Storm Financial Group

[Defender]

I still reckon there should have been a Royal Commission over Storm Financial.

Storm is the perfection of fancy suited Advisers , conning gullible citizens , in to losing money.

It is what they do.

They are up and running again in Townsville.

Gullible mugs, drive in to their cupolas, and their golden dunnies.

Avoid Financial Advisers at all costs.

gg

I know of another financial advisory firm who put their clients into managed funds, using property equity, and additional margin lending in a similar way to Storm. But unlike Storm, they got all their clients through the GFC successfully (according to my advice).

Both Storm and this firm told their clients they could manage them through a major correction. The big difference was that this firm did just that with stepped trigger points as the market fell, so that they were able to reenter the market, at lower prices later on...and not lose the lot. There probably are also other similar advisory firms who managed it as well, but what this demonstrates to me is that Storm had the ability and knowledge to manage it properly, but failed to do so. Why? is the big question!

It also demonstrates that Storm clients did not necessarily behave irrationally. By contrast, the clients of the successful firm could be viewed as wise investors...

 

[Hodgie]

I know of another financial advisory firm who put their clients into managed funds, using property equity, and additional margin lending in a similar way to Storm. But unlike Storm, they got all their clients through the GFC successfully (according to my advice).

Both Storm and this firm told their clients they could manage them through a major correction. The big difference was that this firm did just that with stepped trigger points as the market fell, so that they were able to reenter the market, at lower prices later on...and not lose the lot. There probably are also other similar advisory firms who managed it as well, but what this demonstrates to me is that Storm had the ability and knowledge to manage it properly, but failed to do so. Why? is the big question!

It also demonstrates that Storm clients did not necessarily behave irrationally. By contrast, the clients of the successful firm could be viewed as wise investors...

I do not know the ins and outs of what was going on at Storm but I do know from experience that a huge part to play in whether or not certain clients come out of the GFC ok had to do with the level of gearing involved. That is where a good financial planner needs to make sure that they are not over extending their clients.

With any gearing strategy the adviser needs to make sure that the client can afford the interest payments without the need of dividends/distributions and they need to be able to meet the margin calls.

Over the GFC, clients which were over extended and borrowed more than they should have got hit hard because of the fact that distributions stopped coming in and they couldnt make the interest payments because of lack of surplus income so the interest starts to capitalise. Then the margin calls come which the client cannot meet, the assets need to be sold down at a depressed price which crystalises their losses and they are still stuck with large amounts of debt which they cannot afford to pay. They are the ones that truely get hit hard.

I am not generalising that this as the case that happened to everyone involved in storm im just pointing out that you can have 2 different investors in the same product and they can come out completely different depending on the gearing strategy recommended to them from their adviser.

And all this is still ignoring the internal gearing levels on the products recommended, just because 2 products are managed funds do not mean that they carry the same risk.

 

[Glen48]

CBA are dropping rates which means home sales are down and the banks feeling the pinch.
This will kick off another bubble and investors will be looking for a better return more fuel for Storm style scams.

 

[bunyip]

Comments from the darkside since I have been quiet for a while.

GG lets rephrase what you said. What should be avoided is ANYONE be it financial adviser, stockbroker, realestate spruikers who tell you that they have a sure fire way to make above average returns with little or less risk because they are "in the know".

People get lucky, whether it be lotto, an RSL raffle, a penny mining stock that becomes the next BHP but they are not the norm. They are the stories salesman (not advisers) will tell you but they are not the norm.

You want to make money on shares here is the best advice I can give. Buy good quality companies that can grow the business and their earnings sustainably and hold them for a LONG time. It is that simple. If they can do it with little to no borrowings themselves even better.

True Financial Advisers are not in the business of making people rich. They are in the business of maximising what people get out of what they have. To prove a point I will give a synopsis of my last 2 new clients.

1. 67 yr old with good asset base, still working part time with some rental income as well. Because she got no advice she was not running a transitional pension from her super monies and therefore has been paying roughly $7,000 in tax every year that could have been avoided. Add to that the fact her super earnings could have been tax free also and the cost of no advice was closer to $10,000 pa.

She gets advice and for $1320 it is now set up correctly, she pays us $1650 pa to manage the whole shebang inclduing getting her the Comm Seniors Health Card and over the next few years assist with stopping work and making sure her cashflow is correct. We did a re-contribution as part of the set up and now her estate will pay around $22,000 less in tax when she passes away. If anyone says she is getting ripped off then good luck staying up to date with strategic and technical changes and doing it yourself.

2. Clients both in their 60s, one over pension age and both working part time. We re-structured the portfolios, moving monies between the super accounts and now they receive nearly the full age pension for the next 3 years while her super remains hidden from assessment. Cost to do so, $1,650 ongoing to help manage the ongoing situation. Benefit - roughly $450 / fortnight or $12,000 in extra Centrelink benefit meaning their asset base is well protected for as long as possible.

Again - no talk of how much we will make on their investments, no talk of how they will be millionaires one day. What we did was use strategy and our technical knowledge to improve their situation. We charge a fee for this and they get ongoing service to ensure the situation is maximised at all times.

I dunno, maybe I am wrong but I don't have a problem justifying my fees for the value I add.

If you could pay a doctor to monitor things on an ongoing basis and let you know what changes are needed rather than only seeing them in a reactive manner when something is wrong, wouldn't you expect your health to improve?

It all comes down to whether people are getting the service they are paying for.

The industry needs a massive shakeup to break the link between advice and product floggers in the institutions but true advisers do add value.

Doobsy

Great to see you back on this thread, and speaking your usual good sense.
I think GG is a little cheesed off because he once got done over by some crook in the financial advisory game, and now like Frank Ainslie he's inclined to think that all FP's are tarred with the same dirty brush.
But I doubt if GG, or Frank either for that matter, could fail to see merit in the advice and service you've provided to the two clients you mentioned.

I hope you'll continue to contribute to this thread from time to time - not everybody thinks that one bad apple called Storm is proof that the entire case of apples is bad.

Hodgie - an excellent post from you as well.

 

[Glen48]

you want to make money on shares here is the best advice I can give. Buy good quality companies that can grow the business and their earnings sustainably and hold them for a LONG time. It is that simple. If they can do it with little to no borrowings themselves even better.

The feds are printing money all over the world..the feds are taking super out to stay afloat..???

 

[bunyip]

The old adage 'if it was too good to be true...' Was never mentioned by anyone prior to the crash

It was actually......for more than half a century I’ve been hearing ‘If it sounds too good to be true, etc etc.’
It's always been common knowledge that investments offering higher returns invariably carry higher risk.

we certainly didn't think that 'it was too good to be true..,'. Yet this seems to be the first load od rubbish that has been thrown in our face. Why wasn't it considered to be too good to be true before 2009?

It was – most of the people who looked at the Storm strategy turned their backs and walked away from it.
I understand that a number of financial planners contacted ASIC to express their concern about the Storm strategy. But ASIC appears to have paid little heed.
I wonder how many people were approached for their opinions as to whether Storm’s strategy was sound or was simply too good to be true. I have no doubt that such a question posed to this forum prior to the GFC would have prompted many responses from people pointing out the extreme risk in sinking all your money and a pile of borrowed money into the stock market, and mortgaging your home to do it.
Even if investors didn't know about this forum prior to investing through Storm, there were plenty of other people, including many financial planners, who could have and would have ventured that opinion if they'd been asked.

 

[poverty]

the extreme risk in sinking all your money and a pile of borrowed money into the stock market, and mortgaging your home to do it.

The real kicker for Storm was the fees, being charged exorbitant amounts to manage not only every dollar you have but all the dollars you can borrow too, adding up to tens of thousands of dollars a year? I just don't even... There is some massive disconnect people have when it comes to their money. If they had to pay $1.60/litre for petrol they're jumping up and down and screaming at the clerk, if a slab of beer costs $45 instead of $38 they feel personally insulted, but if it comes to blowing tens of thousands and risking everything they've ever made in their life on a product from an 'advisor' they're all for it, after all, they certainly hadn't heard it was 'too good to be true'. They've never invested before, they thought they were doing the right thing. Just what in the actual....?

 

[Judd]

The real kicker for Storm was the fees, being charged exorbitant amounts to manage not only every dollar you have but all the dollars you can borrow too, adding up to tens of thousands of dollars a year? I just don't even... There is some massive disconnect people have when it comes to their money. If they had to pay $1.60/litre for petrol they're jumping up and down and screaming at the clerk, if a slab of beer costs $45 instead of $38 they feel personally insulted, but if it comes to blowing tens of thousands and risking everything they've ever made in their life on a product from an 'advisor' they're all for it, after all, they certainly hadn't heard it was 'too good to be true'. They've never invested before, they thought they were doing the right thing. Just what in the actual....?

I gave up long ago trying to understand that aspect. Obtain $100k by mortgage, use it to get another $100k on margin, adviser takes 14k leaving the investor with 186K to invest and paying interest on 200k. Couldn't understand how those numbers could work then and still don't. Not worth the effort trying to either.

 

[Glen48]

OR worse buy a property and hold for yrs thinking they will double for decades.
When the answer is to watch the market and sell at a peak or better rent and invest your money wisely

 

[Ijustnewit]

I still firmly believe that Storm was fear based marketing at it's very best. Selling something to unwary consumers based on financial security and success.
For those interested , follow the current ABC series documentary "The Men Who Made Us Spend". Apply this same marketing to the financial sector and there you have it.

 

[Glen48]

Every one has survival fear and will do any thing to make sure they survive, that's why they buy all sorts of drugs and other junk thinking what they are doing is the right thing to help them live long and stay rich.
But fail to realise all are being manipulated by big pharma or finical advisers.

 

[Hodgie]

I gave up long ago trying to understand that aspect. Obtain $100k by mortgage, use it to get another $100k on margin, adviser takes 14k leaving the investor with 186K to invest and paying interest on 200k. Couldn't understand how those numbers could work then and still don't. Not worth the effort trying to either.

It was cases like this that led to changes in legislation so that the adviser could no longer charge commission on borrowed funds. Back then, for a dodgy adviser it was directly in their own best interest to gear every client up as much as possible using any asset as a security because it would mean more commission for them.

The banks had a part to play in this to, they would happy let a typical mum and dad borrow well over what they could afford as it ment more revenue for them to. The banks would allow low doc loans to go through, which required no evidence to show that the amount of borrowings were affordable, they would then allow the borrowed funds to be used as security into a margin loan (known as double gearing) which they would then use to invest The banks did not do their due dilligence letting the adviser and the client borrow to these extents when they did not have the capacity to make the payments if the market went into a decline.

I have seen commissions charged of up to 16% of the amount invested on agribusiness products prior to 2007. They also offered gearing facilities as well to boost that investment amount up.

That being said I have also seen advisers charge unconscionable fees on other things. Such as a simple super rollover into a retail fund and insurance plan for 25k upfront.

The thing is if your a dodgy person your just always going to be dodgy in any occupation, these people are just out for themselves and will do anything to better their own lives, it gets highlighted in financial planning because of the GFC, all these strategies that they had been running came undone during hard times. Absolutely terrible risk management. It was a massive money grab by all parties involved back then, they would have continued doing it today if the economy continued running well.

 

[Judd]

True, Hodgie.

It is bemusing to me how the entrepreneurs of these arrangements do not always follow their own advice. In the case of Storm Financial, it was fascinating to see the Principal attempt to take out a $2m dividend cheque made out to the Family Trust Fund rather than gearing up as much as the firms clients had been. Strange that. However, after being involved in investing in one form or another for around 30 years nothing much surprises me for some reason.

 

[bunyip]

The banks had a part to play in this to, they would happy let a typical mum and dad borrow well over what they could afford as it ment more revenue for them to. The banks would allow low doc loans to go through, which required no evidence to show that the amount of borrowings were affordable, they would then allow the borrowed funds to be used as security into a margin loan (known as double gearing) which they would then use to invest The banks did not do their due dilligence letting the adviser and the client borrow to these extents when they did not have the capacity to make the payments if the market went into a decline.

Yes, banks are unscrupulous buggers who, just like any other business, will sell you as much of their product as possible.
Harvey Normal doesn’t really care whether you can afford the goods you’re buying without putting yourself into financial hardship. A car dealer doesn’t really care if his client will be hard-pressed to afford the payments on the car he’s buying. And the banks don’t care much whether the loan you’re about to take out will stretch you financially......they’re happy to sign you up as long as they have security arrangements in place so they can recoup their money in the event of loan default.

All of which only reinforces the message that it’s important for borrowers to think things through for themselves, rather than just believing everything they’re told.
The Storm debacle revealed many unfortunate stories of people taking on loans that were out of all proportion to their loan-servicing capacity, because Storm told them ‘it would be OK’.

 

[Glen48]

Also with IR's coming down and staying down for years to come banks can lend more and increase their bottom line.

