Storm Financial Group

As an Aside: Salt

Julia said:

... Just as an aside, the latest weird thing that was reported on Radio National today is primary school kids having their urine tested at school so that the researchers can determine if their diet contains too much salt!!! Someone, please deliver us from the nanny state.

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http://www.abc.net.au/radionational/programs/rnfirstbite/australian-children-and-salt/4573400

Yes, heaven help us from fools - enjoy your salt.

Julia said:

Just as an aside, the latest weird thing that was reported on Radio National today is primary school kids having their urine tested at school so that the researchers can determine if their diet contains too much salt!!!

Someone, please deliver us from the nanny state.

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Sounds like an invasion of privacy to me.

Amazing that they can find the resources to do this but seem unable to monitor financial services properly.

Being familiar with legal costings, Levitt's $6-$7 million, seems quite high for a case that saw hardly any court dates. . . Richards that is. As GG and so many others have commented, it is the lawyers who are the big winners in this. I hope his clients are going to ask for invoices and transperancy re all charges/costs.

I am hoping that since MBL hardly sees this as a blip on their earnings, intense negotiations happened around the final amount of $82.5 million. Frank? Were there barristers at the negotiations with MBL?

bunyip said:

But what I find myself wondering is this......
If investors acknowledge that there was no wrongdoing by Macquarie, then why was that company sued by investors?

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Hi Bunyip,

Perhaps the statement could also be turned around thus...

If there is no wrongdoing by Macquarie, then why are they paying out $82.5 million??

Smiley said:

Being familiar with legal costings, Levitt's $6-$7 million, seems quite high for a case that saw hardly any court dates. . . Richards that is. As GG and so many others have commented, it is the lawyers who are the big winners in this. I hope his clients are going to ask for invoices and transperancy re all charges/costs.

I am hoping that since MBL hardly sees this as a blip on their earnings, intense negotiations happened around the final amount of $82.5 million. Frank? Were there barristers at the negotiations with MBL?

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Hi Smiley,

Yes - I believe there were barristers involved. There may not have been many court dates but there was a HUGE amount of out of court work. Huge hours, millions of pages of documents were read and a large amount of travel was logged by the legal teams.

Cheers
Maccka

Yeah, I don't think we will ever really know why each side decided to settle. It's not as if either the plaintiffs or defendants legal teams are going to come out and declare "We reckon we're gonna lose this big time, so we cut the best deal we could."

In any case, they probably have better things to do such as finishing a game of canasta or whist.

maccka said:

Hi Bunyip,

Perhaps the statement could also be turned around thus...

If there is no wrongdoing by Macquarie, then why are they paying out $82.5 million??


Cheers
Maccka

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Yes, Maccka - that question could also be asked.
In fact the same quesiton was asked when CBA (if my memory serves me correctly) made a payout late last year.

I had a girlfriend years ago who negotiated to buy a ballet school. A verbal aggreement was reached about the price and the conditions of sale, the contract was in the process of being drawn up, then the owner of the ballet school decided she wanted some additional conditions included in the contract.
My girlfriend said “No, that wasn’t part of what we agreed on, either you stick to our original aggreement, or the sale is off.”
The owner of the school held fast, and the deal fell through.
My girlfriend decided to start her own ballet school from scratch, in competition to the ballet school she’d tried to buy. Her new ballet school immediately made serious inroads into the business of the other school – more than half the students moved across to the new one.
The owner of the other ballet school sued my girlfriend for breach of agreement.
She was advised by her lawyer to settle out of court.
She said “No way, it was the other party who broke the aggreement, not me, and apart from that we never signed a contract. Why should I pay when I’ve done nothing wrong?”.
Her lawyer said yes, he knew all that, nevertheless there was no certainty that she’d win the case, fighting it would be costly, and if she lost she’d be up for the other party’s legal costs as well as her own.
His professional advice was that they negotiate an out of court settlement, which he was sure would be a relatively trivial amount. He felt that was the most expedient way around the problem.
She she settled out of court for a small sum relative to the income from her new ballet school.
The story got around the small town of 10000 people, the other ballet school continued to lose students to the new one, and closed down inside of 12 months. My girlfriend came out of it all with a smile on her face, a small dent in her bank account from the payout, and her new ballet school continued to flourish.

The morals of the story?
The innocent party doesn’t always win the court case.
The guilty party isn’t necessarily the one that loses.
Innocent or guilty, an out of court settlement is often the most expedient option for the accused.

