Australian (ASX) Stock Market Forum

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.
 
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.


Another thing (and I've already asked you this a few months ago but you didn't reply)....would I be correct in assuming that your finance was provided by the same bank that conducted your research for you?

And if this was the case, did it not occur to you that they had a vested interested in telling you it was a good safe investment?
Would you consider this to be a conflict of interest?
I certainly would, if that was in fact what happened.

The conflict of interest extended to Storm as well.......naturally they were going to tell you how wonderful and safe their strategy was, naturally they were going to encourage you to borrow heavily and then double gear on top of that, toss in all your super as well, and any other money you could get your hands on. Why wouldn't they, when they were creaming a hefty 7% from every dollar you invested!!

Did it not occur to you that they could hardly give you impartial advice that was in your best interests, given that their business revolved around biting you for 7% every time you opened your wallet?
 
Another thing (and I've already asked you this a few months ago but you didn't reply)....would I be correct in assuming that your finance was provided by the same bank that conducted your research for you?

And if this was the case, did it not occur to you that they had a vested interested in telling you it was a good safe investment?
Would you consider this to be a conflict of interest?
I certainly would, if that was in fact what happened.

The conflict of interest extended to Storm as well.......naturally they were going to tell you how wonderful and safe their strategy was, naturally they were going to encourage you to borrow heavily and then double gear on top of that, toss in all your super as well, and any other money you could get your hands on. Why wouldn't they, when they were creaming a hefty 7% from every dollar you invested!!

Did it not occur to you that they could hardly give you impartial advice that was in your best interests, given that their business revolved around biting you for 7% every time you opened your wallet?

Well haven't I made you cracky!!!!

Monies were borrowed from two of the big four banks. Also one of which has settled for a sizeable sum. The other has made a good offer. But next time I'm thinking of investing I will seek you out because you have all the answers as you are the ultimate expert!!!!!

Next time you need a Doctor, diagnose yourself because what would a Doctor know....
 
Well haven't I made you cracky!!!!

Monies were borrowed from two of the big four banks. Also one of which has settled for a sizeable sum. The other has made a good offer. But next time I'm thinking of investing I will seek you out because you have all the answers as you are the ultimate expert!!!!!

Next time you need a Doctor, diagnose yourself because what would a Doctor know....

Hey jjtebj12, I was thinking the same thing.
Maybe we should send Wayne Swann and the Reserve Bank board over to get some advice as well . Man, they could really need some help in the States and Europe as well . All the worlds financial problems solved forever.Yipeee:D
 
Well haven't I made you cracky!!!!

Monies were borrowed from two of the big four banks. Also one of which has settled for a sizeable sum. The other has made a good offer. But next time I'm thinking of investing I will seek you out because you have all the answers as you are the ultimate expert!!!!!


LOL! No need to seek me out, my friend. Learn to paddle your own canoe – it’s really not that hard.
You don't need experts - you just need to think for yourself and use a bit of common sense instead of expecting others to do your thinking and research for you.
That way you just might avoid repeating the costly mistakes you made last time.:)
 
Hey jjtebj12, I was thinking the same thing.
Maybe we should send Wayne Swann and the Reserve Bank board over to get some advice as well . Man, they could really need some help in the States and Europe as well . All the worlds financial problems solved forever.Yipeee:D

Not a bad idea – Swan, Gillard and Co. have proven themselves to be money-wasting, incompetent fools who splash money around like drunken sailors – they could surely use some good advice!:)
 
LOL! No need to seek me out, my friend. Learn to paddle your own canoe – it’s really not that hard.
You don't need experts - you just need to think for yourself and use a bit of common sense instead of expecting others to do your thinking and research for you.
That way you just might avoid repeating the costly mistakes you made last time.:)


I'm paddling my own canoe - don't worry about that.

Also who said I've made costly repeated mistakes - you the misinformed ranter!!!!

Both banks I've dealt with have made offers much to your disgust. Maybe you should take over as chief negotiator for the banks because you are the ultimate expert!
 
hey bunyip,

clearly you seem to be one of those high performing people that never make a mistake and always does 100% due diligence before doing any deal, you must go "above and beyond" the normal scope?

