Storm Financial Group

[Mash]

Just a quick reply so I dont get carried away ... some submitters seem to actually want to know how this all went down.....We first put in $1mill .... yes the up fronts were hefty... but we likened it to a franchisee fee.... no buy/sell spread... and the fees would be equal to other planners after 5 years... only new funds ( more borrowing) attracted the 7% ( of which the local guy got 10%)... so bit by bit we invested big dollars... but only as we got results... seems once we began to capitalize the interest to the loan the market started to slide and we were in trouble.....we tried to get our funds out but were blocked at every turn.... the lenders ( Colonial in our case) only took directive from Storm.. we were stuck.. caught in their web of deceit until we were totally stuffed...but from the beginning advised by all the powers that be ....checked AFP approved ...no probs with ASIC... what else can you do!..obviously now once bitten twice shy...
Onwards and upwards but I still want to see the b@%$&!$'s rot in hell.

 

[Julia]

...but from the beginning advised by all the powers that be ....checked AFP approved ...no probs with ASIC... what else can you do!..

I'd welcome views from others on this, but I suspect there is quite some level of misunderstanding here.

"AFP approved" what does that mean? Just that Storm were members of the Assn of Financial Planners? That's not a guarantee of sound advice as far as I know. Wouldn't anyone passing the basic FP exams be eligible to become a member?

"no problems with ASIC". Given this organisation's reluctance to act and dubious diligence when they do become involved, I wouldn't be setting too much store by this.

Even if the above two could be considered valid recommendations, such considerations would never take the place of common sense in terms of whether any individual can service loans.

 

[Solly]

"Jelich breaks his silence on Storm"

"(Mr Jelich) also disputed reports that Storm clients were not aware of the risks of investing in the stock market using borrowed funds.
``My clients had six months of meetings and compulsory education on financial matters ... they were well educated and understood deeply all aspects of the investment,’’ Mr Jelich said. "

Full story by Bernadette Dias is here.

http://redcliffe-and-bayside-herald.whereilive.com.au/news/story/jelich-breaks-his-silence-on-storm/

I'm a little unsure of what "six months of meetings and compulsory education on financial matters " actually entails, has anybody in this forum been through this ?

 

[swazee]

"It has been reported that the Storm model of doing business was to borrow money for investment in share market funds to make money in a bull market, but Mr Jelich strongly disputed the premise"

You have got to be kidding me. Even after all that has happened, the client testominials, the SIAG meetings, the charges brought against Storm by the FPA, it astounds me that he can still be in denial to what actually happened. Mr Jelich, if that was not the 'general' storm model, please explain to everyone what was?

I have never heard, not even once, any semblence by E&J that perhaps the advice was a little too aggressive, inappropriate or that a mistake was made. Not even for 1 client. All I have heard is them blaming 'someone else' for the problems that occured.

 

[Cosgrove Fenton]

It's a pity that Jelich could not undertake 6mths of study to get some qualification then he might understand what a disaster he was promoting - as for the poor clients try 6mths of harrasment (not education!) to get them to sign. Storm was relentless in the art of courting it's potential prey and like all good courting stories once you consented you were screwed!

 

[Solly]

"Infocus Money Management has hired six advisors from the now-defunct Storm Financial firm"

Story in The Daily here;

http://www.thedaily.com.au/news/2009/feb/18/financial-storm-comes-focus/

A goodwill gesture ?

 

[Smiley]

I'm a little unsure of what "six months of meetings and compulsory education on financial matters " actually entails, has anybody in this forum been through this ?[/QUOTE]
We were clients for years and know dozens who were also stormified. This is just more stormified verbage . . . . Jelich is referring to the couple hours of graphs and stats and quotes that EC or another adviser would present to prospective clients, basically trying to sell you that stocks were a better investment than property . . . Then one had an interview where no risk analysis was done - otherwise how would they have taken all the super from so many retirees and esp disabled people and highly geared them. Then you got the 100+ page statement of advice which was meant to confuse with weird data including assessing one's debt as an asset. If all that was education, which took less than 8 hours by the way, how come we are all broke, were blocked from getting out and are confused as to why storm did what it did - except to make big bucks for founders
.

 

[Solly]

What's happening at cassimatis.com.au ?

It's been 6 days since we've had a "Latest News" update from Wilkinson Media and I noticed that there hasn't been a recent update to the "Recent Questions". Have people run out of questions?

