Storm Financial Group

[sqwark7600]

Hey stung; did you maintain your cool today with the ISUK officuz?
:rippergun

 

[sqwark7600]

"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 ?

Says nothing for their ethics or credibility. To me FPs just work under a company banner and churn products for commission and trails and FPA seems to condone that; what risk, what exit strategy, gear to your limit, what market, what client, so he /she has lost their home does it affect my trails?
Why would you even engage an FP except to clean your toilet?
:sheep:

 

[stung]

Hey stung; did you maintain your cool today with the ISUK officuz?
:rippergun

Indeed I did.

 

[Glen48]

Question:
If we here are being critical of others investing in Storm and being greedy, is buying Gold , Silver etc in a Bull run greed as well or is it just cashing in on a opportunity?

 

[Steve Borden]

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:

I see a significant level of criticism of the FPA in all this but can't quite understand what they could have done. The Association is an organisation for financial planners, it does not have legislative powers and about the best it can do fine or expel planners following a complaints process.

It is not compulsory for a planner to be a member of the FPA and it has no authority over planners outside of the organisation.

Was storm's membership of the FPA a factor in people dealing with them, I would argue not, if you trust an adviser and are satisfied with what they are doing for you then membership is a nice to have and nothing more. Do you ask your doctor if he is a member of the AMA?

The monitoring of the conduct of financial planners is largely the remit of the license holder and ASIC, if a complaint is lodged with the FPA it can act against its members however until this event there were no complaints.

Afterall, why would people complain if things were going swimmingly, if the suggestion is they they should have alerted ASIC to the concerns over the 'model', it is understood that they had. Much of the industry concern about storm would have easily been categorised by EC as professional jealousy or ignorance.

The real issue is licensing, especially groups like storm that hold their own AFSL. storm conducted their own audit and while there are supposed to be processes to separate the sales and audit requirements, does anyone really think that a storm employee would have given bad audits to a storm employee?

This is a matter of ASIC's making and ultimately their monitoring.

I am not a member of the FPA nor an apologist for same however just wanted to point out that whether storm was a member of the FPA or not it would not have changed the outcome for the storm clients.

Now if you are talking about other financial planning debacles, that could be a different matter.

 

[Gerkin]

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:

The FPA is only an organisation that lays down rules for membership, not law.

The CPA organisation lays down rules and ethical guidelines, not law.

The Australian Medical Assocaitaion lays down rules for membership.

Can you see where this is going. There are bad eggs in every profession, in this case its Storm, or the two main directors. How many other advisers live their lifestyle? Not too many ill tell you that.

What about the accountants with the Enron collapse. Did the Chartered Accountants or Certified Practising Accountants get blamed? No, Arthur Anderson was disbanded. Just like storm will be.

What about the doctor that touches his patients in innappropiate ways, or the cut happy doctor, or the teacher who sleeps with his/her student? Do these professional organisations get blamed. The answer is no. Its the individual. Oh and you might say that most FP's new what was going on, yes they did but remember the word Slander, just like most students would know if their teacher was having and affair with a student, you just cant go blurting out these things.

Now I would kindly suggest that you concentrate on what happened here with Storm, and not blame the professional organisation that has actually bought some credibility to the industry. If some of you can remember the 80's would remember it is cleaner than back then.

I am not involved in the FPA or any professional bodies mentioned.

 

[Mofra]

Can you see where this is going. There are bad eggs in every profession, in this case its Storm, or the two main directors. How many other advisers live their lifestyle? Not too many ill tell you that.

What about the accountants with the Enron collapse. Did the Chartered Accountants or Certified Practising Accountants get blamed? No, Arthur Anderson was disbanded. Just like storm will be.

The comments from the FPA after the collapse were more of an impetus to criticise the peak industry body more than the collapse itself.
First unit, first semester of the basic DFP is to "know your client"; Storm didn't even get that far. Their advice was far too aggressive and not tailored to meet individual client needs, breaking some of the basic cardinal rules of FP.

For the FPA to offer support to the double gearing Storm strategy is ludicrous. There are probably only a small number of people who make up FP clients (and realistically, only a very few economic circumstances as well) upon which this strategy is appropriate.

 

[bunyip]

Question:
If we here are being critical of others investing in Storm and being greedy, is buying Gold , Silver etc in a Bull run greed as well or is it just cashing in on a opportunity?

Depends on how you do it. Nothing wrong with taking advantage of a bull market in gold or silver or anything else - that's just good business.
But how about if you borrow a ridiculous amount of money to get a bigger slice of the action, and you don't bother putting any risk management strategy in place.
Now you risk bankruptcy if the bull run fizzles out and a bear market takes hold. It's no longer good business - it's irresponsible, reckless gambling that's almost certain to bring you considerable grief.

