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Storm Financial Group
- Thread starter Garpal Gumnut
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Good evening ASICK!
Do you really believe that Banks will settle their disputes with us if they feel that they have nothing to answer for? The CBA Resolution Scheme was not offered by the CBA because it felt any compassion for those that lost money through Storm and were customers of that bank. Rather, it did so because it allowed them to offer 10% of what they churned out of their Storm clients and this seemed an easy solution for them and a cheap one as well. In this way, the CBA also sought to avoid the fall out in bad publicity that follows an event like this. But most of all, they decided to go down this road because they are fully aware (and have admitted as such) that they have been guilty of a number of breaches in statute and commercial law where Storm’s CBA customers were concerned.
As to whether people were wise to settle or not that is a decision for each individual involved because everyone has a different set of circumstances to consider. Further, if they were strapped for cash they had little choice. The CBA knows this only too well and has used this as a hammer!
It is not easy to spend whatever money we have left on legal fees but that’s the only hope we have of obtaining justice. Sure, we can cave in and take the money! Sure we can sit back and let others find the money and wait for the compensation they obtain for us through the justice system. Sure we can sit back and curse our luck but that doesn’t get it done.
For me personally, if we lose, so be it, but not to have tried at all, be deterred by detractors, decide that it’s all too hard or leave it to others is not in my nature. There are many among us like me that will see this through until the end, no matter how long it takes or whatever it costs. It's a matter of principle.
In a later posting you stated that “I'd be interested if you'd give an outline of those defences. (blow by blow, claim <--> defence, just briefly is fine)."
I have outlined some defences that I anticipate the banks might employ in my posting “Let justice be done, though the heavens fall.” - (Fiat justitia, ruat coelum.) (Part 1). Then again, some members feel that the banks do not have anything to defend. They seem to feel that we would all be better off accepting the ‘status quo’ rather than try to change it because that’s the way it is, and that’s the way it will always be! I often wonder how they would react if they found themselves in our shoes? Would they be so conciliatory then? I doubt it!
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Hi Doobsy!
No because the queue would be too long! Here's some recommended reading matter for you!
"What Have We Learned From Lehman's Monumental Failure?
"As the fourth anniversary of the failure of Lehman Brothers approaches, investors are no more protected than they were during the bubble mania.
The megabanks have gotten bigger as behemoths like Bank of America swallowed up troubled firms like Merrill Lynch. They’ve gotten so big that old Wall Street lions like Sandy Weill have called to break them up, which is one way to stem systemic risk."
See full article at web site http://www.forbes.com/sites/johnwasik/2012/08/29/what-have-we-learned-from-lehmans-failure/
Some quotes from such"
"Fiduciary duty, which would’ve compelled brokers to take legal responsibility for their recommendations, is seemingly dead in its tracks. ...the industry succeeded in curbing this profound investor protection rule, perhaps indefinitely."
"As if Wall Street wasn’t doing enough in its unrelenting fusillade to shut down any meaningful regulation, it got through a provision in the JOBS Act that will ease the rules for anybody raising money for initial offerings on the Internet. Now virtually anyone can become an investment bank. How’s that for democratic capitalism?"
"What Dodd-Frank would’ve done for investors is immeasurable. Brokers would be forced to act in their clients’ best interests instead of bowing to their firm’s bottom line. If fiduciary duty was in place prior to the crash, Lehman would not have sold billions of dollars of structured investments laughingly called “principal protected notes,” which swindled countless older investors thinking they were buying secure bank vehicles. Since the notes were linked to Lehman’s creditworthiness, they became worthless and thousands of investors are still trying to get their money back. Thousands of these products are still being sold by brokers and banks with scant warnings to investors.."
"Some of the most indelible insights on the Lehman failure have come from Lawrence McDonald, who wrote A Colossal Failure of Common Sense:" Boy, that word "commonsense sounds familiar!
"...none of the Lehman brigands were ever sent to jail, nor any of their cohorts in the other investment banks and derivatives houses."
"...it wasn’t Lehman’s size and 40 times leverage that was the systemic problem. It was their $7 trillion of counter-party derivative risk, exposing banks across the world to incalculable destructive forces, this time the dominoes moved only inches apart." My, my! It seems that we weren't the only ones overleveraged?
"Last week, 60-Minutes re-aired a shocking revelation that the SEC was actually inside Lehman Brothers for most of 2008. What did they learn? Did the critical information die on the vine? Many people feel the reason there have been no criminal charges filed against Lehman executives is because the SEC is actually culpable, since they were inside the bank! In 2008, there were 3,798 people working at the SEC. Only 24 people were assigned to regulate the ten largest investment and commercial banks.” Shades of ASIC here!
"Unless the derivatives market is policed, banks are reduced in size and speculative trading separated from other banking activities, there won’t be a bailout next time. Then the global economy won’t be too big to fail and we’ll all get stung by the nuclear-force swindle"
We are talking here about America but “ditto” in Australia as well because “we just love everything American!”
What message does this send to any would be investors out there! Don’t even think about it! The cowboys are still operating in our financial sector in the guise of bankers and financial advisory firms - regulated by an uncaring government and policed by an omnipotent Regulator. How do you pick the good from the bad? You can't because they all look the same. Therefore, instead of contacting any of them, financial advisers that is, my advice to any would be investors would be to visit a casino and have a punt. It’s the same thing really but at least you can watch your money being lost rather than have a bunch of clowns do it for you whilst you are kept in the dark.
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In my reply to this, make it "impotent" instead of "omnipotent" for ASIC. A senior moment!
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ASIC - Is it time for a Royal Commission?
"Mackay grandma bankrupts businessman"
BY: ANTHONY KLAN From: The Australian August 28, 2012 12:00AM
AFTER presiding over seven multi-million-dollar company collapses spanning the past decade, failed businessman Leslie Freeman has been bankrupted by a Mackay grandmother.