 

[Frank Ainslie]

I’ve written a book called ‘I ACCUSE’ in which I have detailed the reasons why people in Australia should think twice before:
(1) They seek advice from financial advisers
(2) They borrow money from banks for investment purposes.
The latest CBA scandal that has erupted in which many financial advisers acting for that Bank have given harmful advice to their clients is just one in a series of events that has been occurring for many years in the financial sector.
We, ourselves, were caught up six years ago in the Storm Financial disaster. In August 2008, Storm’s clients had AU$4.8 billion invested in that company's share funds. Some six months later, Storm Financial was placed in administration. My book is not so much about what occurred then, but what happened to us afterwards.
Like many others that invest, we thought that the:
*consumer laws in this country would protect us against fraud – not so!
*professional indemnity insurance that all financial advisers must take out was valid – not so!
*ASIC would fight our case – not so!
*Law would ensure that the wrongdoers were punished – not so!
*compensation would be adequate – not so!
The fact of the matter is that “we were not given a fair go” and nor will you be if you find yourself in a similar position. Thinking it can’t happen to you is a certain recipe for disaster. Believe me, it can happen to anyone in this country that invests believing that this Government and ASIC will protect them if anything goes wrong. Both ASIC and this Government protect the ‘Big End’ of town, and the consumer laws are framed to do the same.
There is only one sure way you can make certain that your money is safe. Don’t invest it in the first place.
Ask yourself this!
*Do you really want to trust banks like the CBA, the Macquarie Bank and the BOQ who have proven that they can’t be trusted?
*Do you really want to trust financial advisers when so little control is exerted over them?
*Do you really want to trust this Government and ASIC when they can’t control themselves?
Then you need to ask yourself whether you can trust what I am telling you in ‘I ACCUSE’. Well, for one I am offering you this advice in my book “free of charge”. Therefore, I have no reason to mislead you. Further, this book is based on my own personal experiences. I have been there, done that, and I have survived (just).
My motivation in writing this book is a simple one. I do not want anyone else to go through what we, Helen and I, have been through these last six years. I have written ‘I ACCUSE’ because I want to warn everyone about the risks they run if they entrust others with their money. Once you leave your money in someone else’s hands, you lose control of it and that is when the problems arise.
And if you think for one minute that the new regulatory laws will protect you, think again. These consumer laws have been tweaked a bit to keep people happy, but the loopholes still exist. Make sure that you are not one of those that will fall through the cracks created by this Government when another financial disaster occurs.
The choice is yours! I have done what I set out to do – warn you. The rest is up to you.

Frank Ainslie

My book can be down-loaded at my web site ‘Storming on Banks’ https://sites.google.com/site/stormingonbanks/victims-corner/court-time

PS: To all our ‘Stormie’ friends, this one is for you.
“If we can’t keep the bastards honest, at least we can try and reduce the pig feed we put in the trough!”

This email will be sent to every email contact I have, every media outlet, every bank, every law firm including those law sections in universities, every politician, every group dealing with the elderly who have investments, every person on social media and anyone else I can think of in passing.
I want those that have a grievance with a financial adviser or a bank to do the same by sending a copy of my book to anyone you feel may be at risk. Let’s get the message out there that this Government has to protect us from the predators in the financial sector. How many victims do they require before this realisation sinks in?

These rogues may have taken our money but its now their turn to pay. If this Government and ASIC won’t do anything about it, we can do something about it by voting with our feet. If this Government is still not listening, let’s vote them out of Office.

 

[Harleyquin]

Doobsy good to hear from you, I don't check in very often so have just seen your last post. You made the best of points when you said that it all comes down to whether the client is getting the service that they paid for. Apologies in advance if I haven't got that quite word perfect. Hodge you're quite right in your remarks re banks playing their part.

 

[mrfmad]

