Julia
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Good. That means your situation is at least not as bad as those already in retirement or close to it.
Having had this experience, how will you now approach investing for the future?
Storm Financial Group
- Thread starter Garpal Gumnut
- Start date
Having had this experience, how will you now approach investing for the future?
That's the million dollar question because if you were in my shoes - how would you approach investing in the stock market, or more importantly who would you trust with your hard earned? My answer - noone at the moment!!!!!
Julia
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If you'd read any of my posts throughout this thread you'd know the answer. I would educate myself.
Absolutely no one will act as diligently on your behalf as you will yourself.
Financial literacy is not difficult.
Have a read of DocK's post:
DocK has adopted a simple trend following approach. If you spend around $30 and acquire a copy of Stan Weinstein's "How to Profit in Bull and Bear Markets" you will quickly and easily understand this.
While you're waiting for the book to arrive, work your way through the online education about the market supplied by the ASX: http://www.asx.com.au/resources/shares-education.htm .
What happens from here is up to you.
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 ?
Yeah I read that article. Scott Pape is generally quite good I feel with his opinions...I enjoy his articles. He takes a common sense approach.
I have noticed recently a few ex-Stormers have been in the news for being banned....not sure why it has taken so long. You would think any adviser with Storm on their CV would have a black mark against his/her name, and people would avoid them like the plague, yet some people, like the good Reverend, are just too trusting unfortunately.
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 ?
My initial reaction when I heard about Storm investors getting cleaned out was ‘Serves them bloody well right for taking such ridiculous risks with vast sums of borrowed money in the always risky and volatile stock market’.
However, as more information came to light and I learnt about the blatant dishonesty of the so-called ‘experts’ who advised them, I modified my view to some extent.
But really, there comes a time when the actions of some people reach such a level of foolishness that when they come to grief you really do have to think ‘It serves them bloody well right’.
The good reverend must surely be one such person. Perhaps he placed his faith in God to guide him. If so, his faith appears to have been rather misplaced.
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Hi jjtebj12!
I think what Bunyip is telling you is that if you use his crystal ball, you can avoid all the financial pitfalls out there! He also has a device you could borrow that goes 'tick' when you meet a shonky financial adviser and it starts 'beeping' when you meet a shifty banker. The downside is that you might end up going deaf but that's the price you have to pay for good advice these days.
Yes Frank, as a matter of fact I do have such a device. But rather than ticking or beeping, mine rings alarm bells when it senses danger or smells fraud or dishonesty. In fact it rang the alarm bells loud and clear only yesterday when I got an email from someone claiming to have won 130 million Euro in Europe’s largest lottery, and offering to share the prize with me by transferring 2.5 million Euro to my bank account if I’d give them my account details.
My device is called CST (Common Sense Thinking), and it’s steered me clear of many a trap that has snared the unwary and imprudent.
The good news is that you too have your very own CST device. Everyone does. But some people, like yourself for example, have their CST switched off more often than switched on.
And that’s unfortunate, because people with their CST switched off do some crazy things.
Being a Queenslander, you’ll recall the Dragon Rapide vintage aircraft that crashed near Gympie about a month ago, killing all six people on board. Despite his vast flying experience, the pilot obviously had his CST switched off when he took off during atrocious weather, radioed that he was lost in cloud, and slammed into a hillside shortly after. He apparently had no ELB with him either (emergency locator beacon) , so it took several days to locate the wreckage.
From my own experience as a private pilot I know that pilots with their CST switched on choose to stay on the ground during inclement weather, and they carry ELB’s with them on every flight.
How often do we see people swimming in crocodile infested waters, drink driving, wiping themselves out on booze or drugs, putting their health at risk through poor diet, lack of exercise, and obesity. These people all have their CST switched off.
Most devices like TV’s, computers etc, start costing you money as soon as you switch them on. CST is different in that it costs you nothing while it’s switched it on, but it can be extremely costly when you have it switched off.