See full article at
http://www.theaustralian.com.au/bus...upts-businessman/story-e6frg97x-1226459351188
Extract:
“ASIC said it was not investigating Your Trading Room or Mr Freeman and that it planned to take no further action regarding the company or allegations Mr Freeman operated it while banned as a director.
That stance has angered YTR customers such as Lynne Fairhall, who has led the charge against the company and Mr Freeman and is in contact with many other customers associated with the scheme via internet chatrooms.
"What's the point ... if the authorities aren't willing to do anything about it when people alert them to problems and give them evidence?" Ms Fairhall said.
"Many of the group were saying why bother with contacting ASIC and filling out their forms given they're just a toothless tiger."
Up to 2000 small investors worldwide had paid between $5000 and $20,000 to YTR to be instructed in foreign currency trading, a high-risk strategy. Some investors invested $US300,000 or more with the company.
The collapse of Your Trading Room raises serious questions for ASIC, such as why it registered a company that had no directors and no shareholders, and why it failed to monitor such a company despite its extremely close connections to Mr Freeman.
ASIC repeatedly has refused to comment when asked those questions.”
"Mackay grandma bankrupts businessman"
BY: ANTHONY KLAN From: The Australian August 28, 2012 12:00AM
AFTER presiding over seven multi-million-dollar company collapses spanning the past decade, failed businessman Leslie Freeman has been bankrupted by a Mackay grandmother.
See full article at
http://www.theaustralian.com.au/bus...upts-businessman/story-e6frg97x-1226459351188
Extract:
“ASIC said it was not investigating Your Trading Room or Mr Freeman and that it planned to take no further action regarding the company or allegations Mr Freeman operated it while banned as a director.
That stance has angered YTR customers such as Lynne Fairhall, who has led the charge against the company and Mr Freeman and is in contact with many other customers associated with the scheme via internet chatrooms.
"What's the point ... if the authorities aren't willing to do anything about it when people alert them to problems and give them evidence?" Ms Fairhall said.
"Many of the group were saying why bother with contacting ASIC and filling out their forms given they're just a toothless tiger."
Up to 2000 small investors worldwide had paid between $5000 and $20,000 to YTR to be instructed in foreign currency trading, a high-risk strategy. Some investors invested $US300,000 or more with the company.
The collapse of Your Trading Room raises serious questions for ASIC, such as why it registered a company that had no directors and no shareholders, and why it failed to monitor such a company despite its extremely close connections to Mr Freeman.
ASIC repeatedly has refused to comment when asked those questions.”
Frank, I am well versed in the wall st failures but thanks for the link.
Not sure of the relevance. What companies based overseas do is up to them and their regulations. Maybe we should chase Bill Clinton as he has plenty of money and it was him that pushed for the investment banks to be allowed to gear at such levels in the hope "All Americans that want a home should be able to get one".
Aussie banks were geared around 4 x less due to great regulation by APRA and is the reason we powered through with such a small impact (in an overall sense).
I think I am done here, I will go back to viewing only for my clients sakes.
Good luck with your fight and chase to blame the banks for everything that has happened. As a final note I will re-instate my position:
The banks DO have areas that need to be answered and addressed but that does not include the overall strategy put together by EC and JC, adopted by the clients and put in place with the HELP of the financiers.
The banks are NOT to blame for the margin calls - clients or Storm could have sold out at any time - they are at fault for screwing up the margin call process.
Storm clients were all done in even if there had been no secret arrangements to change to margin call levels. They rode a falling market all the way to the bottom because their advisers were too stupid or scared to get them off a sinking ship.
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Doobsy,
“Not sure of the relevance. What companies based overseas do is up to them and their regulations.”
The GFC started in the States but its affects were felt right around the world because the banks in the States set the trend for banks globally and when they went under, the domino effect kicked in. To try and isolate what happened in the States from the rest of the world is therefore like trying to say that Adam fell from grace without Eve’s intervention. If you believe in all that to begin with, that is?
“Good luck with your fight and chase to blame the banks for everything that has happened.”
Anyone who reads back through my posts can hardly construe that I have let Storm off the hook where blame is concerned. In fact I’ve been one of their most vocal critics. So to suggest otherwise is somewhat bemusing. No one in their right mind would blame the banks for everything! It takes two to tango and Storm and the banks were pretty nifty at it. They must share the blame equally!
"The banks DO have areas that need to be answered and addressed but that does not include the overall strategy put together by EC and JC, adopted by the clients and put in place with the HELP of the financiers."
When people on this forum discuss these matters they tend to forget that the financial world was a different place back in 2008. Then it was the norm for banks and financial advisers to play hard and fast with investors money. The advice Storm gave to its clients to over-leverage their assets by taking out unnecessarily risky loans wasn’t in and of itself illegal. Certainly, it was “bad advice” but Storm’s directors and the Banks have not ended up in Court because they simply gave “bad advice”. If that were an offence half the financial advisers in this country would be locked up by now!
It is also a fact that the Banks mixed up in this debacle were never paid to give out financial advice as you have been quick to point out. So why then, you must ask yourself, have Storm’s directors and the Banks aligned with Storm ended up in the dock? I would have thought that people like yourself that have a vested interest in this matter would be curious about that? Particularly so when the Regulator, ASIC, has laid such charges! Yet, you persist in your argument that the fault really lies with the investors who believed in what Storm offered.
If the strategy that Storm used or the way the Banks went about supporting that strategy transgressed the laws that have been put in place to protect investors, then those in the dock will be found guilty. On the other hand, if they behaved within the confines of the law they will not. It’s as simple as that!
There are no “maybes” or “only if I feel like it” options open to people where the law is concerned, nor should there be. There is, however, doubt where we are concerned because nothing is simple in law and sometimes it is subjugated by money and influence that can ride roughshod over people’s rights. We can but hope that this doesn’t happen here.