I find your comments quiet rude to be honest, yes a certain amount of blame does have to go to the investor, but do you honestly think people should do that amount of "research" when investing in something? He isnt a financial adviser, he isnt a financial wizz like you obviously are so therefore he relies on other peoples advise as well as his own to make a decision.

You are being harsh, and you are placings YOURSELF on a Pedestal and you do have a pretty ignorant attitude I must say.
 
I'm paddling my own canoe - don't worry about that.

Also who said I've made costly repeated mistakes - you the misinformed ranter!!!!

Both banks I've dealt with have made offers much to your disgust. Maybe you should take over as chief negotiator for the banks because you are the ultimate expert!


You should read more carefully what was written.
I didn’t say you’ve made ‘costly repeated mistakes’. I said that by thinking for yourself and using a bit of common sense, you just might be able to ‘avoid repeating the costly mistakes you made last time’.
And you did make some costly mistakes....not even you would deny that.

I have no reason to be disgusted that you’ve received offers from the banks who gave you a favourable opinion of the Storm strategy – people who endorse highly risky investments as ‘minimal risk’ should be held accountable.

Once you’ve cooled down a bit and have exhausted your repertoire of petty, scornful comments such as ‘you are the ultimate expert’, I suggest you go back and re-read my comments in Post 1673 where I outlined the steps that you could have taken to properly evaluate the Storm strategy. You’ll see that all of those steps are simple, common sense measures that were well within your capabilities. The information you needed was available free of charge, and it would have taken you no more than a few days of your time to find it.
While it’s probably too late for you to benefit from these tips, there will be plenty of readers of these pages in years to come who may save themselves some grief if they know how to properly evaluate investment proposals.
Storm is gone, but other reckless investment schemes will spring up to replace it. More people will be burnt, but the number can be minimized if the general public have some basic investment education that seems to have been lacking in Storm investors.
 
hey bunyip,

clearly you seem to be one of those high performing people that never make a mistake and always does 100% due diligence before doing any deal, you must go "above and beyond" the normal scope?

I find your comments quiet rude to be honest, yes a certain amount of blame does have to go to the investor, but do you honestly think people should do that amount of "research" when investing in something? He isnt a financial adviser, he isnt a financial wizz like you obviously are so therefore he relies on other peoples advise as well as his own to make a decision.

You are being harsh, and you are placings YOURSELF on a Pedestal and you do have a pretty ignorant attitude I must say.

I may seem to you like ‘a high performing person who never makes mistakes’. But I can assure you that I’m just an ordinary bloke whose made plenty of mistakes as well as some good decisions. Overall I’ve done OK from investment, but I make no claims to be filthy rich, and I never have. I have modest financial means that have allowed me to retire early to a nice little acreage property where my wife and I lead a simple, inexpensive and very contented lifestyle.
I personally know many high performing people, and every one of them has made mistakes. The important thing is that we all learn from our mistakes so that we do better next time.

Some people like yourself may find my comments ‘quite rude’. Some others find them honest and helpful. This includes some Storm victims who have contacted me in person and thanked me for giving them information that they can pass on to their kids and grandkids to help them avoid falling into the same traps that caught Storm investors.
When you’re honest and forthright like I am, it’s inevitable that some people will get their feathers ruffled while others will appreciate you.

Do I really think people ‘should do that amount of research when investing in something’? Too right I do!
Storm was recommending two products to their clients – index funds as the investment, and margin loans to fund the investment. Don’t you think it would have been wise to thoroughly look into both to learn how they worked, how they’d performed in the past, what the risks were?
jjtebj12 told us he spent months in research. The kind of research I’ve outlined could have been done in just 1 or 2 days, or even in just a couple of hours by using the wonderful resource called the internet.
He didn’t need to be a financial wizz. There’s nothing complex or high tech about the sort of research I’ve outlined. It’s just a case of putting a bit of thought into it and spending a couple of days getting the right information.
I’d say it’s worth spending a couple of days researching an investment proposition before committing millions of dollars or even a few hundred grand to it, wouldn’t you??

