Storm Financial Group

Trevor_S said:

Nope, not unusual at all (though their may be some that do), I have never been asked for proof of income for the several ML's I have had over 2 decades. ML's are based around the security of the shares ie if you don't pay the interest bill OR the value of the shares falls below the LVR (+ a small margin) then they simply sell the shares from under you if you don't supply more cash or more security to get back under the LVR. ie anyone with an margin loan should be keeping a watchful eye on their loan facility.

Margin loans are a wonderful tool if used correctly, I have been using them off an on since the early '90's and run LVR's around 30% - 40% at most.

With all due respect, how don't you know this ? These are the sorts of questions you should have been asking before you took the loan out. I know you trusted your adviser but if you didn't understand would you not have asked them how an ML worked ?

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Thanks for that..

No, I understand how they work, just did not 100% know if on establishment they require proof of income etc.

Ron Jelich from Redcliffe branch of storm claims storm told him they had 18M in cash, to my way of thinking Storms agenda was to use victims equity to buy shares so were they only investing a small portion in shares and keeping the rest for themselves?

Re:wtf..earn $50k get $1.8m loan?which bank?

For me this sums up this mob in 1 criminal action

punter makes $50,000 per year,storm gets him margin loans worth $1.8m.

bank & storm should be charged,same as the sub prime "liar loans".

complete joke

"Storm plan to regain control and sue CBA"

"THE founders of Storm Financial plan to regain control of the failed financial planner and use it as a vehicle to sue business partner and financier Commonwealth Bank for allegedly causing Storm's collapse."

Full story by Colin Kruger from The Age is here;
http://business.theage.com.au/business/storm-plan-to-regain-control-and-sue-cba-20090215-883z.html

Re: wtf..earn $50k get $1.8m loan?which bank?

tigerboi said:

For me this sums up this mob in 1 criminal action

punter makes $50,000 per year,storm gets him margin loans worth $1.8m.

bank & storm should be charged,same as the sub prime "liar loans".

complete joke

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Borrower is guilty too, charge all 3 parties with financial terrorism.

Solly said:

"Storm plan to regain control and sue CBA"

"THE founders of Storm Financial plan to regain control of the failed financial planner and use it as a vehicle to sue business partner and financier Commonwealth Bank for allegedly causing Storm's collapse."

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Enterprising little buggers aren't they? This whole thing is almost surreal.

The banking arm cannot talk to the margin lending arm of the same bank due to privacy issues. To get a mortgage you need to declare your income and debts so if you get the mortgage before you get a margin loan your income of $50k may service the mortgage debt. The margin loan does not require an income statement or even an asset/liability assessment. You just have to have sufficient equity in cash and shares to get some shares at a specific LVR and gearing. Provided you keep within the margin buffer everything is hunky dory. The only problem was that it just didn't happen.

I just don't understand that with such a large amount of debt, people did not monitor it every week or month and start to wonder "How in Christ's name am I ever going to be able to pay back this debt?"

Judd, some place today a wood duck will be sold a money making scam just as bad as Storm. If you was a sales person on a big commission would you care how they are going to pay the money back, the sales people have all been paid, and will be back at work looking for the next lot to rip off.

Judd said:

Enterprising little buggers aren't they? This whole thing is almost surreal.

The banking arm cannot talk to the margin lending arm of the same bank due to privacy issues. To get a mortgage you need to declare your income and debts so if you get the mortgage before you get a margin loan your income of $50k may service the mortgage debt. The margin loan does not require an income statement or even an asset/liability assessment. You just have to have sufficient equity in cash and shares to get some shares at a specific LVR and gearing. Provided you keep within the margin buffer everything is hunky dory. The only problem was that it just didn't happen.

I just don't understand that with such a large amount of debt, people did not monitor it every week or month and start to wonder "How in Christ's name am I ever going to be able to pay back this debt?"

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Obviously I don't agree that 'this is all the bank's fault'. But if these accounts were liquidated by CBA promptly within 4-5 days of margin call they would have very few or zero accounts in negative equity. AND Storm wouldn't have a case against them.

the unfolding of this mess is truly tragic, we will see it roll
out for many years to come

jonny

Let them go ahead and sue the CBA and ASIC. As far as I am concern the Principals of Storm aren't exactly squeaky clean.