“Storm clients were all done in even if there had been no secret arrangements to change to margin call levels. They rode a falling market all the way to the bottom because their advisers were too stupid or scared to get them off a sinking ship.”
I don’t believe that Storm or the banks “rode a falling market all the way to the bottom because their advisers were too stupid or scared to get them off a sinking ship.” I think they knew what a wonderful vein of gold they had found and didn’t want to let it go. Therefore they gambled that the markets would come good. When they didn’t the likes of the CBA jumped ship and laid all the blame on Storm. They have been doing so ever since.
"The banks are NOT to blame for the margin calls - clients or Storm could have sold out at any time - they are at fault for screwing up the margin call process."
You make it sound as if Storm alone was on the sinking ship. You make no mention of the banks’ responsibilities to make margin calls not only when such are considered warranted but also in “reasonable” time. Not in "their own good time" when the water has closed over their customers' heads! According to your argument Storm was in a position to dictate to the banks what they should do. That will be the day!
I’ll go along with one thing though! There is no question that because many investors in Storm were over-leveraged and were therefore in the “high risk” category, the GFC would have been terminal in many of their cases irrespective of what the Banks could have done. However, this is not about what the banks could have done but all about what they didn’t do at the end of 2008. Combine that with their wrongdoings when handling their Storm customers’ monies and you arrive at where we all are today.
I believe there are some (I think you are one of them) on this forum that think it unfair that so many investors were wiped out in 2008 when the share markets collapsed and yet those that were in Storm appear to have a second chance.
Frankly, I believe that the only reason Storm’s clients were any different from the rest was in the sheer weight of numbers. I believe there are many poor devils out there that have a case against their financial advisers and the banks that lent money at that time because recklessness was rife within the financial sector then. Unfortunately for them they are isolated and are bereft of the means to fight back. We that were in Storm do have the numbers and collectively we have found the monetary means to litigate. That, and that alone is why we have made it this far and they have not. It has nothing to do with justice and everything to do with being able to pay so that justice can be served. That, unfortunately is the way our society works.
There are also many on this forum that have pushed the barrow that “Storm investors must be held responsible for their own actions” because did they not arm themselves sufficiently with the necessary financial awareness to see through these nefarious schemes that Storm and its buddies in the Banks had concocted for mutual gain to the detriment of their clients/customers”.
In business there is a maxim! “If you know nothing about the business your in, either get expert advice or don’t have a bar of it!” We ‘Stormies’ now know that the so-called “expert advice” we obtained at the time from qualified professional financial advisers was tainted because they had ulterior motives for giving out this advice. The financial sector was replete with such individuals at the time so Storm was not alone. Does that situation still exist? Probably because the will to change from within seems somewhat lacking.
If we ‘Stormies’ had been astute as many here claim we should have been, then we should have seen through Storm’s overtures. “Beware the Greeks bearing gifts!”. Certainly, if we had been educated beforehand in “criminal profiling”, which is now a must do course for any would-be-investors, then we might easily have perceived that our financial advisers were shifty characters who could not be trusted. Actually I remember saying to Helen at the time, “Drummond’s eyes are to close together and he keeps saying ‘sux’ instead of ‘six’” A clear indication to my mind that he was another malefactor from the land of the long white cloud.
Is this deep mistrust of financial advisers” that Storm and it cohorts has engendered in our psyche justified? I believe it is because the term “professional” and those that operate within the financial sector do not seem to equate. A professional is defined as follows:
“Of, relating to, engaged in, or suitable for a profession: lawyers, doctors, and other professional people.
Conforming to the standards of a profession: professional behavior.
Engaging in a given activity as a source of livelihood or as a career: a professional writer.
Performed by persons receiving pay: professional football.
Having or showing great skill; expert: a professional repair job.”
When anyone hangs out their shingle professing to be a “professional” having gained the appropriate qualifications that evidence such, it is reasonable to assume that he or she has these attributes? I don’t believe any amount of training given to would-be-nvestors would prepare them for spotting shonky financial advisers.
“No, but the advice they handed out was so off the planet that no one with an ounce of common sense would have believed it!” I can hear ‘Bunyip’s wheels ticking over as I write.
As I remember our money was invested in the entire market. For an index fund to “go bad”, it requires the entire market to go bad as it did in late 2008. No one could foresee the way the market would collapse. Certainly, not the Banks it appears who kept lending and the financial advisers that kept advising people to invest whilst black clouds were gathering. Why then should Storm’s investors have been any the wiser?
“Storm over-leveraged their clients to unacceptable levels which any fool knows is courting disaster.” (Again, Bunyip, I am anticipating your next response!) Really! Perhaps someone should have told Lehmann Bros and the rest including some of the largest banks in the world because they were the biggest offenders where over-leveraging was concerned in 2008 and the years before.
“Who would take out an investment loan on their house?” (Bunyip! How many out of three did I get right!) The banks such as the CBA and the Bank of Queensland considered it safe enough because they had no qualms about lending money to people on their houses even when the borrowers had little or no collateral and were in their dotage.
So, if it was all right for them, and professional financial advisers told clients to invest in this way why now claim that Storm’s investors were taking unacceptable risks and should have known about it whilst excusing banks from any blame? I’ve heard no one so far condemning the banks for doing the same? Oh, but I forgot! They are immune from criticism because they are the “untouchables” that operate outside the law. Funnily enough, that’s exactly what they did in our particular case and they are about to find out just how sacrosanct they really are!
So what am I really saying? If you want to advise any would be investor on this forum how to avoid what we Stormies experienced then you need to identify the real culprits and the reasons why this all occurred. Not seek to blame those that were the victims but examine the behaviour of those that are now before the Court. Until you fully understand what they have done and how it affected the investments of those Storm’s clients who were the Banks’ customers, you will never be able to identify and come to grips with the Storm saga. Yes, there are lessons to be learnt but you need to understand the reasons why the Storm occurred before you can comment on how to avoid another one.