 

[bunyip]

The FPA is only an organisation that lays down rules for membership, not law.

The CPA organisation lays down rules and ethical guidelines, not law.

The Australian Medical Assocaitaion lays down rules for membership.

Can you see where this is going. There are bad eggs in every profession, in this case its Storm, or the two main directors. How many other advisers live their lifestyle? Not too many ill tell you that.

What about the accountants with the Enron collapse. Did the Chartered Accountants or Certified Practising Accountants get blamed? No, Arthur Anderson was disbanded. Just like storm will be.

What about the doctor that touches his patients in innappropiate ways, or the cut happy doctor, or the teacher who sleeps with his/her student? Do these professional organisations get blamed. The answer is no. Its the individual. Oh and you might say that most FP's new what was going on, yes they did but remember the word Slander, just like most students would know if their teacher was having and affair with a student, you just cant go blurting out these things.

Now I would kindly suggest that you concentrate on what happened here with Storm, and not blame the professional organisation that has actually bought some credibility to the industry. If some of you can remember the 80's would remember it is cleaner than back then.

I am not involved in the FPA or any professional bodies mentioned.

If a professional organisation endorses dangerous or unethical behaviour from any of its members, then it's clearly a damning indictment on that organisation.

Did the FPA endorse the practices of Storm?
If they did, then they deserve to be taken to the cleaners through the processes of the law.
If they didn't endorse Storms practices, then I don't see that they have any case to answer.

 

[sqwark7600]

If they didn't endorse Storms practices, then I don't see that they have any case to answer.

Whilst not wishing to start a slinging match I find it very difficult to accept that there are always those libertarians/apologists who jump in and endeavour to turn the preditor into the victim.
My take is that the FPA endorsed Storm by default esp. in the eyes of the investor who saw the FPA CFA shingle on the wall endorsing the preditor.
:sheep:

 

[sqwark7600]

I understand that the FPA has the right to discipline their members under the rules and by signing up as a member of FPA esp. as a CFP then the member becomes liable for discipline by the FPA if the code of conduct is ignored.
From
http://www.moneymanagement.com.au/article/In-the-eye-of-the-Storm/435223.aspx

“Storm Financial is...(was)....a principal member of the FPA, and as such the FPA has commenced a formal investigation into the group’s conduct. But while the group itself was a principal member, FPA chief executive Jo-Anne Bloch said very few of the authorised representatives of the group were Certified Financial Planners...(there was reportedly 4 CFA's at Storm)
The FPA took action by facilitating impartial advice for confused Storm clients, but has refrained from taking a hard line approach against the group thus far. Bloch said last week it was important not to jump to conclusions about the group, which still (prior to the closure of the business) had many loyal clients. Bloch defended the use of margin lending and pointed to the difficult times faced by many…(i.e. financial planners)…in the industry as a result of the financial crisis.”

And of the 40 or so FPs under the Storm aegis how many FPA members are being investigated by the FPA?
I believe that the FPA has a responsibilty to all of it's members to ensure that their code of conduct is adhered to and enforced; otherwise disallow their banner being flaunted to unsuspecting clients.
:sheep:

 

[sqwark7600]

And if you have lost confidence in the FP industry try the bankers:

http://www.businessspectator.com.au/bs.nsf/Article/Licensed-to-kill-$pd20090218-PDAPG?OpenDocument&src=sph

“The top British bankers who signed off on the structured financial products that have ravaged the global financial system, had no recognised banking qualification! This has got to stop.”

It would be interesting to check up on the qualifications on the bank executive who authorised the margin loans of $1.8m to the Storm client on an income of $50k.
:sheep:

 

[Judd]

It would be interesting to check up on the qualifications on the bank executive who authorised the margin loans of $1.8m to the Storm client on an income of $50k.
:sheep:

sqwark7600. You seem to missing the point with margin loans. They do NOT require that one's income needs to be declared. It has been said often enough in previous posts but to reiterate, all you need to do for a margin loan is offer cash and/or securities. There is no income test nor is there any assets/liabilities test.

These products have been available in Australia since 1987 when Bankers Trust established the things. If over that time, people simply act in ignorance, despite over 20 years of operation of the concept, and take them up without exploring the best/worst of them, well, they are simply stupid.

 

[Junior]

The primary purpose of a 'margin call' is to ensure the account doesn't go into negative equity...theoretically it shouldn't matter what the individuals income/asset situation is because they will never be forced to make any payments off the loan balance. It just means if the gearing level gets too high the bank will liquidate the account and terminate the loan.

