads up, I'll be interested in observing the behaviours and language used in responses.

 

[Garpal Gumnut]

ABC Radio News states there will be an interview with Storm principal this evening on the 7.30 Report.

It gets curioser and curioser.

From the ABC online tonight.

http://www.abc.net.au/news/stories/2009/01/27/2475655.htm

Storm customers, who face losing their homes and life savings, will gather in Townsville tomorrow night to hear options for action against the company and associated banks.

The firm's founder, Emmanuel Cassimatis, has told ABC1's 7:30 Report he has done nothing wrong and the company did not advise clients to go too heavily into debt.

He says he is also facing financial ruin and the banks are to blame for the company's collapse.

"I feel a huge moral responsibility. Our clients trusted us implicitly, we trusted the system, we trusted all the players in the system, we trusted the bank; it went horribly, horribly wrong," he said.

I'll be watching it.

gg

 

[Solly]

Here is a letter to The Age about two former storm clients aged 70 and 65 and retired, by a person stating that they are a forensic accountant.

In part the letter states:

"Adjusting the model for their actual tax rate (zero) and a realistic adjustment for living inflation (3.5%) they would in fact have still owed Macquarie around a net $90,000 at the end of the 17 years.

Had accurate and realistic modelling inputs been used, Storm's own financial model would have shown the investment to not be viable for these clients and they should not have been invested.

Subsequently, just two margin calls wiped out their wealth."

The full letter and the writer's opinion is here.

http://business.theage.com.au/business/storm-financial-letter-1-20090127-7qh0.html

 

[Solly]

Storm collapse raises intervention issues

FPA chief executive Jo-Anne Bloch says....

that prior to November 2008 the FPA had no cause to investigate Storm as they had completed their compliance requirements and conducted themselves like any other member of the FPA.

"The fact that margin lending will become a regulated financial services product will help," she said.

"It has been a gap in financial services that margin lending has fallen between the cracks, but the issue in terms of Storm's business model and at what point of time do you step in is one where Australian law is pretty clear and the concept of innocent until proven guilty must apply."


Full story by Kate Kachor at Investor Daily is here;

http://www.investordaily.com/cps/rde/xchg/id/style/5618.htm

 

[Solly]

ABC Radio News states there will be an interview with Storm principal this evening on the 7.30 Report.

I saw a devastated man who can't believe his empire was pulled from under him.....

Life is a hard task master.

Transcript here:

http://www.abc.net.au/7.30/content/2008/s2475656.htm

 

[pilots]

Just watched the 7.30 report, it is sad what has happened, and this is only the start, you will see a lot more of this happening in the next six months. On all the share postings they tell you DYOR. The biggest mistake the people made was to believe a sales man.

 

[cuttlefish]

One comment that Cassimatis made in the interview led me to think that CBA may have not made the margin calls until the share portfolio's were well over the margin limit - as opposed to making the margin calls and selling the stock as soon as they hit the margin limit. This may have occurred - and if it did then people possibly didn't get margin called until they were a lot further into the red than they were supposed to be. This would understandably be a cause of frustration but is also quite a ridiculous thing to rely upon.

It is incredibly poor portfolio management to rely on a lender to execute a margin call/sale of stock rather than monitoring the position of the portfolio yourself.

I assume that Cassamatis managed private investors portfolios on their behalf, or that we are talking about margin calls on the Storm baded index funds? Anyway, interesting insight, on balance my subjective view (i.e. opinion only) is still that Storm bears the main responsibility for the situation. (and that any investor that has borrowed a lot of money bears a high level of personal responsibility for monitoring the investments made with that money).



There's also downloadable video on the right hand side of the page on the link Solly posted.
http://www.abc.net.au/7.30/content/2008/s2475656.htm

 

[Solly]

Just watched the 7.30 report, it is sad what has happened, and this is only the start, you will see a lot more of this happening in the next six months. On all the share postings they tell you DYOR. The biggest mistake the people made was to believe a sales man.

DYOR , for me is seeking multiple varied opinions from a range of people and sources, asking questions including asking the same question in multiple ways.
While I have no basic abhorrence to the engagement of FPs, I still use a spread of investment techniques, this also mitigates, avoids and transfers risk. Sometimes Salespeople have something to offer but only if you can pay the price and/or is beneficially deductable.