You found that out the hard way, didn’t you Frank, by switching off your CST during you dealings with Storm!
If you’d had your CST switched on you may spotted the risk by asking yourself just a couple of simple questions like those outlined by SJG in his recent post.......
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.
Just think of how different your present situation would be if only you’d asked and answered a couple of simple questions like those.
I firmly believe that most people who approached Storm walked away because their CST told them that neither gearing nor the stock market was safe and conservative, as was being claimed. Sure, some may have walked because they were just window shopping.. But most would have been aware of the wild swings and murderous plunges that are common in the market, and most would be well aware of how easy it is to get into trouble if you load up with too much debt. On that basis they saw straight through Storm’s ridiculous claim that their model was safe and conservative. So they turned their back on it and walked away.
Frank ol’ son, take a tip from your old sparring partner - switch on your CST. You’ll find it’s a lot cheaper to have it on than off, and it just might save you from further grief.
My device is called CST (Common Sense Thinking), and it’s steered me clear of many a trap that has snared the unwary and imprudent.
The good news is that you too have your very own CST device. Everyone does. But some people, like yourself for example, have their CST switched off more often than switched on.
And that’s unfortunate, because people with their CST switched off do some crazy things.
Being a Queenslander, you’ll recall the Dragon Rapide vintage aircraft that crashed near Gympie about a month ago, killing all six people on board. Despite his vast flying experience, the pilot obviously had his CST switched off when he took off during atrocious weather, radioed that he was lost in cloud, and slammed into a hillside shortly after. He apparently had no ELB with him either (emergency locator beacon) , so it took several days to locate the wreckage.
From my own experience as a private pilot I know that pilots with their CST switched on choose to stay on the ground during inclement weather, and they carry ELB’s with them on every flight.
How often do we see people swimming in crocodile infested waters, drink driving, wiping themselves out on booze or drugs, putting their health at risk through poor diet, lack of exercise, and obesity. These people all have their CST switched off.
Most devices like TV’s, computers etc, start costing you money as soon as you switch them on. CST is different in that it costs you nothing while it’s switched it on, but it can be extremely costly when you have it switched off.
You found that out the hard way, didn’t you Frank, by switching off your CST during you dealings with Storm!
As you can see from the above quote, you admit that your failure to apply some common sense cost you all that you had in the end.
If you’d had your CST switched on you may spotted the risk by asking yourself just a couple of simple questions like those outlined by SJG in his recent post.......
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.
Just think of how different your present situation would be if only you’d asked and answered a couple of simple questions like those.
I firmly believe that most people who approached Storm walked away because their CST told them that neither gearing nor the stock market was safe and conservative, as was being claimed. Sure, some may have walked because they were just window shopping.. But most would have been aware of the wild swings and murderous plunges that are common in the market, and most would be well aware of how easy it is to get into trouble if you load up with too much debt. On that basis they saw straight through Storm’s ridiculous claim that their model was safe and conservative. So they turned their back on it and walked away.
Frank ol’ son, take a tip from your old sparring partner - switch on your CST. You’ll find it’s a lot cheaper to have it on than off, and it just might save you from further grief.
IJustNewit - you have to make some assumptions to get an answer but I will put something up.
Lets say gearing level was a more conservative 50% (which was Storms preferred level) when the market peaked at around 6750.
If margin call was triggered at the 80% level and not the 90% level the if required a fall of 37.5% on the market. This would equate to 4220.
Now the important thing is where did the equity come from to see what impact it had on clients. There are 2 scenarios:
1. Client came in with available equity and no house or was not willing to borrow against the house. This would include super monies withdrawn.
2. Client came with a house that was mortgaged against to provide capital.
Starting with 1. Lets use basic numbers. Client brings $100K to Storm, storm arrange the margin loan for a further $100K so 50% geared. When the margin call triggers and the investments are sold (80% LVR) the $200,000 investment is now worth $125,000. Pay back the margin loan of $100K and client left with $25K of their original $100K. A 75% loss. Yes they have monies to play another day but you need to see the $25K go up by 4x just to get back to even. Pretty hard considering you would assume they would be gunshy of borrowing again to leverage the return.