The issue that Storm have with CBA is that they didn't liquidate quickly enough when the market plummeted over 30% in Oct/Nov, therefore pushing a large number of clients' accounts into negative equity.

 

[Judd]

The primary purpose of a 'margin call' is to ensure the account doesn't go into negative equity...theoretically it shouldn't matter what the individuals income/asset situation is because they will never be forced to make any payments off the loan balance. It just means if the gearing level gets too high the bank will liquidate the account and terminate the loan.

The issue that Storm have with CBA is that they didn't liquidate quickly enough when the market plummeted over 30% in Oct/Nov, therefore pushing a large number of clients' accounts into negative equity.

I consider that your second paragraph is very relevant. If the margin lender advised Storm that clients were in a margin buffer but Storm did not advise the their clients of the fact, then I believe the responsibility for that failure falls on Storm. Then, if Storm continued to take no action despite being advised by the lender, then the financier would have been correct to sell down the holdings as per the margin lending agreement. If the situation worsened, as it apparently did, then I consider it proper for the financier to take action to let the client's of Storm know of the position they were in. Actually, they probably didn't even need to do that, just keep on selling due to lack of instructions being provided and then, after she all gone poop, letting Storm's clients know how much they owed - as the principal seemingly did nothing.

 

[Trevor_S]

Question:
If we here are being critical of others investing in Storm and being greedy, is buying Gold , Silver etc in a Bull run greed as well or is it just cashing in on a opportunity?

http://business.smh.com.au/business/gold-stocks-surge-but-will-it-last-20090219-8bvm.html

Mr Thompson says such prices could hold, but “Gee you’ve got to be sitting there saying it would take only a little bit of sanity” for gold prices to drop, even to “a relatively good level.”

 

[bunyip]

Whilst not wishing to start a slinging match I find it very difficult to accept that there are always those libertarians/apologists who jump in and endeavour to turn the preditor into the victim.

If you're referring to me, then you couldn't be further off track if you tried!

My post expressed no views about whether the FPA was or was not guilty of any wrong-doing in relation to Storm.

 

[sqwark7600]

sqwark7600. You seem to missing the point with margin loans. They do NOT require that one's income needs to be declared. It has been said often enough in previous posts but to reiterate, all you need to do for a margin loan is offer cash and/or securities. There is no income test nor is there any assets/liabilities test.

Pardon my tech glitch Judd; but still…$1.8k debt and $50k p.a. income….ya gotta wonder.

So if a Storm client takes out a secured loan at an LVR of 80-90% and has kept topping up that loan to keep it at the highest LVR and the security suddenly reverses and goes into free fall to the extent that the LVR rapidly exceeds 105-110% then the bank is in the hole for 5-10%. And if the bank can’t access and sell the security before it reaches 120% it is in the hole for 20%.
It may also be in the hole for the valuations it put on clients homes. Looks like the banking buzz word for 2009 is going to be impairment and the courts will be scrutinising governance and due diligence surrounding these loans.
I think the authorising officers are hitting the bottle at present.
But your point is right rather than look at a paltry $50k income maybe the banks should have started to prudently (another bygone banker buzz word) reduce the LVR’s on such Storm loans at some stage into the downturn if not to save the clients house, super and financial assets then to provide their shareholders with a modicum of corporate governance.

These products have been available in Australia since 1987 when Bankers Trust established the things. If over that time, people simply act in ignorance, despite over 20 years of operation of the concept, and take them up without exploring the best/worst of them, well, they are simply stupid.

They are not simply stupid, I consider that an arrogant remark; the banks have been proven to be the stupids on a gigantic global scale.
In regard to the length of time margin loans have been in the market, that has no direct correlation with peoples comprehension of them. These people have been duped into accepting the particular loan from the banker packaged by a Storm financial planner without exit or risk strategies and whom we will probably find meddled a little more than is evident at present. Then we have the worst share market since the great depression.
Best/worst of them? They are a loan product low interest=good, high interest=worst.
:sheep:

 

[Cosgrove Fenton]

Judd is absolutly correct - Storm are the "Responsible Entity" and accordingly were impowered and authorized to action the margin call. I suspect they got the margin calls - hoped the market would lift and ignored the calls. The market did not lift, the bank said enough is enough and sold. Storm then have the hide to say the only received 6 minutes notice, naturally the bank sold (having decline the unsecured loan EC asked for - $60m!)having had enough of Storm crying wolf.

 

[Glen48]

Ron Jelich Storms agent in Redcliffe gets his face on ACA Friday night should be a good show for those ex home owners in Tents and caravans, although I know Ron and I think he is deeply upset about the whole thing.