 

[Solly]

I'm a little unsure of what "six months of meetings and compulsory education on financial matters " actually entails, has anybody in this forum been through this
We were clients for years and know dozens who were also stormified. This is just more stormified verbage . . . . Jelich is referring to the couple hours of graphs and stats and quotes that EC or another adviser would present to prospective clients, basically trying to sell you that stocks were a better investment than property . . . Then one had an interview where no risk analysis was done - otherwise how would they have taken all the super from so many retirees and esp disabled people and highly geared them. Then you got the 100+ page statement of advice which was meant to confuse with weird data including assessing one's debt as an asset. If all that was education, which took less than 8 hours by the way, how come we are all broke, were blocked from getting out and are confused as to why storm did what it did - except to make big bucks for founders
.

Thanks for your reply.....Why am I not surprised by your response.......

 

[Steve Borden]

"Infocus Money Management has hired six advisors from the now-defunct Storm Financial firm"

Story in The Daily here;

http://www.thedaily.com.au/news/2009/feb/18/financial-storm-comes-focus/

A goodwill gesture ?

Solly

Just good business sense, these advisors will have been ones that sold their businesses to storm in 2007 or thereabouts. They will have a significant number of loyal clients who will not have been stormified and are still in need of advice.

They stand to pick up a large number of clients for 'free' rather than buy them back from the administrators.

 

[Bill Bailey]

There's something about the Storm saga that rings a bell: why was it so hard to get your money out once it was in? Surely it wasn't only because Storm was going to lose trailing commissions? What it smacks of is a Ponzi or pyramid scheme, where new investors' money is needed to pay returns (and occasionally repayments of capital) to old investors. When inflows from new investors start to dry up, then withdrawals by existing investors are 'discouraged', which certainly seems to be the case with Storm. Was there some of this going on as well? Did every cent that was meant to go into investments (after those generous upfront fees were deducted) actually go into those investments?

 

[Trevor_S]

As a novice investor with a tiny portfolio, I was just wondering if an upfront fee of 7%, as Storm apparently charged, is reasonable? Seems like an unreasonable amount to me.

and to me... after all all they seem to have done is recommended unsophisticated investors buy an index fund , using a house mortgage to get capital to by shares to use as equity to get a margin loan. They were not getting what you pay for, so all Storm needed were salesmen rather then financial wizards. Hell, sans leveraging, I recommend to anyone who asks me (eg my sister) to invest in a decent LIC (like ARG/STW) using dollar cost averaging, because if they are asking me for advice, they surely have no idea what the hell they are doing

 

[Jifromoz]

What's happening at cassimatis.com.au ?

It's been 6 days since we've had a "Latest News" update from Wilkinson Media and I noticed that there hasn't been a recent update to the "Recent Questions". Have people run out of questions?

Solly,

I asked a number of direct questions on their site but unfortunatey they were evidently too hard to answer. In any case the spin doctors will not allow any real questions to be answered.

 

[Steve Borden]

There's something about the Storm saga that rings a bell: why was it so hard to get your money out once it was in? Surely it wasn't only because Storm was going to lose trailing commissions? What it smacks of is a Ponzi or pyramid scheme, where new investors' money is needed to pay returns (and occasionally repayments of capital) to old investors. When inflows from new investors start to dry up, then withdrawals by existing investors are 'discouraged', which certainly seems to be the case with Storm. Was there some of this going on as well? Did every cent that was meant to go into investments (after those generous upfront fees were deducted) actually go into those investments?

Bill

The funds were never invested in storm but by storm in managed funds, the reason people could not get their money out was because that was against the model. There is a auditable trail that confirms the funds were not diverted elsewhere, there is no fraud in that regard.

EC and his salespeople/advisers were apparently a lot smarter than the investors and the investors needed to be protected from themselves. Don't know how many instances I have seen where people went in to take money out in June/July and ended up putting new money in. This is 'coincidently' when cashflow would have started to dry up.

Of course the response from EC is that it would make sense to be putting more money in when the market drops, black swan event, trusted Colonial, etc. The truth is that many, if not all, of the retirees were in a world of hurt when their margin loan went past an LVR of around 80% as that would have been the point when they still would have had enough equity to repay the home loans. Futhermore at that point the investment would not have generated enough income to service the margin loan let alone home loan repayments and living expenses.