Scenario 2. Same result of $25K but they still owe $100K on the house (which provided the initial capital) so they are actually in a much worse position as there is no way to turn off the interest on the home loan and if they use the $25K remaining to minimise the interest they don't have anyway of getting a return on the monies to hopefully see them grow a bit again.
The strategy only worked if clients were NEVER sold out. If the markets fell and they stayed in then Storm assumed it would rebound and losses would be recovered as they still had the same amount of units invested. This is why Storm arranged higher LVRs, without them it would have gone to mud even quicker. Clients would have been better off but still hopelessly screwed.
We have also seen that markets have not rebounded so even if they had some way of keeping them in and avoiding the margin call we are still down around 35% and their interest would have kept on compounding for 4 years meaning they would need markets to run even higher than last time to get back to that magical 50% gearing level.
Before I get a run of responses let me be clear about a couple of things. The STRATEGY was legal. Storm and the banks arrangements may be found to be otherwise but I can still give the same advice to a client and not be in breach should they fall under the right risk tolerance. So ASIC were never going to say the strategy was illegal. What ASIC missed was who it was being sold to. The same with the banks, the strategy is legal so no one in their compliance arm would say otherwise based on purely the advice. What they missed was how it was being funded.
Can I also make this point.
If a client walks into my office with $500,000 and no debt on their house (worth $500,000) and I invest that for them into shares I need the share market to drop 100% (ie not exist anymore, BHP, Woolworths, ANZ all not be worth anything) before I can lose all of that clients money.
If that client walked into Storm. They get to redraw $400,000 from the house, use the $500,000 and then gear at 50% for a total investment of $1.8M. The value only needs to drop to $1.3M (28%) before that client has on paper lost all of their capital.
Be very careful with ALL debt.
If a client walks into my office with $500,000 and no debt on their house (worth $500,000) and I invest that for them into shares I need the share market to drop 100% (ie not exist anymore, BHP, Woolworths, ANZ all not be worth anything) before I can lose all of that clients money.
If that client walked into Storm. They get to redraw $400,000 from the house, use the $500,000 and then gear at 50% for a total investment of $1.8M. The value only needs to drop to $1.3M (28%) before that client has on paper lost all of their capital.
Be very careful with ALL debt.
And just to elaborate a little more to further illustrate the enormous risk.....
If a client has a 1.8 million dollar portfolio, of which 1.3 million is borrowed money and half a million is his own money, just one day of precipitous decline such as the 25% market collapse on 20/10/87 would wipe out 450k or 90% of his base capital of 500k. IN ONE DAY. And 80% of that decline would have occurred the instant the market the opened, assuming a repeat of the ‘87 crash. Margin calls would have been useless in saving him from catastrophic loss in that situation.
That’s how risky the Storm model was. And to spot that risk, the client only had to divide his proposed portfolio value by 4 to find out how much it would decline in one day if there was a 25% drop, and then work out what percentage of his base capital he’d be left with.
It really was that quick and simple to find out that they were having a lend of you by selling this as a safe and conservative strategy.
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Hi Doobsy!
Time to pick your brain!
The scheme that Storm operated was to my mind simply a device for churning money out of clients with substantial assets that Storm used for their own purposes. It was clever because few if any saw through the scheme from the simplest investor right the way through to ASIC. As you say it was legal in nature but illegal in its design and purpose.
I am pressed for time at the moment because I am in court most days. However, I’ll start with the LVR deception and comment on other flawed aspects in this scheme when time permits.
Because you seem to know what you are talking about, I would welcome your comments.