I’m not much interested in your comments that I’m being ignorant and I’m putting myself on a pedestal. You can see it any way you like. But I’ll continue to give information that I believe can help future investors to avoid being burnt. If that gets up your nose, then don’t read my posts from here on.
 
The research needed wasn't overly comprehensive to be honest. And you didn't need to be a financial wizard to untangle the risks. Far from it.

Many went to Storm wanting a conservative strategy, and the Storm "advisers" recommended these people borrow and invest 100% in shares.

These people needed to ask themselves two straight forward questions, the answers to which can be found very easily-

1. Is investing in shares low risk? Answer NO, it is high risk.
2. Does gearing reduce the risk of investing in shares to a conservative level? Answer NO, its the complete opposite.

Two simple questions, two easy to find answers, one giant disaster averted.

The people who sold this as low risk need to be held accountable for their misleading conduct, and I would go a step further and say that any "independent" experts clients saw for a second opinion who looked over the strategy and said it was acceptable and low risk should be run out of the industry for failing to grasp even the most basic of investment fundamentals.
 
RESEARCH, DUE DILIGENCE??? I banked for over 10 years with one of the big four (not CBA). It took me months in research.

jjtebj12, no obligation to respond, of course, but could you give us an idea of what actually you were researching that took months?
 
jjtebj12, no obligation to respond, of course, but could you give us an idea of what actually you were researching that took months?

Well we met with Storm, then our Bank (of over 10 years business and private) then our accountant (over 10 years with us) then our broker who was looking after our current investments in the stock market. We had further meetings with our bank who had conducted research into Storm.

Our personal business banker along with his manager went and met with Storm for over four hours on two occasions. Our Accountant met with Storm following this. Following all these meetings both my accountant and my bank representatives sought independent advice (internally from a major bank). My banks advice along with my accountant came back 3-4 weeks later that it was sound advice that we received from Storm, nothing to be concerned with as any falls in the market both Banks would manage to ensure the safety of my assets. Following this we had several meetings with our bank managers and my accountant about our reservations. My bank said it would be beneficial for us to invest. No-one stated a risk or conveyed concerns quite the contrary both my bank and my accountant said it was a "sound scheme" (hence the reasons they settled). Our banks also said that we needed financial security and Storm could offer that. They the bank "off the record admitted their mistakes". The other bank has made a offer which is being sorted through.

You can all say I should of, could of done more however we extensively conducted our due diligence (well documented). Our Bank admitted they failed us, hence immediate settlement. Please don't think that I'm a person who will sit here and blame someone for my mistakes. I've made plenty of errors and moved forward quietly. However I believe there was nothing more I could of done as I needed advice for financial security(as it wasn't my expertise and it's a mindfield) and for an comfortable retirement.

Don't return mail as I'm not interested. The above is a small snap shot of our investigations into Storm. No one will ever know unless you are privi to our Court documents. We ask our associate experts who we had faith in, however trust isn't in our vocabulary any more!!

NOT INTERESTED IN ANY REPLIES, SO PLEASE DON'T BOTHER!
 
Well we met with Storm, then our Bank (of over 10 years business and private) then our accountant (over 10 years with us) then our broker who was looking after our current investments in the stock market. We had further meetings with our bank who had conducted research into Storm.

Our personal business banker along with his manager went and met with Storm for over four hours on two occasions. Our Accountant met with Storm following this. Following all these meetings both my accountant and my bank representatives sought independent advice (internally from a major bank). My banks advice along with my accountant came back 3-4 weeks later that
Following this we had several meetings with our bank managers and my accountant about our reservations. My bank said it would be beneficial for us to invest. No-one stated a risk or conveyed concerns quite the contrary both my bank and my accountant said it was a "sound scheme" (hence the reasons they settled). Our banks also said that we needed financial security and Storm could offer that. They the bank "off the record admitted their mistakes". The other bank has made a offer which is being sorted through.

You can all say I should of, could of done more however we extensively conducted our due diligence (well documented). Our Bank admitted they failed us, hence immediate settlement. Please don't think that I'm a person who will sit here and blame someone for my mistakes. I've made plenty of errors and moved forward quietly. However I believe there was nothing more I could of done as I needed advice for financial security(as it wasn't my expertise and it's a mindfield) and for an comfortable retirement.

Don't return mail as I'm not interested. The above is a small snap shot of our investigations into Storm. No one will ever know unless you are privi to our Court documents. We ask our associate experts who we had faith in, however trust isn't in our vocabulary any more!!

NOT INTERESTED IN ANY REPLIES, SO PLEASE DON'T BOTHER!
Despite your instruction above, I do want to thank you for responding to my question in such detail.

What seems to be a common factor amongst all Storm clients posting here is this, from your account above:
it was sound advice that we received from Storm, nothing to be concerned with as any falls in the market both Banks would manage to ensure the safety of my assets.

i.e. that Storm had systems in place to ensure you were protected from market volatility.

What we've learned from this thread - and many others - is that so called professional advice was anything but.

It's easy for us to say "oh, all you needed to do was look at the gyrations of the market over a few decades" etc., but I do understand that someone lacking any experience of financial markets will feel less than confident making any such assessments, will have no idea how to access charts which so clearly show that the market does not always go up, and will therefore think "OK, I am investing a lot of money here so I need to get specialist advice."

I'll always maintain that borrowing money to invest and then borrowing again for a margin loan on those borrowed funds when one is retired or close to retirement age is clearly fraught with risk.
It's a strategy, however, which probably would make at least some sense for a young investor who had many years to recover losses.
I have no interest in defending ASIC who are largely a waste of taxpayer funds, but perhaps when they 'approved' the Storm strategy, it was with a younger investor in mind. And that's being generous to them.

I can, however, remember a time when I thought the so called advisers really did have a monopoly on wisdom,and that their experience must outweigh my own common sense instincts.
Such a great pity that trust in such advisers, and those banks which apparently supported such a flawed strategy, prevailed over what must have been common sense misgivings on the part of investors.

I'm genuinely glad to hear you are being offered settlements in the matter.
 
Despite your instruction above, I do want to thank you for responding to my question in such detail.

What seems to be a common factor amongst all Storm clients posting here is this, from your account above:


i.e. that Storm had systems in place to ensure you were protected from market volatility.

What we've learned from this thread - and many others - is that so called professional advice was anything but.

It's easy for us to say "oh, all you needed to do was look at the gyrations of the market over a few decades" etc., but I do understand that someone lacking any experience of financial markets will feel less than confident making any such assessments, will have no idea how to access charts which so clearly show that the market does not always go up, and will therefore think "OK, I am investing a lot of money here so I need to get specialist advice."

I'll always maintain that borrowing money to invest and then borrowing again for a margin loan on those borrowed funds when one is retired or close to retirement age is clearly fraught with risk.
It's a strategy, however, which probably would make at least some sense for a young investor who had many years to recover losses.
I have no interest in defending ASIC who are largely a waste of taxpayer funds, but perhaps when they 'approved' the Storm strategy, it was with a younger investor in mind. And that's being generous to them.

I can, however, remember a time when I thought the so called advisers really did have a monopoly on wisdom,and that their experience must outweigh my own common sense instincts.
Such a great pity that trust in such advisers, and those banks which apparently supported such a flawed strategy, prevailed over what must have been common sense misgivings on the part of investors.

I'm genuinely glad to hear you are being offered settlements in the matter.

I'm still a long way off retirement. That's has been our saviour over the last few years.
 
Can anyone tell me if Storm and the Banks had kept their end of the bargain ie . selling down when they said they would. Is it feasible that an investment in a managed fund covering the ASX200 and using a Margin loan with a maximum LVR at 60 % would have worked ? This includes paying down the loan and handing it in so as not to incur any more interest. Also moving the leftovers if any ? to a term deposit for example. I understand there would be losses but would it be possible to walk away with something and play another day ?
I'm just curious as all the above scenarios and all the previous crashes dating back to 1929 / 30 and including the 1987 stock market crash and 9/11 were all covered in the Storm seminars . And at the time before the last crash the history of the ASX showed it had returned an average of 14%? ( correct me if I'm wrong ).
I have not included loans against property , just someone turning up with a sack of cash.
Cheers.
 