One more thing! We paid a great deal of money for professional financial advice. Therefore, our actions thereafter in following that advice can never be the issue in this debate because we acted solely on that professional advice. Therefore, the focus for any debate on Storm and the Banks should never centre on those that were deceived, but rather on the actions of those that did the deceiving; namely Storm and the Banks. In other words, we need to identify the real villains rather than pick on those that got caught in the cross fire.
Julia
In Memoriam
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What exactly is the point of repeating yet again everything that has already been alleged several times before?
Maybe it's like so called positive thinking, i.e. if you repeat something positive to yourself sufficiently often, you imprint on your brain the indelible belief that it is so.
Not saying any Storm investor is doing this. I'm just puzzled about the apparent need to continue repeating the same stuff.
Good, Frank, that you recognise that large numbers of ordinary people have seen their asset base diminished significantly because of the GFC . Some of those people, at least, have as a result engaged in some financial education and realised it's not especially complicated or difficult to acquire sufficient understanding of financial markets to avoid being burned again.
Maybe it's like so called positive thinking, i.e. if you repeat something positive to yourself sufficiently often, you imprint on your brain the indelible belief that it is so.
Not saying any Storm investor is doing this. I'm just puzzled about the apparent need to continue repeating the same stuff.
Good, Frank, that you recognise that large numbers of ordinary people have seen their asset base diminished significantly because of the GFC . Some of those people, at least, have as a result engaged in some financial education and realised it's not especially complicated or difficult to acquire sufficient understanding of financial markets to avoid being burned again.
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I regret making my recent post. Nothing more can be achieved here. Frank's primary concern is bringing the banks to justice, my primary concern is preventing people from being in the situation where they need to be involved in legal action. But since Frank has touched on the very point I was making I'll have one last go.
This was exactly my point and you obviously agree. Even if Storm and the banks had followed every letter of the law, many of the Storm clients would still have gone down the drain. The advice was just that bad. So should criminals be prosecuted for their crimes? Absolutely, go get em. But it doesn't solve the problem that no amount of laws will protect people from bad advice. That's where people need to learn that you can't trust others with your life savings. If you don't have the time to research the business yourself then don't do it.
I personally lost money in 2008 by taking my advisers advice to leverage up to the eyeballs and "ride it out". No laws were broken in my case, just plain bad advice and I made a poor business decision when I agreed to it. What I want is for others to avoid what happened to me. Bringing the banks to justice in the Storm case won't help people avoid plain bad advice. This is more than simply a case of broken laws.
Why not? Market collapses have happened many times before. I was given plenty of reasons why it was unlikely to happen again, but you can't say you thought it was impossible when it stands out so clearly on any long term index chart. The risk was clear.
The issue isn't about investors having the ability to see through bad advice, it's very easy to see if you look. The real issue is that many people are under the misconception that "professional" advice is automatically good advice. They don't believe they need to understand because they paid someone else to understand for them. This is simply not true. I fail to see how anyone who has been burnt by bad advice can remain an advocate of blindly trusting in professional advice.
Another thing is that you tend to read things that aren't there. Just because people aren't attacking the banks on this thread doesn't mean they support the banks. Lets look at an unrelated scenario so you don't get defensive about it. People have lost large sums on money when their broker illegally used client funds to trade with, lost it all and closed up shop. The discussion then becomes - How do you avoid the risk of loss due to broker failure? Discussing this question does not in any way excuse the brokers illegal actions. They are criminals and should be brought to justice. But you can only change what you can change. You can't prevent people from breaking laws, do business long enough and you'll find a criminal. You can however take actions to minimise the potential loss should you ever encounter a criminal. Who wants to be involved in legal action? Are you having fun? I think not. That's all I'm trying to point out when I mention bad business decisions. There is risk involved in trusting professional advice. Good business practice would be to minimise that risk as much as possible.
The reason why this occurred - Bad advice compounded by criminal actions. By your own admission, many Stormies would have suffered greatly even if the laws were followed. So to avoid what Stormies experienced requires more than simply identifying broken laws. It also requires the investor to take actions to either identify bad advice, or take measures to reduce the potential impact of bad advice.
Once again, to be perfectly clear - Any criminal actions in the Storm case must be uncovered and the appropriate penalties applied. But this alone will not prevent future losses due to bad advice.
There, I've said all I can say. Best of luck to you all.
This was exactly my point and you obviously agree. Even if Storm and the banks had followed every letter of the law, many of the Storm clients would still have gone down the drain. The advice was just that bad. So should criminals be prosecuted for their crimes? Absolutely, go get em. But it doesn't solve the problem that no amount of laws will protect people from bad advice. That's where people need to learn that you can't trust others with your life savings. If you don't have the time to research the business yourself then don't do it.
I personally lost money in 2008 by taking my advisers advice to leverage up to the eyeballs and "ride it out". No laws were broken in my case, just plain bad advice and I made a poor business decision when I agreed to it. What I want is for others to avoid what happened to me. Bringing the banks to justice in the Storm case won't help people avoid plain bad advice. This is more than simply a case of broken laws.
Why not? Market collapses have happened many times before. I was given plenty of reasons why it was unlikely to happen again, but you can't say you thought it was impossible when it stands out so clearly on any long term index chart. The risk was clear.
The issue isn't about investors having the ability to see through bad advice, it's very easy to see if you look. The real issue is that many people are under the misconception that "professional" advice is automatically good advice. They don't believe they need to understand because they paid someone else to understand for them. This is simply not true. I fail to see how anyone who has been burnt by bad advice can remain an advocate of blindly trusting in professional advice.