It seems to me that when the market plunged the underlying home loan was forgotten and they (storm) were more concerned with keeping people in the market than having a logical exit strategy.

If the market goes back up they maybe could have survived, we now know that didn't happen.

By the way, really like the three men in a pub gag.

 

[Glen48]

Storm victims would have been better of using the equity in their property and placing in machines which are available at most large venues at least they had a chance of winning or going home with some money and the screen will tell them at any given time how much they have lost.

 

[bunyip]

Solly,

I asked a number of direct questions on their site but unfortunatey they were evidently too hard to answer. In any case the spin doctors will not allow any real questions to be answered.

Same here - I asked them half a dozen very confronting questions and they haven't shown any of them, let alone answered them. I'm sure there will be dozens or even hundreds of other confronting questions that have been canned because they just don't have the courage or character to answer them.
That website is mostly just hot air, a public relations exercise to try and boost their flagging support while they continue to throw stones at CBA and deny any wrong doing themselves.

 

[sqwark7600]

Bill

It seems to me that when the market plunged the underlying home loan was forgotten and they (storm) were more concerned with keeping people in the market than having a logical exit strategy.

I have done the sums on the basis of reported fees and layered margin loans on loans on loans over three good FYs 2004/5/6 and your point seems to be on the mark regarding Storm's disregard for their clients homes.
With a start of $100k super and $300k mortgage proceeds kicked in plus an annual prepayment of interest together with an annual increase in the margin loan as the LVR dropped in the good years the “portfolio” would be very close to a $1m.
The increases of course would attract the 7% entry fee; and the annual trail of 1% on 1m is $10,000.
The spread of investors ranged from the $50k initial to $18m so there was a bundle in trails being made by Storm.
I bet my “dogs ashes” on the fact that Storm with the possible knowledge of the lenders coerced their clients to hold in the vain and naïve hope (Storm’s) that the market would correct.
No matter what happened their trails would have rolled in and probably did right up to margin loan liquidations. Now that is picking the bones in my view.
What trader on this site would enter a trade without the discipline of a money management plan, a tight stop loss and a sell plan and hold a trade during a 50% market decline? Very few I would hazard.
So Storm whilst looking extremely stupid seems to be at least, derelict in their duty of care to their clients and at worst….well we will have to wait for the judges verdict.
:sheep:

 

[Solly]

I have just been advised that the Bris Supreme Court has extended the freeze on the $2 mill dividend paid to the Cassimatis' until 25th March.

 

[basilio]

Good article in The age on Financial Planning Association. Basically make then look like a bunch of greedy sharks. Nice comment on the Storm situation.

Overall worth a read.

Turning up the heat
Michael West


Page 1 of 2 Single page view

Reeling in the aftermath of the Storm Financial collapse, the Financial Planning Association has taken a financial planner to court to stop it from planting facetious advertisements in newspapers.

The FPA was granted an interim injunction in the Federal Court against Bannister Mansfield from publishing ads which show a photo of the Association's chief executive Jo-Anne Bloch beside photos of Richard ''I am not a crook'' Nixon and Bill ''I did not have sex with that woman'' Clinton.

The photo of Ms Bloch is accompanied by the caption ''FPA members inevitably put the client first''. Ironically, the advertisement states a factual position: until a new code of practice was recently introduced, it had not been official FPA policy that client interests should come first.

And it is clear from the Storm Financial Group debacle that FPA members can and sometimes do put their clients a distant last.

Storm was an FPA member and the FPA took no action until the firm had collapsed and its clients were losing their life savings after advice to borrow against their homes to punt the stock market. Even then, its CEO Ms Bloch still protested that the Storm leverage model was acceptable practice.

Disaster money

The essential conflict for the FPA, and planners in general, is that planners charge fees on the size of a client's asset base, not according to performance. The greater the leverage then, the greater the fees. And Storm charged up to 8% upfront when its clients could have achieved the same disastrous results by gearing up via the banks themselves and plunging into a Vanguard index fund, for instance, at less than 1%.

http://business.theage.com.au/business/turning-up-the-heat-20090218-8atc.html

 

[sqwark7600]

All I see is the FPA bringing the industry down and about time!
Maybe a government inquiry into the dealings of the FPA is overdue. Hey!:sheep: