RESEARCH, DUE DILIGENCE??? I banked for over 10 years with one of the big four (not CBA). It took me months in research. My personal banker along with another, so called expert in investing met with Storm and went through the same process as us. My accountant also went through the same process as the bank. They then prepared a report and sent it to their internal department for Risk Analysis. Guess what they confirmed that the structure of Storm works and they had other clients of the bank who had been involved with Storm. In their words "yes this works with minimal risk"! They also stated that Storm had the necessary steps and experience to manage our portfolio. They have since settled quietly. I work long hours and was looking for long term investing strategies and professional advice on my situation and a plan for my comfortable retirement. There is no one in the finance industry that you can trust. Every where you turn it's all hidden agendas. So please do not tell me I didn't do any research or due diligence because as you can see I did.
What I can see is that you handed over the responsibility of researching the strategy to others, rather than conducting the research yourself.
Did you call into a stockbrokers office and ask about the performance of the All Ordinaries Index over many years?
Did you bother to find out that any stockbroker can arrange for you to invest in index funds, and they won’t charge you anywhere near 7% to do it?
Did you look at a graph that every stockbroker and many real estate agents have that shows the performance of the All Ords since it first began?
Did you take the trouble to find out that although the stockmarket has averaged x percentage annual return since it began, it can be up 15 or 20% one year and down by twice that much next year, or flat for several years with virtually no movement at all?
Did you consider how you’d meet your loan commitments if the market stayed flat and gave you no return for a prolonged period? Or worse still, collapsed spectacularly like it’s done many times before, and stayed down for years like it’s done since late 2007?
Did you bother to find out (or remember) that the market collapsed 25% in a single day back in 1987? Did you crunch a few figures on your pocket calculator to find out what effect another crash of that magnitude would have on your financial position if you were heavily invested with a lot of borrowed money in the market? Did you consider that in such a situation the banks might foreclose on your house over which they held a mortgage? Or did you just accept Storm’s assurance that you couldn’t lose your home?
Did you research margin loans to find out exactly how they work, what the risks were? It was pretty easy to do......you only had to jump on the internet, or better still go and have a yarn with a lending officer at the bank, and ask him or her to explain in detail everything about margin loans.
When Storm presented you with performance figures for different asset classes, showing that shares outperform the others, did you bother to dig a little deeper by consulting one of the real estate organizations such as REIQ? Or did you just accept what Storm told you?
Did you compare three or four financial planning firms, or did you only go to Storm?
If you’re the investor putting up the money, then you, not someone else, should do the research. All the information you need is readily available to you at no cost.
Handing over the responsibility to someone else to do your research for you is fraught with danger. Unfortunately you’ve had to learn that the hard way.