Whatever the Administrators & investors in Storm cannot get of them let their lawyers take them to the cleaners.

In response to the comments / observations made by bunyip and Steve Borden yesterday I was one of the advisers approached by Storm in 2007 - prior to it's failed IPO - to sell my business to them and have me join their team.

It will come as no surprise to you to have me confirm that as I listened to the sales pitch it was, to use that well worn phrase, too good to be true and far from giving it any serious consideration, I couldn't run away fast enough. Need I say more!

Have been away for a bit and just caught up with the 400 posts since (wow!).

My take on the Storm model runs like this using a LVR of 80% (and I invite correction):
The SC starts with say $100k super invested in fund units; SC then borrows $80k against these units. Say SC house is worth $300k then $240k is borrowed against the home and tipped in to more units against which a margin loan of $192k is used to buy further units. If the market goes up and SC LVR reduces to a trigger level of say 70% then the loan is ratcheted back up to 80% et seq. SC now knows what happens if the market goes down.
SC now has $400k equity and a $512k loan for a $612k investment at a debt to equity ratio of 56% which value investors will know is high even for a well managed commercial company.
Storm’s up-front fees are reported at ~7%of $612k or $42.84k with a ~1% trailing of $6.12k p.a. This leaves $569.16k to invest with $6.12k trails accruing.
Bank margin loan interest is ~8.5% of $512k or $43.52k p.a. plus fees.
But wait there’s more:
The badged index retail funds would have standard contribution fees of ~4% and management fees of ~2% a trailing fee of ~1% and a buy sell spread on the units of ~.4%. I am not sure the deal made by Storm and the fund manager but let’s say it was a straight 5% which I don’t think Storm would carry.
So the fund manager gets 5% of $569.16k or $28.46k plus trails.
Score board:
Storm are reportedly picking up about $42.84k plus a cut from the fund unit purchase, plus trailing fees thereafter plus…..
Lender reportedly picks up about $43.52k p.a. on the margin loan plus establishment and break fees and….
Fund Manager reportedly picks up about $28.46k plus trails.
SC starts with a $569.16k portfolio of funds which accrue a buy/sell spread leaving the portfolio at a discounted value say $565k. Over the year SC costs will have totalled about $121k.
SC at end of year 1 will need to have made 21.42% compound interest on the initial $565k to claw back to the original $612k investment.
No wonder the FPs flocked to the Storm fold; fees and commissions too! It is frightening and sad that this phenomenon seems to occur on a regular cycle and the regulators and professional associations are powerless to take any constructive action. I will watch with interest from the sideline running my own SMSF as the industry once again is smacked softly and sent to bed with their supper and I have my super.
FP=a non professional who places bets on commission with other peoples borrowed money and then charges fees for so doing whilst needing no personal risk assessment nor exit strategy?
:sheep:

Even FP got caught with E& J C buying up their business which made Storm look much bigger than the really were however the F P are still waiting for their money also I see we have to call the Fire victims in Vic etc. storm survivor's so I guess Storm Fin. victims must be called the same as both parties have lost every thing.

schumy said:

In response to the comments / observations made by bunyip and Steve Borden yesterday I was one of the advisers approached by Storm in 2007 - prior to it's failed IPO - to sell my business to them and have me join their team.

It will come as no surprise to you to have me confirm that as I listened to the sales pitch it was, to use that well worn phrase, too good to be true and far from giving it any serious consideration, I couldn't run away fast enough. Need I say more!

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Clearly you made the right decision. Can you give us a general outline of their offer to you?

bunyip said:

Clearly you made the right decision. Can you give us a general outline of their offer to you?

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Specifically whether the fund fees were included in the Storm 7+1% slug. :sheep:

Solly said:

There is story by Mitch Gaynor in today's Sunday Mail that reports that former Redcliffe Storm Financial Adviser Ron Jelich "is ready to cop the consequences if found guilty of leading clients to financial devastation".
He states he is ready to sit in a court room, Senate inquiry, Royal Commission.