IF Macquarie is guilty of any wrongdoing (and Storm investors have acknowledged that they are not), then the law has allowed them to buy their way out of trouble for a relatively paltry sum that amounts to small change for a company of that size, while at the same time enabling investors to recoup a small percentage of their losses.

IF Macquarie is innocent of any wrongdoing (as has been acknowledged by investors), then I assume their legal advice has been that irrespective of their innocence, the most expedient course of action is to make a small out of court settlement.

I don’t think you could really pick a winner and a loser, but all things considered, I’d say that Macquarie has come out of it better than investors have done.

Ijustnewit said:

Yes invest wisely in the future and stay away from financial advisers .. Ahmen to that.

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IJN
After the way Storm treated you I guess I can understand your reluctance to ever again get involved with a financial planner.

But on the other hand it’s not reasonable to tar all planners with the same brush because of the unscrupulous actions of one dodgy outfit. Not all financial planners are rogues, some are decent moral people who can give valuable advice across a range of finance and investment issues such as estate planning, taxation minimization, retirement planning etc.
You may be doing yourself a disservice by not utilizing their professional advice.

The question of course is how do you know which ones are giving you decent advice.
I believe Ainslie has made a pretty good suggestion in that regard by advising investors to use a bit of common sense by consulting a number of different planning firms, and comparing what they’re offering.

Frank Ainslie said:

Okay! Then how does one know whether what a financial adviser is telling you is in your best interests? You don’t which is why, I now firmly believe, we ‘Stormies’ should have sought a second and indeed a third opinion from other financial advisers as to the merit of Storm’s financial model and, for those that had an accountant, run it past him or her as well. Yes, it would have cost us more money and financial advice does not come cheap but with the amount of money we were investing, it would have made little difference to us. After all, if one can’t afford the small amount of money it would have cost, one shouldn’t be in investing anyway.

Often, when you consult with more than one professional you pick up some useful advice anyway in your search for the best solution to your particular needs, whatever they may be. This is commonsense after all! As it was, our failure to apply some commonsense and test Storm’s plan independently cost us all that we had in the end.

Even when dealing with tradesmen, you don’t accept the first quote submitted but obtain two or more others as well. We all know this! The fact that we ’Stormies’ never went down this path was a major failing on our part and one that is inexcusable

So my first first advice to any would-be investors out there is not to take anyone’s word for it but rather to get a second or third opinion. Someone said on this forum some time ago, “If something sounds too good to be true, it normally is!” It’s a well known maxim and one we should have been mindful of before we signed up with Storm.

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Further to Ainslie’s comments about common sense, I’d stress the importance of applying some common sense thinking to any advice you get, regardless of whether it’s from a doctor, a financial planner, or anyone else.
Doctors a couple of centuries ago prescribed opium for pain relief. But if our doctor gave us the same advice today we’d have enough knowledge and common sense to know the advice was badly flawed and highly risky. We wouldn’t just blindly act on his advice without even thinking about it.
Similarly, we all know the stock market is risky, and it didn’t take the GFC to prove it – we knew it well before then. The spectacular rises and falls of the stockmarekt and of individual companies have always been publicly documented in our newspapers and TV news programs. We couldn’t avoid reading or hearing about it even if we wanted to.
When the advice from a financial planning firm is to get your hands on as much money as possible by cashing out your assets, your business, your super, and borrow heavily against your home, sinking all the money into the always risky stock market, then double gearing to raise even more investment funds for the same purpose, then taking step after step to keep ramping up the borrowings for more market investment, and they clearly have a vested interest in getting you to invest as heavily as possible so they can pull 7% from ever dollar you invest, they’re advising you to put all your eggs in the same basket, no diversification to spread your risk, they’re not taking into account your age......I mean really, let’s be honest and realistic here – wouldn’t just a little bit of common sense thinking have set your alarm bells ringing? Was it really that difficult to work out that you were being given a bum steer? Was it truly so hard to see that they were putting their own interests before yours?

My purpose of going over this again is not to rub salt into any wounds, but merely to point out that it need not be as scary or difficult as some of you seem to think to evaluate the advice from financial planners to sort the good from the bad,
If any of you Storm victims were to consult with a number of planners these days, I very much doubt that you’d be so prone to being taken for a ride as you were last time. I think you’d make a better effort to evaluate the advice on offer.

Macquarie settles on Storm claim

Some investors who lost everything through their involvement with storm financial are angry an out of court settlement has been agreed with Macquarie Group and concerned they've been sold short.