Another thing is that you tend to read things that aren't there. Just because people aren't attacking the banks on this thread doesn't mean they support the banks. Lets look at an unrelated scenario so you don't get defensive about it. People have lost large sums on money when their broker illegally used client funds to trade with, lost it all and closed up shop. The discussion then becomes - How do you avoid the risk of loss due to broker failure? Discussing this question does not in any way excuse the brokers illegal actions. They are criminals and should be brought to justice. But you can only change what you can change. You can't prevent people from breaking laws, do business long enough and you'll find a criminal. You can however take actions to minimise the potential loss should you ever encounter a criminal. Who wants to be involved in legal action? Are you having fun? I think not. That's all I'm trying to point out when I mention bad business decisions. There is risk involved in trusting professional advice. Good business practice would be to minimise that risk as much as possible.
The reason why this occurred - Bad advice compounded by criminal actions. By your own admission, many Stormies would have suffered greatly even if the laws were followed. So to avoid what Stormies experienced requires more than simply identifying broken laws. It also requires the investor to take actions to either identify bad advice, or take measures to reduce the potential impact of bad advice.
Once again, to be perfectly clear - Any criminal actions in the Storm case must be uncovered and the appropriate penalties applied. But this alone will not prevent future losses due to bad advice.
There, I've said all I can say. Best of luck to you all.
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Hi Lone Wolf,
Your response is thoughtful and I have no doubt that you are sincere in your views. I have a somewhat different view however of where solutions can be found. For one, they cannot be found on this forum because the heart of the problem lies elsewhere.
You stated in an earlier posting that, “Where this thread could be far more useful is in teaching new investors browsing the forum how to avoid going to court in the first place.” How pray can you do that when bad financial investors do not have a label on them?
Basically your argument is that in the end it is up to would-be investors to make the right choices by listening to advice that they believe is sound and is in their best interests. In other words, they need to do some homework to avoid fly-by-nights whose schemes are obviously detrimental rather than beneficial. We assume by that you are referring to Storm among others.
I have already expounded on why people invested using Storm so I do not intend to go over old ground. Suffice to say that I do not agree with your premise that in the end it is all up to the investors. Your recent comments suggest that the onus should be upon investors rather than the financial industry as a whole? This to my mind this is putting the “cart before the horse” because it does nothing to rectify the problems that exist in the financial sector other than issuing warnings to would-be investors that they exist and how best to avoid them.
The GFC and the Storm’s of this world were not caused by the investors who were inadvertently caught up in them, but rather by the laxity that existed within the financial sector that allowed the excesses that led to our current state of affairs.
Why were the regulations in place at the time inadequate? Why was the professional indemnity insurance cover that Storm had taken out ineffective? Why did the Banks throw their credit control systems out the window? Why had margin loans flown under the radar as far as statutory regulations were concerned? Why was Storm allowed to give “one fit for all” advice” to their clients? Why did ASIC compliance fail?
Why! Why! Why! These and other factors that contributed to this financial debacle are the questions that should be asked because they are factors that led us all here!
“…The real issue is that many people are under the misconception that "professional" advice is automatically good advice. They don't believe they need to understand because they paid someone else to understand for them. This is simply not true. I fail to see how anyone who has been burnt by bad advice can remain an advocate of blindly trusting in professional advice.”
I was once a professional myself in the field of international logistics. I had the qualifications and experience to prove it and I was duty bound to give expert advice based on the needs of those that sought my advice. After all, that is what I had been trained to do. That was what was expected of me as a professional! Should financial advisers be treated any differently? The truth of the matter is that there is something sadly lacking where financial advisers are concerned. Their standards both ethically and professionally need to be raised to the acceptable levels of professionals in other industries. They need to meet investors' expectations as well as those standards demanded of any specialized field of endeavour.
One more thing in this regard! My training included subjects such as ‘commercial law’, ‘law of carriage’ and ‘marine insurance’ that were not areas I would have any direct involvement in on an every-day basis because my field was freight movements. However, by studying such, it gave me an understanding of the basics of these subjects which led to an awareness of how they could impact from time to time on my profession. The Institutes where I did my studies included these in their courses for this reason. To my mind, there are many financial advisers operating today that do not seem to have a grasp of consumer laws because they have never been taught them. It’s time they were because they do impact on their business!
“That's where people need to learn that you can't trust others with your life savings.”
To my mind it’s a sad commentary on the financial advisory sector if you are now saying that you can’t trust them with your life savings. I thought that was part of their function? But then I get it! You mean find the ones that can be trusted!
“You can't prevent people from breaking laws, do business long enough and you'll find a criminal.”
This is exactly why everything should be done to make it harder for those that take advantage of the loopholes in the financial sector. Simply accepting the “status quo” or saying that it is all too hard when something can be done about it will only encourage people to offend again and again.
“I have always held the belief that it is reasonable to expect that when a person engages a qualified professional organisation for expert advice, the advice offered should be of the highest impeccable standard.” Solly
”My view is that a more effective form of protection can only be effected through legislation, regulation and enforcement. Then followed by punitive measures for breaches and non-compliance.” Solly
Solly has it absolutely right on both counts. The industry itself is where the problems lie rather than with those investors that place their trust in people that operate within it. Until these problems are fixed (and I doubt that they ever will be because “loose allows abuse” and some just love operating in such an environment) no would-be investors can feel safe. There is no roadmap that by-passes “shonks”. Therefore, until the minefield is cleared of montebanks by introducing and enforcing controls and punishing those that transgress with appropriate sentences, investors will in many cases continue to be stung and another Storm is just around the corner.
“…my primary concern is preventing people from being in the situation where they need to be involved in legal action”.
I‘m posting on this forum for the same reason! We just see things differently where prevention is concerned.