The story also reports that "Mr Jelich claims Mr Cassimatis has yet to fully answer several key twists to the sudden collapse of his company", also the article states the Mr Jelich had a breakdown over Xmas and spent time in hospital.

If you can get your hands on a copy of the Sunday Mail, the article is quite an interesting read.....

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The article also quotes Jelich on Cricketer Andrew Symonds "Althought it was strained for a few months, we are very good friends" and on Cricket coach John Buchanan and sports identity John Gibbs "We're very good friends. I am devastated at what's happened to them" Symonds, Buchanan and Gibbs are all stated as clients of Jelich's but how does one confirm whether or not someone is suitabilty qualified? Is there a difference between a Financial Adviser and Financial Planner and how to you confirm their qualifications/memberships to professional associations?

Cosgrove Fenton said:

The article also quotes Jelich on Cricketer Andrew Symonds "Althought it was strained for a few months, we are very good friends" and on Cricket coach John Buchanan and sports identity John Gibbs "We're very good friends. I am devastated at what's happened to them" Symonds, Buchanan and Gibbs are all stated as clients of Jelich's but how does one confirm whether or not someone is suitabilty qualified? Is there a difference between a Financial Adviser and Financial Planner and how to you confirm their qualifications/memberships to professional associations?

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It always disgusts me when these sporting hero idiots or other high profile people get up and mislead the general public by promoting a product or organisation, when in reality they know very little about it. For example, Buchanan likening Storm management to the Australian cricket team and the captaincy of Mark Taylor, Ricky Ponting & others.
Or a few years back there was a news reader, Ross (I think his surname was Simonds) who publicly promoted a shonky share trading software program that sold for 10 grand and promised outlandish returns of 30% a month.
Many people bought it on his recommendation, only to find it was a con and they'd wasted their money. Once the scam was exposed, the low-life admitted he'd never used it.
Then there was Olympic sprint champion Carl Lewis and his well publicised endorsement of some sports injury product. That one was finally exposed as a scam too, but not until sales had been boosted by Lewis's lies. Then he admitted he'd never used the product.

At least in the case of Andrew Symonds and John Buchanan, it appears that they were in fact Storm clients, obviously the starry-eyed variety who couldn't differentiate between brains and a bull market.
It makes it no less immoral though, that they accepted big money to promote a company which they really knew very little about. It's not as if they were low income people who needed to make a few extra quid on the side.

Ian Turpey was flogging some sex improvement product turned out he didn't have a problem, I signed up on his say so then realise I was single and didn't have a girl friend and that was the problem.

hart2hart said:

I started reading this thread some weeks ago in the hope of picking up some useful advice. I am not sure what.

We already know that we were stupid and naive and that "something that seems to be too good to be true usually is". We also know that what was always a pretty meagre nest egg at best is now a non-existent one. It is pointless wasting any energy getting upset or angry.

We were directed to Storm by our then financial adviser in 2006 and stupidly let them make our decisions. No matter how many times we said we were uncomfortable with the amount of debt we had (with no assets) we were always talked out of it. Yes, we feel pretty weak and silly about that too.

Even though we phoned and emailed, they stopped communicating with us in December and left MacQuarie Bank to chase up the loan which was quickly turning in to a negative due to the interest. We now have an argument with the bank as they did not action a letter emailed prior to Xmas asking that the loan was paid out by our cashed up share portfolio CMT until January 6th.

We are trying to be proactive, although we are starting from a pretty weak base. No matter how many skills you have, trying to get employment at 65 in a shrinking job market is not easy.

We really do need some advice on what to do. No financial planner is going to be interested in us as we really have nothing left to invest. I guess we are down to survival now. What are other people doing? On the bright side we are not either flooded out nor surrounded by bushfires!!!

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Try post#511 for a start. Will update it soon. Good luck.
:sheep:

:sheep:

Glen48 said:

Ian Turpey was flogging some sex improvement product turned out he didn't have a problem, I signed up on his say so then realise I was single and didn't have a girl friend and that was the problem.

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That is very funny!