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More by Annie Guest @ http://www.abc.net.au/news/2013-03-22/macquarie-settles-on-storm-claim/4589882?section=qld

I can see that some investors will not be happy with the amounts they will be offered , but as they say " a bird in the hand is worth two in the bush". This was certainly the case also with the CBA settlements.
This is ONLY my opinion but I feel some investors still can not relate losses back to what they started with, for example.
You start with $ 600,00 and the bank gives you another $600, 000 so the investment is worth 1.2 million give and take market ups and downs . Now some early investors saw their investment grow to around 3 million at the height of the market. So I think some may be upset when receiving an offer of around 50 % of their initial investment that is $300,00. I think some still think they should be getting a slice of the 3 million.
Maybe it's still hard to work out for some , but I think it's a chance to move on and rebuild , and let's face it I think your health is worth more than any money .

Cheers
IJN

An interesting viewpoint, Ijustnewit. It is one that hadn't crossed my mind in all of this.

Storm collapse fighter faces losing home to bank

A PALMWOODS couple facing eviction from their family home have accused one of Australia's big four banks of bullying tactics.

Mark and Ann Weir have described the past four years as a rollercoaster of emotions as they battled Westpac Bank over a loan debt.

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More @ http://www.sunshinecoastdaily.com.au/news/bank-stand-no-shelter-from-storm/1803506/

Solly said:

More @ http://www.sunshinecoastdaily.com.au/news/bank-stand-no-shelter-from-storm/1803506/

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Banks are companies owned by shareholders, and shareholders want their company management to run a tight ship, not operate as charity organizations that give out freebies by writing off loans to people who can’t repay them. It’s not victimization when banks exercise their right to recover loans by foreclosing on mortgaged assets. It’s simply the way they have to operate, otherwise they’d go out of business.
I can understand that it’s a bitter pill to swallow for people whose homes or other assets are repossessed. But such are the cold harsh realities of borrowing money.

Solly said:

More @ http://www.sunshinecoastdaily.com.au/news/bank-stand-no-shelter-from-storm/1803506/

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I thought long and hard about whether I’d comment on some of the things that Mark Weir is reported to have said. At first I thought ‘why bother’, but as I read and re-read the article above I felt that someone should correct some of the ill-considered views and allegations that are being bandied around in relation to the Storm debacle.

The first thing I take issue with is Mr. Weir’s statement in which he refers to his ‘unavoidable financial circumstances brought on by Storm Financial.’
The circumstances that Mr. Weir or any other Storm investors find themselves in were not ‘unavoidable’.
On the contrary, what happened to Storm investors was absolutely avoidable. Nobody forced anyone to borrow heavily to invest in the stock market, mortgage their homes to raise loans, use double gearing, sink all their own money and all the borrowed money into just one risky investment. Nobody forced anyone to sit by and do nothing to address their debt crisis while the stock market collapsed. Nobody forced anyone to accept Storm’s advice. Nobody prevented anyone from consulting a number of financial planning firms to compare their offerings. (this move alone would have revealed the risky nature of Storm’s strategy compared to the more conservative advice that most planning firms offer.)
Many thousands of people approached Storm to see what they were offering. Most of them rejected Storms’ advice, thereby avoiding getting caught up in the financial disaster that destroyed Storm investors.
So for any Storm investor to describe their financial circumstances as ‘unavoidable’......well, it simply is not correct.

Mr. Weir describes Westpac’s action as ‘corporate bastardry’. I have to wonder if he’s really being fair here, or if he’s just lashing out from emotional stress.
Banks usually consult with clients who are in financial difficulties, in an attempt to help them find a way around their problems. I have no doubt that Westpac has done so in this case. Foreclosure would be a last resort.
When we take out a bank loan we usually don’t think about where the bank gets the money they lend us. It’s borrowed money – they borrow the money from someone else, then lend it to us. The bank has to meet loan commitments just like the people they lend to have to meet loan commitments. If they can’t meet their loan commitment then they go out of business, just like us ordinary investors go out of business if we can’t meet our loan commitments.
Clearly then, banks have to insist that clients honor the terms and conditions of their loans. If they don’t, then the bank moves to recover the money. It has nothing to do with ‘corporate bastardry’ – it’s just standard and necessary business practice.
No thinking person wants to see our banks go broke. But they’d go broke quick and lively if they adopted a complacent attitude to debt recovery.

I note the claim that the Weirs lost their life savings when Storm Financial collapsed in 2008.
The fact is that Storm investors were wrecked regardless of whether Storm Financial collapsed or survived. Investors lost their life savings because of the stock market crash and because of their extreme levels of gearing, not because Storm collapsed, and not when Storm collapsed. Their savings were lost long before then – the damage was already done by the time Storm folded.