What do I mean by the LVR Deception? I am referring to the distortion that arose in the LVR’s due to Storm’s failure to include all investors’ liabilities and assets in the necessary equation. The result for any Storm clients that were over-leveraged (and most were) was catastrophic when this extension in risk was combined with the inordinate delays that occurred in selling clients down in late 2008.
In the Liquidator report (Worrells) it said in this respect: “The liquidators understanding of the evidence given by Mr and Mrs Cassimatis on this topic is that, despite the statement made in the SOA and the prospectus, Storm never had the capacity, or the intention of closely monitoring and managing client's debts and portfolios. It seems that the monitoring that did occur was undertaken primarily to identify opportunities for Storm to persuade clients to take further "step" investments (as mentioned in section 7 of this report) rather than in pursuance of a policy of ensuring that the clients loan to security ratio was not placed at risk. Further, it seems Storm was totally reliant on receiving accurate "data feeds" from at least one major source to carry out even the limited monitoring role mentioned.”
One of the reasons that Storm never had the capacity to “closely monitor and manage client's debts and portfolios” was because its ‘software’ was not designed to cater for the monitoring of any bank loans be they ‘housing loans’ or ‘margin loans’. For such information Storm relied entirely on data fed to it by the banks involved. The LVR’s used by Storm were consequently distorted because the housing loans were never taken up and margin loan data had to be fed in from bank information to hand. Invariably, it was late.
The following was taken from an investor’s statement that was presented to the PJ-C. It tallies with my own findings
“The Loan to Value Ratio - The LVR Deception
The main indicator of our debt/asset position was the gearing level or LVR which was available via Macquarie Margin Lending Summary.
During any advice session this was always a reference point. Whenever our advisor reviewed our position, the Macquarie Margin Lending LVR was always referred to and used as a key and current indicator of our true position and whether further investment should be undertaken.
Sadly it is only now and in hindsight that we have come to understand more exactly the degree of obfuscation that clouded our understanding and judgement in relation to the all important LVR (Loan to Value Ratio) which was used when planning our 'Next Steps' i.e. additional investments. The LVR was so critical in determining whether the step was judicious.
When advising us our level of debt was always represented only by the LVR as per
Macquarie Margin Lending's Summary.
There was no account taken of the $380,000.00 loan from the Bank of Queensland which was derived from the debt against the house.
This was not 'visible' as part of the debt/loan balance/LVR of our Margin Loan and was not ever referred to in discussion about our LVR.
This omission and failure to consider the WHOLE debt position obviously gave a false and misleading reading of our actual investment situation.
A real example of the misleading LVR is as follows:
In the period from October to December 2007 our "Current Gearing Level' was showing as: 61.54% (Current Loan Balance $1,686,153.00: Market value $2,739,735.00) which, according to STORM and our advisor, would represent a very acceptable situation - a safe gearing level, a no worry situation and an ideal time to further invest.
In fact we took another 'step' and invested a further $66,000.00 in December 2007.
BUT it seems to us that what really should have been not only visible, but also added to the loan balance to see the REAL LVR and true level of debt, was the additional $380,000.00 debt of borrowings against the house. This was after all borrowed along with the Macquarie Margin Loan with the sole purpose for investment into the Indexed Trusts.
Thus in the period from October to December 2007 the real LVR was in actual fact 75.06% i.e. Current Loan Balance: $1,686,153.00 + Home Loan of $380,000.00 = $2,066,153.00 versus Market Value $2,739,735.00. It was not the touted acceptable 61.54% - Current Loan of $1,686,153.00 versus Market Value $2,739,735.00.
Why then were we advised to invest when the gearing level, taking into account the real level of debt, was in fact at a very dangerous and unacceptable level of 75.06%
So, even when matters were under control and markets were still behaving in early 2007 and our 'visible' yet 'deceptive LVR' was showing on our MML Summary at a mere and supposedly safe and conservative 46.02%. the 'real and actual, but invisible and not taken account or LVR i.e. the one taking into account the home loan debt (invested into the market) should have read as 64.4% i.e. Loan value of $950,818.00 + Home Loan of $380,000.00 = 1,330,818.00 versus Market value $2,066,077.00 and not as 46.02% i.e. Loan Balance of $950,818.00 versus Market Value of $2,066,077.00”
MBL’s failure to notify its Storm clients in reasonable time of margin calls because of its prior arrangements with Storm and its failure to ensure that the clients’ true LVR’s could be accurately established by Storm at any time largely contributed to the losses that followed. These deficiencies within a system that Storm and the MBL operated jointly (Alliance’ agreement)effectively jammed the escape hatch at a time when extrication was still possible.
Clearly Storm could not deliver and the MBL among others are now being held accountable for this. The MBL assigned the margin loan contractual obligations they had to their customers to Storm, and in so doing violated their customers' rights. For the MBL to simply say now that, 'We didn't know that Storm could not do what they told us they could do!' isn't good enough. The MBL should have made it its business to know!
I will finish by saying this. Once banks such as the CBA and Macquarie Bank made separate arrangements with outside parties such as Storm WITHOUT NOTIFYING THEIR CUSTOMERS AND OBTAINING APPROVAL they effectively breach their contracts with their margin loan clients because they are assigning their obligations without novation. That is a fundamental part of contract law.
Be that as it may, the LVR's were set high enough as it was and the fact that they were also inaccurate just shortened the fuse even further. Let's hope this all comes out in Court!
Time to pick your brain!
The scheme that Storm operated was to my mind simply a device for churning money out of clients with substantial assets that Storm used for their own purposes. It was clever because few if any saw through the scheme from the simplest investor right the way through to ASIC. As you say it was legal in nature but illegal in its design and purpose.
I am pressed for time at the moment because I am in court most days. However, I’ll start with the LVR deception and comment on other flawed aspects in this scheme when time permits.
Because you seem to know what you are talking about, I would welcome your comments.
What do I mean by the LVR Deception? I am referring to the distortion that arose in the LVR’s due to Storm’s failure to include all investors’ liabilities and assets in the necessary equation. The result for any Storm clients that were over-leveraged (and most were) was catastrophic when this extension in risk was combined with the inordinate delays that occurred in selling clients down in late 2008.
In the Liquidator report (Worrells) it said in this respect: “The liquidators understanding of the evidence given by Mr and Mrs Cassimatis on this topic is that, despite the statement made in the SOA and the prospectus, Storm never had the capacity, or the intention of closely monitoring and managing client's debts and portfolios. It seems that the monitoring that did occur was undertaken primarily to identify opportunities for Storm to persuade clients to take further "step" investments (as mentioned in section 7 of this report) rather than in pursuance of a policy of ensuring that the clients loan to security ratio was not placed at risk. Further, it seems Storm was totally reliant on receiving accurate "data feeds" from at least one major source to carry out even the limited monitoring role mentioned.”
One of the reasons that Storm never had the capacity to “closely monitor and manage client's debts and portfolios” was because its ‘software’ was not designed to cater for the monitoring of any bank loans be they ‘housing loans’ or ‘margin loans’. For such information Storm relied entirely on data fed to it by the banks involved. The LVR’s used by Storm were consequently distorted because the housing loans were never taken up and margin loan data had to be fed in from bank information to hand. Invariably, it was late.
The following was taken from an investor’s statement that was presented to the PJ-C. It tallies with my own findings
“The Loan to Value Ratio - The LVR Deception
The main indicator of our debt/asset position was the gearing level or LVR which was available via Macquarie Margin Lending Summary.
During any advice session this was always a reference point. Whenever our advisor reviewed our position, the Macquarie Margin Lending LVR was always referred to and used as a key and current indicator of our true position and whether further investment should be undertaken.