Can anyone tell me if Storm and the Banks had kept their end of the bargain ie . selling down when they said they would. Is it feasible that an investment in a managed fund covering the ASX200 and using a Margin loan with a maximum LVR at 60 % would have worked ? This includes paying down the loan and handing it in so as not to incur any more interest. Also moving the leftovers if any ? to a term deposit for example. I understand there would be losses but would it be possible to walk away with something and play another day ?
I'm just curious as all the above scenarios and all the previous crashes dating back to 1929 / 30 and including the 1987 stock market crash and 9/11 were all covered in the Storm seminars . And at the time before the last crash the history of the ASX showed it had returned an average of 14%? ( correct me if I'm wrong ).
I have not included loans against property , just someone turning up with a sack of cash.
Cheers.

The hypothetical scenario you've posed is very close to my situation. I bypassed Storm and dealt directly with Macquarie and got out of both the Storm indexed funds and my margin loan at just over 70% lvr. Later than I should have (it was initially around 50%), but much better than leaving it to my Storm adviser or I would no doubt have wound up in negative equity. Since then I slowly and tentatively fed the "leftovers" into the market (unfortunately missing a big chunk of the rise off the March '09 low due to "sharemarketphobia"), then got out and put the funds into a set-off account against left-over debt against property, and started reinvesting some earlier this year. I'm not following an index-based approach this time, but a trend-following system on individual shares that I exit without fail if an uptrend falters. To date I'm up a very modest amount, including divs, but given the lack of any sustainable uptrend in the overall market I'm OK with that - it's more important to me to protect capital and be placed to take advantage of the next bull market - if that ever happens again! I see this as the best way of clearing my residual debt on my home - given I have several years to retirement age.

So I guess the short answer to your hypothetical is: had Storm/margin lender/ got all margin loan customers out when they should have, their capital would have taken an absolute hiding, but they'd have a chance of replacing it given enough time and an obliging market.
 
The research needed wasn't overly comprehensive to be honest. And you didn't need to be a financial wizard to untangle the risks. Far from it.

Many went to Storm wanting a conservative strategy, and the Storm "advisers" recommended these people borrow and invest 100% in shares.

These people needed to ask themselves two straight forward questions, the answers to which can be found very easily-

1. Is investing in shares low risk? Answer NO, it is high risk.
2. Does gearing reduce the risk of investing in shares to a conservative level? Answer NO, its the complete opposite.

Two simple questions, two easy to find answers, one giant disaster averted.

The people who sold this as low risk need to be held accountable for their misleading conduct, and I would go a step further and say that any "independent" experts clients saw for a second opinion who looked over the strategy and said it was acceptable and low risk should be run out of the industry for failing to grasp even the most basic of investment fundamentals.
An excellent post, SJ. I particularly agree with your succinct appraisal of how simple it was to see that the Storm model was exactly the opposite of the ‘safe, conservative and fail-proof strategy’ that it was touted to be.

Unfortunately, many of the incompetent and unscrupulous people who sold the strategy as ‘safe and conservative’ are still working in the industry. Many of them will receive no penalty at all, others will get off with a slap over the wrist.
It's doubtful that any of them will do jail time, though they surely deserve it.
 
Yes Bunyip this seems to be the case. There was an article in my local Tasmanian paper on Saturday by the Barefoot Investor Scott Pape . The article was titled "Beware Of False Profits ". Unfortunately I can not find a link anywhere.
The story was about The Reverend Alan Colyer who according to the article lost $250,000 with Storm when it collapsed. The Reverend then followed the SAME advisor over to Sonray Capital Markets who advised him to invest with Sonray to recoup his Storm losses . He lost another $500,00 when Sonray collapsed.
Now not withstanding the Reverend must have some real faith in people , WHYin Gods name was this advisor allowed to continue to work in the industry. Certainly there is something fundamentally and ethically wrong with the financial advice sector when something like this is allowed to happen. How many more of these advisers are still out there working and giving advice ? :banghead:
 
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