In summary.....
* The financial circumstances of Storm investors were avoidable.
* Banks moving to recover loans are simply following necessary business practice – otherwise they’d soon go out of business.
* Storm investors were wiped out by a combination of heavy gearing and a collapsing stock market – not by the collapse of Storm Financial.

Ijustnewit said:

I can see that some investors will not be happy with the amounts they will be offered , but as they say " a bird in the hand is worth two in the bush". This was certainly the case also with the CBA settlements.
This is ONLY my opinion but I feel some investors still can not relate losses back to what they started with, for example.
You start with $ 600,00 and the bank gives you another $600, 000 so the investment is worth 1.2 million give and take market ups and downs . Now some early investors saw their investment grow to around 3 million at the height of the market. So I think some may be upset when receiving an offer of around 50 % of their initial investment that is $300,00. I think some still think they should be getting a slice of the 3 million.
Maybe it's still hard to work out for some , but I think it's a chance to move on and rebuild , and let's face it I think your health is worth more than any money .

Cheers
IJN

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I think that’s good advice......move on and rebuild, your health is worth more than money.

Can anyone tell me......Was the Macquarie case related to an allegation that they were involved in a UMIS?

Are there any outstanding class actions in relation to banks allegedly being involved in a UMIS?

Also, can anyone tell me or at least give a hint as to what percentage of the settlement money is taken by a law firm that operates on a ‘no win no fee’ basis? If you get a 300 grand settlement from a bank, does 50% of it go to the law firm? 40%? 30%?
A fellow down the road from me has engaged a law firm to represent him in a legal case regarding a workplace injury. The firm is working on a ‘no win no fee’ basis.
He tells me that if he wins the case the bulk of the settlement will go to the law firm, and he wonders if there will be enough left over for him to make it worthwhile.

Something that may be not well know is that many clients had more than enough money at the height of the markets to pay off their mortgage. This did not occur in most cases and the complete opposite took place.
Why ? because Storm were dead against property investment of any kind. Most advisers would themselves rent or have extra margin loans out against any bricks and mortar held. Why wouldn't you pay out your mortgage in the good times ? The answer probably has more to do with Storm missing out on some fees and opportunity to get more cash to ramp up margin loans. As far as I'm aware many retired and sometimes elderly investors where encouraged to renegotiate their current mortgages with a more Storm friendly bank. To my good fortune I was never in this position , and if I had been I would have made sure that my house was secured and the mortgage was paid out in full when the cash was available to do so. To allot unfortunately they took every word from Storm and their advisers as gospel and did anything they asked . After all they where paying top dollar for that advice , and at the height of the market that advice seemed to be working. I don't know if this was the case with the couple in the article Bunyip refers to .


IJN

Storm Financial investors meet to discuss settlement offer
More than 100 former Storm Financial investors met at Redcliffe, north of Brisbane, last night to get details on the latest settlement offer.

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http://www.abc.net.au/news/2013-03-...-discuss-settlement-offer/4599670?section=qld

Solly said:

http://www.abc.net.au/news/2013-03-...-discuss-settlement-offer/4599670?section=qld

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Thanks Solly.

From that link

Former investors say the only way to stop another disaster like Storm Financial is for the courts to discipline the banks and set a precedent.

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I would dispute this.

My mate who lost the lot with Storm is back with a similar Financial Adviser, and ecstatic with his returns.

Nobody can convince him to rein in, smell the flowers and enjoy life.

He has swallowed the hook, and is borrowing again.

Is it the Financial Adviser's fault.

Or is it the Muppets' ?

gg

"Discipline the banks"???
For what exactly?

Julia said:

"Discipline the banks"???
For what exactly?

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Perhaps it has something with fractional banking?

And regulating for the lowest common denominator.


I'm all for lenders exercising a duty of care, but I think those days have passed where lenders have individual relationships. And I doubt whether those days were much different.

chops_a_must said:

I'm all for lenders exercising a duty of care

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How far do you go in making businesses responsible for exercising a duty of care? Should a duty of care apply only to businesses that sell loans, or should it also apply to businesses that sell other products?

Should a motor dealer exercise a duty of care by ensuring that you can afford the car you want to buy?
Before Harvey Normal loads you up with furniture or electrical gear, do they have a duty of care to ensure you can afford it without putting yourself in financial hardship?
Before your bank offers to increase your credit card limit, does it have a duty of care to ensure that you’ll be able to handle the additional debt you’re likely to run up?

Investors should exercise a duty of care to themselves by borrowing responsibly. Most investors already do so, but the Storm debacle has shown us that some do not.