Sadly it is only now and in hindsight that we have come to understand more exactly the degree of obfuscation that clouded our understanding and judgement in relation to the all important LVR (Loan to Value Ratio) which was used when planning our 'Next Steps' i.e. additional investments. The LVR was so critical in determining whether the step was judicious.
When advising us our level of debt was always represented only by the LVR as per
Macquarie Margin Lending's Summary.
There was no account taken of the $380,000.00 loan from the Bank of Queensland which was derived from the debt against the house.
This was not 'visible' as part of the debt/loan balance/LVR of our Margin Loan and was not ever referred to in discussion about our LVR.
This omission and failure to consider the WHOLE debt position obviously gave a false and misleading reading of our actual investment situation.
A real example of the misleading LVR is as follows:
In the period from October to December 2007 our "Current Gearing Level' was showing as: 61.54% (Current Loan Balance $1,686,153.00: Market value $2,739,735.00) which, according to STORM and our advisor, would represent a very acceptable situation - a safe gearing level, a no worry situation and an ideal time to further invest.
In fact we took another 'step' and invested a further $66,000.00 in December 2007.
BUT it seems to us that what really should have been not only visible, but also added to the loan balance to see the REAL LVR and true level of debt, was the additional $380,000.00 debt of borrowings against the house. This was after all borrowed along with the Macquarie Margin Loan with the sole purpose for investment into the Indexed Trusts.
Thus in the period from October to December 2007 the real LVR was in actual fact 75.06% i.e. Current Loan Balance: $1,686,153.00 + Home Loan of $380,000.00 = $2,066,153.00 versus Market Value $2,739,735.00. It was not the touted acceptable 61.54% - Current Loan of $1,686,153.00 versus Market Value $2,739,735.00.
Why then were we advised to invest when the gearing level, taking into account the real level of debt, was in fact at a very dangerous and unacceptable level of 75.06%
So, even when matters were under control and markets were still behaving in early 2007 and our 'visible' yet 'deceptive LVR' was showing on our MML Summary at a mere and supposedly safe and conservative 46.02%. the 'real and actual, but invisible and not taken account or LVR i.e. the one taking into account the home loan debt (invested into the market) should have read as 64.4% i.e. Loan value of $950,818.00 + Home Loan of $380,000.00 = 1,330,818.00 versus Market value $2,066,077.00 and not as 46.02% i.e. Loan Balance of $950,818.00 versus Market Value of $2,066,077.00”
MBL’s failure to notify its Storm clients in reasonable time of margin calls because of its prior arrangements with Storm and its failure to ensure that the clients’ true LVR’s could be accurately established by Storm at any time largely contributed to the losses that followed. These deficiencies within a system that Storm and the MBL operated jointly (Alliance’ agreement)effectively jammed the escape hatch at a time when extrication was still possible.
Clearly Storm could not deliver and the MBL among others are now being held accountable for this. The MBL assigned the margin loan contractual obligations they had to their customers to Storm, and in so doing violated their customers' rights. For the MBL to simply say now that, 'We didn't know that Storm could not do what they told us they could do!' isn't good enough. The MBL should have made it its business to know!
I will finish by saying this. Once banks such as the CBA and Macquarie Bank made separate arrangements with outside parties such as Storm WITHOUT NOTIFYING THEIR CUSTOMERS AND OBTAINING APPROVAL they effectively breach their contracts with their margin loan clients because they are assigning their obligations without novation. That is a fundamental part of contract law.
Be that as it may, the LVR's were set high enough as it was and the fact that they were also inaccurate just shortened the fuse even further. Let's hope this all comes out in Court!
Julia
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I don't think Doobsy said it was illegal in its design and purpose.
How you could just ignore the home loan in your total LVR calculations is beyond me.
What did you think had happened to that debt?
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It never ceases to amaze me that some non stormies assume that stormies in their 30s and 40s can easily start again. I know a stormie couple in their early 40s who are both working just to pay the interest on their loan. How can they start again. How many others are in this same position.