“I personally lost money in 2008 by taking my advisers advice to leverage up to the eyeballs and "ride it out". No laws were broken in my case, just plain bad advice and I made a poor business decision when I agreed to it. What I want is for others to avoid what happened to me.”
You are not alone. There are many on this forum including some that were not with Storm that have lost money because financial advisers gave them “bad advice”. To accept that “bad advice” is something that we must live with because standards are low is unacceptable. The truth of the matter to my mind is that the financial sector needs a drastic overhaul because it has been out of control for some time. Until those within accept that notion, my message to all would-be investors is this, “Avoid the pitfalls of investing by keeping your money in a safe place! The financial sector is unsafe and will continue to be until they clean it up! So far there is little sign of that! ‘Prevention is better than cure!’”
Hold that thought, you would-be investors and you can’t go far wrong! Until the people in the financial sector show some good faith by doing something about the problems that exist there, you should look elsewhere. They need your business to survive so it is up to them to get their house in order - not lecture to others on good housekeeping!
"There, I've said all I can say. Best of luck to you all!"
Thanks for that! I respect your views! I just don't agree with them! Then again, if we all thought the same way, what a boring world this would be! Good luck to you as well!
Your response is thoughtful and I have no doubt that you are sincere in your views. I have a somewhat different view however of where solutions can be found. For one, they cannot be found on this forum because the heart of the problem lies elsewhere.
You stated in an earlier posting that, “Where this thread could be far more useful is in teaching new investors browsing the forum how to avoid going to court in the first place.” How pray can you do that when bad financial investors do not have a label on them?
Basically your argument is that in the end it is up to would-be investors to make the right choices by listening to advice that they believe is sound and is in their best interests. In other words, they need to do some homework to avoid fly-by-nights whose schemes are obviously detrimental rather than beneficial. We assume by that you are referring to Storm among others.
I have already expounded on why people invested using Storm so I do not intend to go over old ground. Suffice to say that I do not agree with your premise that in the end it is all up to the investors. Your recent comments suggest that the onus should be upon investors rather than the financial industry as a whole? This to my mind this is putting the “cart before the horse” because it does nothing to rectify the problems that exist in the financial sector other than issuing warnings to would-be investors that they exist and how best to avoid them.
The GFC and the Storm’s of this world were not caused by the investors who were inadvertently caught up in them, but rather by the laxity that existed within the financial sector that allowed the excesses that led to our current state of affairs.
Why were the regulations in place at the time inadequate? Why was the professional indemnity insurance cover that Storm had taken out ineffective? Why did the Banks throw their credit control systems out the window? Why had margin loans flown under the radar as far as statutory regulations were concerned? Why was Storm allowed to give “one fit for all” advice” to their clients? Why did ASIC compliance fail?
Why! Why! Why! These and other factors that contributed to this financial debacle are the questions that should be asked because they are factors that led us all here!
“…The real issue is that many people are under the misconception that "professional" advice is automatically good advice. They don't believe they need to understand because they paid someone else to understand for them. This is simply not true. I fail to see how anyone who has been burnt by bad advice can remain an advocate of blindly trusting in professional advice.”
I was once a professional myself in the field of international logistics. I had the qualifications and experience to prove it and I was duty bound to give expert advice based on the needs of those that sought my advice. After all, that is what I had been trained to do. That was what was expected of me as a professional! Should financial advisers be treated any differently? The truth of the matter is that there is something sadly lacking where financial advisers are concerned. Their standards both ethically and professionally need to be raised to the acceptable levels of professionals in other industries. They need to meet investors' expectations as well as those standards demanded of any specialized field of endeavour.
One more thing in this regard! My training included subjects such as ‘commercial law’, ‘law of carriage’ and ‘marine insurance’ that were not areas I would have any direct involvement in on an every-day basis because my field was freight movements. However, by studying such, it gave me an understanding of the basics of these subjects which led to an awareness of how they could impact from time to time on my profession. The Institutes where I did my studies included these in their courses for this reason. To my mind, there are many financial advisers operating today that do not seem to have a grasp of consumer laws because they have never been taught them. It’s time they were because they do impact on their business!
“That's where people need to learn that you can't trust others with your life savings.”
To my mind it’s a sad commentary on the financial advisory sector if you are now saying that you can’t trust them with your life savings. I thought that was part of their function? But then I get it! You mean find the ones that can be trusted!
“You can't prevent people from breaking laws, do business long enough and you'll find a criminal.”
This is exactly why everything should be done to make it harder for those that take advantage of the loopholes in the financial sector. Simply accepting the “status quo” or saying that it is all too hard when something can be done about it will only encourage people to offend again and again.
“I have always held the belief that it is reasonable to expect that when a person engages a qualified professional organisation for expert advice, the advice offered should be of the highest impeccable standard.” Solly
”My view is that a more effective form of protection can only be effected through legislation, regulation and enforcement. Then followed by punitive measures for breaches and non-compliance.” Solly
Solly has it absolutely right on both counts. The industry itself is where the problems lie rather than with those investors that place their trust in people that operate within it. Until these problems are fixed (and I doubt that they ever will be because “loose allows abuse” and some just love operating in such an environment) no would-be investors can feel safe. There is no roadmap that by-passes “shonks”. Therefore, until the minefield is cleared of montebanks by introducing and enforcing controls and punishing those that transgress with appropriate sentences, investors will in many cases continue to be stung and another Storm is just around the corner.
“…my primary concern is preventing people from being in the situation where they need to be involved in legal action”.
I‘m posting on this forum for the same reason! We just see things differently where prevention is concerned.
“I personally lost money in 2008 by taking my advisers advice to leverage up to the eyeballs and "ride it out". No laws were broken in my case, just plain bad advice and I made a poor business decision when I agreed to it. What I want is for others to avoid what happened to me.”
