Storm Financial Group

[SJG1974]

The bank passed on all the Storm information to their internal department (I'll have to check the department name as it's been so long). Admitting after the collapse that their advice was incorrect, hence quiet settlement. As for my accountant, inside his large firm they do have qualified financial advisers who also got it wrong. Banks and larger accountancy firms offer a broad range of services these days - but accordingly to you we shouldn't seek their services.

How did they get it wrong?

As mentioned, the strategy is perfectly legit. Nothing illegal. It was a strategy that I understand many non Stormers also employed. The problem isn't the strategy itself...it is how it was sold to the clients, the clients it was sold to and further on, how Storm's advisers managed everything when the **** hit the fan during the GFC.

For all intents and purposes it is a sound strategy provided the client understands it and is prepared to accept the risks they are taking for the potential returns they are getting. Just like any legal financial strategy.

No professional when reviewing the strategy could be expected to identify that Storm were completely unable (or unwilling) to do what they said they would and properly manage your investments as they fell down the drain. Noone could have forseen that, and it is a separate issue.

But they should be able to identify that this is not a conservative strategy that will protect your hard earned as some have claimed they thought it was, and that the strategy itself is on the high risk side of things because shares and gearing, by their very nature, are high risk....no matter how you use them.

Did the professionals point this out to you, or could they not even see this themselves?

[Solly]

Well friend, we know of a bank employe who WAS getting a kick back from Storm.

Was this a dubious arrangement? And did you inform the police?

[Julia]

As for my accountant, inside his large firm they do have qualified financial advisers who also got it wrong. Banks and larger accountancy firms offer a broad range of services these days - but accordingly to you we shouldn't seek their services.

Another example of distortion of what has been said. Perhaps you could quote any posts which suggest people should never seek the services of banks, accountants or financial planners.

It is quite wrong to infer from assertions that clients had a responsibility to ensure advice offered was appropriate to their circumstances = advice that those clients should never consult any financial professional.

If, however, I wanted advice about wealth creation I would never expect to get it from an accountant or a bank manager, and only from a very few financial planners.
No one, absolutely no one, has your best interests at heart as you do yourself. Most 'professionals' will have an eye to what's in it for them. Why else do you think there has been all the consternation about commission based advice?

Learn how to make valid decisions for yourself. If you need basic factual information go to see a Centrelink Financial Information Services officer. You do not need to be a customer of Centrelink to do this. These people are extremely knowledgeable and helpful.

[pilots]

Was this a dubious arrangement? And did you inform the police?

Why call the police, every ones knows that if you don't grease the wheels, they wont turn.

[Lone Wolf]

If other financial advisers that were asked to view Storm's plan couldn't see its flaws (a financial planner from Westpac who was asked by us to come up with something better saw our Storm proposal before we signed with Storm) how the heck can so called financial experts on this forum now claim that it was easy to see through it. Quite frankly,they are up themselves.

You're assuming that the adviser you hired to investigate Storm did their job the way you expected them to (I see a pattern forming here). There are two possibilities - One is that, now hold on, this might come as a shock to you - the other adviser didn't do their job properly. The other possibility is that the other adviser didn't understand that you thought this was a conservative strategy.

Honestly Frank, what do you stand to gain from convincing other people that it's impossible to determine the risk involved in a strategy? I'm not asking you to admit that you should have avoided being where you are now. You've already explained why you shouldn't have needed to do your own research and I accept your personal opinion even if I don't agree.

Why do you feel the need to go one step further and try to prevent us from helping other investors monitor their risk level? You claim that it's utterly impossible for anyone other than a trained professional to understand the risks of borrowing money. Anyone who thinks they can is apparently "up themselves". Numerous times now people have explained the simple steps that can be taken to determine if a strategy is conservative or not. You have never once explained why you think those simple steps won't uncover a high risk strategy. If you can't explain why it won't work, how are you in a position to comment?

[Lone Wolf]

As it now seems that according to this forum we can no longer trust any Professional as they are just salesman , I have taken to doing my own electrical , plumbing , tested my own eyes and whipped up some specs . Today I found a bargain on a drill and some bits at Bunnings , so the quote and advice I got from my Dentist will soon be a thing of the past. Does anyone have some advice about a Boeing 737 as I'm travelling to Melbourne for business next week and flying one of those things can't be that hard, can it ?

A misinterpretation of what is being said. Deliberate or not I don't know.

We are talking about blindly trusting professionals when it is unnecessary to do so. Looking at your examples:
- You can't do your own electrical work because it's illegal.
- It's pretty safe to trust a professional to test your eyes and make glasses for you. Worst case scenario you get a headache due to the glassed not being made correctly. Hardly life shattering stuff.
- Dentist, if he recommends extracting a tooth but the tooth feels fine to you, will you let him do it or seek a second opinion? Easy enough to double check and once again, not life shattering stuff if he's wrong.
- Flying a plane without a licence, not only is it illegal but you are putting others at risk with your own stupidity.

The point is you should seek professional advice while keeping in mind that the advice could potentially be incorrect. If the consequence of it being incorrect is minimal, who cares? But if the consequence of bad advice is life changing then it seems reasonable not to blindly take their word for it if you don't have to.

Professional electricians end up in court for poor wiring burning buildings down. Doctors end up in court for doing the wrong thing. There is a misconception that professional means guaranteed high quality. The sooner people realise that this is untrue the better.