Going to make the mistake of getting involved in this forum again.
HQ, they can start again by selling things, going bankrupt, whatever. Harsh I hear, yep. Are they all that different from the tourism operators that have gone under in recent times in FNQ? Some of them no doubt had equity from their house invested in their businesses and were having a fair dinkum crack at making a business work. They will have debt to repay too.
How about the contractors that were owed tens to hundreds of thousands of dollars when developers went under. Most of them have their house as equity against their business. Bet there are plenty that had their homes taken when it was nothing they did wrong, they just never got paid for work they had done.
Stormies in their earlier years have been taught a nasty lesson on getting rich quick. I was talking to a client who had his best mate sell up his business machinery, invest with Storm and retire at 45. What was he thinking? That isn't normal. It sounded great but as with most schemes promising the world there is always a catch.
Exactly. How can one suddenly "forget" they have a $380,000 debt against their home?
So let me get this straight....we have heard Storm clients who...
Paid massive fees for cookie cutter advice
Borrowed to the gills under the impression it is conservative
Invested the whole lot in shares under the impression it is conservative
Were blissfully unaware that we were going through a Global Financial Crisis
Didn't take the slightest bit of interest in the fact that the portfolio is losing money hand over fist on an almost daily basis during 2008 or at least didn't think to check
Borrowed more as the market continued to fall
Overlooked the massive debts against their homes
It beggars belief. Cassimatis and his minions must have been some amazing salespeople to get people into this under the guise of it being "conservative".
Frank - I was waiting for a question but there wasn't one.
Lets be clear here. It was not a requirement of a margin lender to find out where the equity offered as security came from. It is now. Back then all the rules said were that you had to offer security to the margin lender. In doing so you were giving them the right to take that security should the loan go bad and you could not meet the margin call.
I refuse to go back over the same ground of special deals and special LVR levels. The courts will sort this.
Lets take a step back. For a NON storm client who had a margin loan - they offered equity (in the form of shares/managed funds/cash) to the margin lender and the ML then gave them a loan against that equity. Why is it the ML responsibility to ensure the equity offered is legit and wasn't sourced from other borrowing? SURELY the guy applying for the loan knows where the equity came from and knows whether part of it was funded from their house equity. Surely they know that if the margin loan gets triggered and the ML takes the equity offered to protect that loan that they are left with little to no equity to pay back the other loan and therefore the equity (whether borrowed or taken from super or cash from a property sale) is going to be lost.
In all this the Margin Lender will only get in trouble for the special deal, not the lending. ML lending is all about equity and all clients came to the ML with equity.
On the monitoring of loans. BS BS BS BS BS BS. Lets look at LVR on the margin loan. Loan value - pretty frickin simple to get from the lender. As most pre-paid interest the value did not change throughout the year unless there was another step taken. This was TOO EASY to know correct values.
Value of Investments - Colonial or Challenger would have been providing daily unit pricing. Units x unit price = value. Again nothing complex there. If they claim they were getting value from the ML I ask why as it isn't the investment manager.
LVR - Loan as per above divided by Value as per above. HOW HARD WAS IT???????????????????????????????
I could set up an excel spreadsheet in about 15 minutes to do that let alone give me a couple of million $ to develop some BS software system. Funnily enough they were quick and accurate on LVR when it dropped and that triggered the system to tell them someone should be taking another step.
Overall LVR
This was surely Storm that should have as the ones in charge of and the ones who recommended the strategy that should have known all available information and therefore what the Overall debt position to overall asset position was. Again - I don't think home loans (investment withdrawal components as opposed to legit home debt) were changing unless Storm arranged it and recommended it and interest was prepaid were possible to max the tax deduction so they had a bloody good idea.
Do not believe the lies of EC and JC, they are playing as dumb as possible. Are you telling me people smart enough to get to $5B under their management did not know what their clients had? Clients took 6 months to get on board because of how thorough the fact finding was and how they needed every last detail to plug into their fancy modelling to fool everyone into thinking all was well.