You are not alone. There are many on this forum including some that were not with Storm that have lost money because financial advisers gave them “bad advice”. To accept that “bad advice” is something that we must live with because standards are low is unacceptable. The truth of the matter to my mind is that the financial sector needs a drastic overhaul because it has been out of control for some time. Until those within accept that notion, my message to all would-be investors is this, “Avoid the pitfalls of investing by keeping your money in a safe place! The financial sector is unsafe and will continue to be until they clean it up! So far there is little sign of that! ‘Prevention is better than cure!’”
Hold that thought, you would-be investors and you can’t go far wrong! Until the people in the financial sector show some good faith by doing something about the problems that exist there, you should look elsewhere. They need your business to survive so it is up to them to get their house in order - not lecture to others on good housekeeping!
"There, I've said all I can say. Best of luck to you all!"
Thanks for that! I respect your views! I just don't agree with them! Then again, if we all thought the same way, what a boring world this would be! Good luck to you as well!
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I'm pretty busy at the moment so writing longwinded forum replies on topics that have been discussed to death isn't high on my list. But Frank, your reply in this case was so well mannered and sensibly constructed that I don't want to do you the discourtesy of not responding. So grab a coffee because this goes on a bit.
By listening to the advice, then going away and doing your own research to determine if the advice is sound. The question then is - What's the point of paying for advice if you're going to go to the effort of confirming it yourself? That's a different topic. You can't avoid bad advisers, but you can ignore bad advice.
This is exactly what I want to see happen. You consider it putting the cart before the horse. I see it as a vital part of a two part solution. Even if you rework the financial advice industry you still won't be able to eliminate all bad advice. People need to be know that there is no guarantee that the advice they are given is good advice. In a way, I believe you are the one putting the cart before the horse. This forum has zero impact on the financial industry or the law. We can't fix that here. What we can do here is warn people about the sorry state the financial advice industry is in. Ask them to spread the word that people need to understand and monitor their own investments. If you come across a wet slippery patch on the floor what should you do? First you should warn others of the hazard so they don't get hurt by it, then you go off and find a way to eliminate the hazard.
All very valid questions that all need addressing. No argument there. My personal gripe with the system is that many people who call themselves financial advisers are simply financial product salesmen. They don't give you true advice based on your situation. They have a number of products on the shelf and they sell you the one that's a close enough fit. They also usually charge an entrance fee based on the total investment amount including borrowed money. I see this a a conflict of interests as the more money they convince you to borrow, the more they get paid. Believe me I have no love for the industry and it really needs an overhaul. However, there are also things individuals can do to avoid falling into the trap.
No, they are no different. But what stopped you from providing bad advice? Nothing but your personal moral code. Sure there are laws in place and there are consequences for you if you don't do your job properly. But that is merely a deterrent, not a prevention. Just as there were (or will be?) consequences for the managers of Storm. But you don't find out that a so called professional is rotten until it's too late. In all professions you occasionally hear of professionals who have been found to be incompetent or criminal. You'll never eliminate it. That's my message, you can't eliminate the bad, so take precautions against it.
No! I'm certainly not saying find the ones that can be trusted. You can't tell until it's too late. I'm saying don't trust them blindly at all. Understand what they are doing with your money and monitor it. If you can't do that then don't invest at all. Financial advisers shouldn't be there to take over complete control of your money. They should be there to offer advice on how to best make use of your money. This is the public perception that I want to change. Go to people for advice by all means, but never, never hand over your money and walk away.
Absolutely something should be done about loopholes in the financial sector. But telling investors that falling into the Storm trap was unavoidable doesn't help them avoid falling into another trap. I'm sure many Storm clients went to other financial advisers when Storm collapsed. Rather than simply hope that their new adviser is better, I'd like to think they took the time to understand the advice given by their new adviser and now monitor it regularly.
The problem is that people are trusting in something that can't be trusted. There are two solutions, make the thing trustworthy (in my opinion it can never be 100% trustworthy), or inform people that it can't be trusted. Or better yet, inform people that it can't be trusted then work on making it more trustworthy.
Exactly! This is the message Frank. This is what I want the public to know. One slight difference in opinion between us though - You believe it's possible to overhaul the financial sector in a way that makes it safe to blindly trust them with your money. I believe you will never achieve that level of security and we should encourage people to always take personal responsibility for their investments. In the same way that we expect people to take steps to secure their home.
I'll also say that people don't necessarily need to completely avoid financial advisers, they just need to understand that it is advice only. It's up to you to determine if that advice is good. If you are unable to make that call then stay away.
Well that was certainly more than I had intended to write. But I want us both to get our point across here (and I think we have) then we can go our separate ways. Honestly Frank, I believe there is very little difference between what you want and what I want. We both want to see the financial sector overhauled. We both want increased transparency and professionalism. We both want any criminal actions to be uncovered and criminals brought to justice. The difference seems to be that I want people to do everything they can to protect themselves rather than rely on others to protect them.
Maybe you'd call it pessimism, but I firmly believe that every time you rely on someone else to do something for you, you run the risk of them letting you down. So if there's something you can't afford to lose, protect it yourself.
By listening to the advice, then going away and doing your own research to determine if the advice is sound. The question then is - What's the point of paying for advice if you're going to go to the effort of confirming it yourself? That's a different topic. You can't avoid bad advisers, but you can ignore bad advice.
This is exactly what I want to see happen. You consider it putting the cart before the horse. I see it as a vital part of a two part solution. Even if you rework the financial advice industry you still won't be able to eliminate all bad advice. People need to be know that there is no guarantee that the advice they are given is good advice. In a way, I believe you are the one putting the cart before the horse. This forum has zero impact on the financial industry or the law. We can't fix that here. What we can do here is warn people about the sorry state the financial advice industry is in. Ask them to spread the word that people need to understand and monitor their own investments. If you come across a wet slippery patch on the floor what should you do? First you should warn others of the hazard so they don't get hurt by it, then you go off and find a way to eliminate the hazard.