I’ve written a book called ‘I ACCUSE’ in which I have detailed the reasons why people in Australia should think twice before:
(1) They seek advice from financial advisers
(2) They borrow money from banks for investment purposes.
The latest CBA scandal that has erupted in which many financial advisers acting for that Bank have given harmful advice to their clients is just one in a series of events that has been occurring for many years in the financial sector.
We, ourselves, were caught up six years ago in the Storm Financial disaster. In August 2008, Storm’s clients had AU$4.8 billion invested in that company's share funds. Some six months later, Storm Financial was placed in administration. My book is not so much about what occurred then, but what happened to us afterwards.
Like many others that invest, we thought that the:
*consumer laws in this country would protect us against fraud – not so!
*professional indemnity insurance that all financial advisers must take out was valid – not so!
*ASIC would fight our case – not so!
*Law would ensure that the wrongdoers were punished – not so!
*compensation would be adequate – not so!
The fact of the matter is that “we were not given a fair go” and nor will you be if you find yourself in a similar position. Thinking it can’t happen to you is a certain recipe for disaster. Believe me, it can happen to anyone in this country that invests believing that this Government and ASIC will protect them if anything goes wrong. Both ASIC and this Government protect the ‘Big End’ of town, and the consumer laws are framed to do the same.
There is only one sure way you can make certain that your money is safe. Don’t invest it in the first place.
Ask yourself this!
*Do you really want to trust banks like the CBA, the Macquarie Bank and the BOQ who have proven that they can’t be trusted?
*Do you really want to trust financial advisers when so little control is exerted over them?
*Do you really want to trust this Government and ASIC when they can’t control themselves?
Then you need to ask yourself whether you can trust what I am telling you in ‘I ACCUSE’. Well, for one I am offering you this advice in my book “free of charge”. Therefore, I have no reason to mislead you. Further, this book is based on my own personal experiences. I have been there, done that, and I have survived (just).
My motivation in writing this book is a simple one. I do not want anyone else to go through what we, Helen and I, have been through these last six years. I have written ‘I ACCUSE’ because I want to warn everyone about the risks they run if they entrust others with their money. Once you leave your money in someone else’s hands, you lose control of it and that is when the problems arise.
And if you think for one minute that the new regulatory laws will protect you, think again. These consumer laws have been tweaked a bit to keep people happy, but the loopholes still exist. Make sure that you are not one of those that will fall through the cracks created by this Government when another financial disaster occurs.
The choice is yours! I have done what I set out to do – warn you. The rest is up to you.

Frank Ainslie

My book can be down-loaded at my web site ‘Storming on Banks’ https://sites.google.com/site/stormingonbanks/victims-corner/court-time

PS: To all our ‘Stormie’ friends, this one is for you.
“If we can’t keep the bastards honest, at least we can try and reduce the pig feed we put in the trough!”

This email will be sent to every email contact I have, every media outlet, every bank, every law firm including those law sections in universities, every politician, every group dealing with the elderly who have investments, every person on social media and anyone else I can think of in passing.
I want those that have a grievance with a financial adviser or a bank to do the same by sending a copy of my book to anyone you feel may be at risk. Let’s get the message out there that this Government has to protect us from the predators in the financial sector. How many victims do they require before this realisation sinks in?

These rogues may have taken our money but its now their turn to pay. If this Government and ASIC won’t do anything about it, we can do something about it by voting with our feet. If this Government is still not listening, let’s vote them out of Office.

Thank you Frank. This is a great Idea & I think that's exactly how many stormers feel I am sure. If you can help just 1 person then it was a success.
Your support & bravery to remain on here & still try to get your point across to warn others speaks volumes. I & many others will not do this as we all know if you are a stormer on this forum YOU ARE BURNED AT THE STAKE for the strangest reasons or ANY comment, in fact you are set upon. Hardly a forum where discussions occur.

Being on here its almost like fighting the courts again accept the courts were easier to communicate with. Or posters on here must have had a vested interest like it was coming from their pocket & were only happy laying the boot in & always want it to remain one sided. Yet have NO FACTS! A bit like the media.

Yes this could happen to ANYONE Frank & YES it WILL happen again. Hopefully we can help warn others & we agree with you. You cant invest with ANYONE EVER NO FINANCIAL ADVISER EVER!! Including BANKS! They are all protected by the same laws.

Thank you again for your support & the book but most of all having the balls to post on here!!!!
Let the fools keep saying that it was because we were fools/greed etc, at the end of the day they are all the same.

Very sad to see how much compassion/respect certain repeat posters have for their fellow Aussies, continuously taking posters quotes out of context & twisting them to WHAT??? & for WHAT?? Support of your fellow man or to KICK him whilst hes down. SHAME!!! I would hate to go to battle with someone like you by my side, but Frank Id have you in my regiment any time.

All the best.

 

[Harleyquin]

Agree with GG there should have been a Royal Commission into storm financial. The true facts need to be exposed.

Thank you Frank for your link, you've told it like it should be told.

There are posters on here with a vested interest who have tried at every turn to try and water down and divert the blame, and they will continue to do so.

We know what happened. We know where the blame lies.

 

[Julia]

What 'vested interests' are you suggesting, harleyquin?