Lets be clear here. It was not a requirement of a margin lender to find out where the equity offered as security came from. It is now. Back then all the rules said were that you had to offer security to the margin lender. In doing so you were giving them the right to take that security should the loan go bad and you could not meet the margin call.
I refuse to go back over the same ground of special deals and special LVR levels. The courts will sort this.
Lets take a step back. For a NON storm client who had a margin loan - they offered equity (in the form of shares/managed funds/cash) to the margin lender and the ML then gave them a loan against that equity. Why is it the ML responsibility to ensure the equity offered is legit and wasn't sourced from other borrowing? SURELY the guy applying for the loan knows where the equity came from and knows whether part of it was funded from their house equity. Surely they know that if the margin loan gets triggered and the ML takes the equity offered to protect that loan that they are left with little to no equity to pay back the other loan and therefore the equity (whether borrowed or taken from super or cash from a property sale) is going to be lost.
In all this the Margin Lender will only get in trouble for the special deal, not the lending. ML lending is all about equity and all clients came to the ML with equity.
On the monitoring of loans. BS BS BS BS BS BS. Lets look at LVR on the margin loan. Loan value - pretty frickin simple to get from the lender. As most pre-paid interest the value did not change throughout the year unless there was another step taken. This was TOO EASY to know correct values.
Value of Investments - Colonial or Challenger would have been providing daily unit pricing. Units x unit price = value. Again nothing complex there. If they claim they were getting value from the ML I ask why as it isn't the investment manager.
LVR - Loan as per above divided by Value as per above. HOW HARD WAS IT???????????????????????????????
I could set up an excel spreadsheet in about 15 minutes to do that let alone give me a couple of million $ to develop some BS software system. Funnily enough they were quick and accurate on LVR when it dropped and that triggered the system to tell them someone should be taking another step.
Overall LVR
This was surely Storm that should have as the ones in charge of and the ones who recommended the strategy that should have known all available information and therefore what the Overall debt position to overall asset position was. Again - I don't think home loans (investment withdrawal components as opposed to legit home debt) were changing unless Storm arranged it and recommended it and interest was prepaid were possible to max the tax deduction so they had a bloody good idea.
Do not believe the lies of EC and JC, they are playing as dumb as possible. Are you telling me people smart enough to get to $5B under their management did not know what their clients had? Clients took 6 months to get on board because of how thorough the fact finding was and how they needed every last detail to plug into their fancy modelling to fool everyone into thinking all was well.
Julia
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And dozens more similar examples. The people running legitimate businesses with insulation who were done over when the government's pink batts scheme turned into such a fiasco.
I don't know anyone who hasn't experienced some sort of significant setback in their lives, often through absolutely no fault of their own as distinct from people who took what should have been an obvious risk.
First step to recovery is to not get attached to the mantle of victimhood.
The Seven Stages of Grief
Loss of a substantial part of one's life's saving can be quite a shock and there are established "stages" of recovering (mentally) from such a loss:-
http://www.recover-from-grief.com/7-stages-of-grief.html
Loss of a substantial part of one's life's saving can be quite a shock and there are established "stages" of recovering (mentally) from such a loss:-
http://www.recover-from-grief.com/7-stages-of-grief.html
SJG.....There’s one thing you forgot to mention – none of this is their fault!! LOL
At least, that’s what a handful of diehards on this forum keep trying to tell us!
As for the Storm mob being great salespeople – perhaps, yet of the many thousands of people who consulted Storm, three out of four of them for whatever reason didn’t take the bait. So maybe the Storm sales team wasn’t so great after all.
Fair enough that ASIC didn't shut down what was a legal strategy.
But what really condemns them is the glowing endorsement they publicly gave to the Storm model. It's unforgivable that ASIC were so effusive in their priase of a 'get rich quick' strategy that was highly risky and downright farcical.