All very valid questions that all need addressing. No argument there. My personal gripe with the system is that many people who call themselves financial advisers are simply financial product salesmen. They don't give you true advice based on your situation. They have a number of products on the shelf and they sell you the one that's a close enough fit. They also usually charge an entrance fee based on the total investment amount including borrowed money. I see this a a conflict of interests as the more money they convince you to borrow, the more they get paid. Believe me I have no love for the industry and it really needs an overhaul. However, there are also things individuals can do to avoid falling into the trap.
No, they are no different. But what stopped you from providing bad advice? Nothing but your personal moral code. Sure there are laws in place and there are consequences for you if you don't do your job properly. But that is merely a deterrent, not a prevention. Just as there were (or will be?) consequences for the managers of Storm. But you don't find out that a so called professional is rotten until it's too late. In all professions you occasionally hear of professionals who have been found to be incompetent or criminal. You'll never eliminate it. That's my message, you can't eliminate the bad, so take precautions against it.
No! I'm certainly not saying find the ones that can be trusted. You can't tell until it's too late. I'm saying don't trust them blindly at all. Understand what they are doing with your money and monitor it. If you can't do that then don't invest at all. Financial advisers shouldn't be there to take over complete control of your money. They should be there to offer advice on how to best make use of your money. This is the public perception that I want to change. Go to people for advice by all means, but never, never hand over your money and walk away.
Absolutely something should be done about loopholes in the financial sector. But telling investors that falling into the Storm trap was unavoidable doesn't help them avoid falling into another trap. I'm sure many Storm clients went to other financial advisers when Storm collapsed. Rather than simply hope that their new adviser is better, I'd like to think they took the time to understand the advice given by their new adviser and now monitor it regularly.
The problem is that people are trusting in something that can't be trusted. There are two solutions, make the thing trustworthy (in my opinion it can never be 100% trustworthy), or inform people that it can't be trusted. Or better yet, inform people that it can't be trusted then work on making it more trustworthy.
Exactly! This is the message Frank. This is what I want the public to know. One slight difference in opinion between us though - You believe it's possible to overhaul the financial sector in a way that makes it safe to blindly trust them with your money. I believe you will never achieve that level of security and we should encourage people to always take personal responsibility for their investments. In the same way that we expect people to take steps to secure their home.
I'll also say that people don't necessarily need to completely avoid financial advisers, they just need to understand that it is advice only. It's up to you to determine if that advice is good. If you are unable to make that call then stay away.
Well that was certainly more than I had intended to write. But I want us both to get our point across here (and I think we have) then we can go our separate ways. Honestly Frank, I believe there is very little difference between what you want and what I want. We both want to see the financial sector overhauled. We both want increased transparency and professionalism. We both want any criminal actions to be uncovered and criminals brought to justice. The difference seems to be that I want people to do everything they can to protect themselves rather than rely on others to protect them.
Maybe you'd call it pessimism, but I firmly believe that every time you rely on someone else to do something for you, you run the risk of them letting you down. So if there's something you can't afford to lose, protect it yourself.
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When matters are next in Court
Proceedings are being held in public so anyone interested may attend.
4 September 2012
ASIC unregistered managed investment scheme proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000
19 September 2012 ASIC civil penalty proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000
Source: https://storm.asic.gov.au/storm/storm.nsf/byheadline/Next Court Dates?opendocument
Proceedings are being held in public so anyone interested may attend.
4 September 2012
ASIC unregistered managed investment scheme proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000
19 September 2012 ASIC civil penalty proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000
Source: https://storm.asic.gov.au/storm/storm.nsf/byheadline/Next Court Dates?opendocument
If I was an investor in Storm, I wouldn't take too much comfort from the SMH's biased reporting. The bank is entitled to cross-claim (or, as the plaintiffs' lawyers call it, 'sabre rattling') - actually, I'm surprised it took so long.
The litigant who stated, "I asked our solicitors to send them a message: You have just driven a steel rod down the spine of my resolve." clearly hasn't recognized that his side has already 'driven a steel rod down the spine' of the bank's resolve.
And then there is the possible appeals process. Sends a shudder down my spine simply thinking about it. Litigation is somethng I will avoid if at all possible.
But it will change nothing. People will still hand their money over to others, it will be lost and again the wail will go up it wasn't my fault. Usually it is because most are not prepared to put their feet up for a few hours or days, doodle around with numbers using a $10 calculator from the nearest supermarket - and think, what if?
Sad, because the vast majority have average intelligence although that does not necessarily translate to each has the same ability. Maybe it is because some investors are curious about things and continually ask questions.
Julia
In Memoriam
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+1. As you suggest, Judd, a few simple "what if?" calculations will negate any suggestion that one needs to be a financial wizard to avoid getting into trouble.
The court case seems to have been a very long time coming. Hope it's completely over soon so that people can get on with their lives. Living with ongoing stress and anxiety is dreadful.
As always Judd, you’ve once again hit the nail on the head.
No amount of legal action or legislation will eliminate the potential to get burnt if investors are not prepared to put at least a small amount of effort into appraising the advice they’re given.
Even the simple precaution of consulting two or three financial planning firms, rather than just consulting one firm and believing everything they say, would go a long way towards helping investors to spot the sort of flawed investment advice that brought Storm investors undone.
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If you have a God, pray to that entity some agreement is reached soon.
Those who prefer a vendetta, go for it but I really do wish that the small fry in this saga get some form of closure soon. An elderly relative of mine who lives up past Cairns knows a few who are involved and she has told me that they are not traveling well at all. Very much on the borderline health wise. According to me Mama (she isn't but I call her that 'cause I love her), they understand that a lot of what has happened was of their own doing but still, not a pleasant way to be at the end of your years