Here, I looked up 'professional' in the dictionary for you:
"following an occupation as a means of livelihood or for gain: a professional builder."

Professional simply means they get paid to do it. No guarantee they do it well. How easily you trust them should depend on the consequence of their actions.

However I'll say it again, you should still seek professional advice. They can explain things to you and alert you to things you haven't previously considered. Not only is there nothing wrong with seeking a professional opinion but it is recommended that you do so. Just use some commonsense and if the advice is critical then do everything within your power to verify it.

[Solly]

Why call the police, every ones knows that if you don't grease the wheels, they wont turn.

So does this mean you condone allegedly criminal activity?

[Judd]

The bank passed on all the Storm information to their internal department (I'll have to check the department name as it's been so long). Admitting after the collapse that their advice was incorrect, hence quiet settlement. As for my accountant, inside his large firm they do have qualified financial advisers who also got it wrong. Banks and larger accountancy firms offer a broad range of services these days - but accordingly to you we shouldn't seek their services.

Thank you for responding, jjtebj12.

I posted assuming that both the bank manager(s) and the accountant were not accredited financial planners when providing you with advice. However, from your reply, it appears they sort an opinion from those in their respective organisations who were. If that is the case, then it puts a slightly different perspective on the matter.

All the best.

[bunyip]

So five years after the start of the bear market that wiped out investors who trusted Storm and/or bank managers and/or accountants because they were so called ‘professionals’, we still have a handful of diehards telling us that we’re talking through our hats by saying that if you consult someone for professional investment advice, it is YOU, not someone else, YOU who must thoroughly evaluate their advice before you commit serious money to it.

These amusing little people tell us we’re ‘up ourselves’, they seem to think our policy is to never consult or trust a professional.
So let me spell it out for them in an effort to clear up their confusion.....
We’re not suggesting there’s anything wrong with consulting a professional. But put in some effort to thoroughly evaluate the advice they give you, particularly if the advice is to mortgage your home and borrow vast sums of money to sink into an investment like the stock market that every man and his dog knows is high risk.

The above holds true for any professional advice, not just investment advice.

Years ago I consulted my doctor about a growth on my eye. The eye was constantly burning and watering, but my GP told me nothing could be done about it and I’d just have to use eye drops and learn to live with it. I was a 22 year old with no medical training. My GP was a professional doctor with a medical degree and 15 years in private practice.
I should have trusted his judgment implicitly, right? WRONG. What I should have done, and what I did do, is evaluate his advice, doubt that it was correct, and consult another GP for a second opinion. This GP told me the growth could be surgically removed, and he referred me to an eye specialist who performed the surgery within the week. Problem solved. He told me I would have eventually lost most of the sight in my eye if I hadn’t had the surgery.

My sister has a friend whose leg was badly mangled in a motorbike accident. His orthopedic surgeon told him the leg was beyond repair and would have to be amputated.
Should he have trusted the opinion of this doctor, and allowed him to amputate the leg? Or should he have evaluated the advice, and sought to establish whether or not it was correct?
He consulted another orthopedic surgeon for a second opinion. He now walks with a limp, but at least he still has two legs.

Get the idea, all you diehards on here who think the rest of us don’t know what we’re talking about? There’s nothing wrong with consulting a professional – but YOU have a responsibility to evaluate that advice before accepting it and acting upon it. Let me repeat....it’s YOUR responsibility, not someone else’s, to evaluate the advice you’re given.

[pilots]

So does this mean you condone allegedly criminal activity?

No I do not condone criminal activity, but if you had ever been in business you would know that the wheels WONT turn if you don't grease them. One of the sad things with Storm was the old people that was conned in to investing millions of dollars that they could have lived on with out getting conned in to this scam, you could say a lot of the people that got coned here was just plain GREEDY. Whats that old saying, if it looks to good to be true????????????????????????????

[Frank Ainslie]

A bit unfair there, pilots. Maybe true in one case but it does not necessarily apply to all.

jjtebj12, says he/she consulted bank managers and an accountant. Would have done so in all good faith. And it could be the case that the bank managers and accountant, also in good faith, gave their respective views on the proposal by Storm Financial.

Only one small potential problem. And that would occur if neither the bank managers or the accountant had any authority to give financial planning advice. Bank manager advise on the banks deposit and lending products but for financial advice go and see a planner. Accountant the numbers go here and this bit is tax deductible but for financial advice go and see a planner. No “know your client”, no Statement of Advice as per Storm Financial.

However, why would jjtebj12 actually know the ins and outs of that? I need opinion. Oh, I know, I'll talk to a bank manager and the accountant as they know about finances.

Oh dear, all the rules and regulatory structures that have been introduced by Governments in the past to protect the consumer have just been rendered ineffective because the poor downtrodden consumer is not fully aware of those ins and outs. The game shifted years ago but I suspect that the public is not really aware of the shift.

Judd,

Do I detect a note of sarcasm when you refer to consumers as 'downtrodden'?Those downtrodden consumers you refer to keep financial advisers in business. If the goal posts have shifted don't you believe that it is up to financial advisers to fully inform consumers, who rely on them to protect their interests?"

Incidentally, those rules and regulatory structures mentioned by you have been given a shake-up since Storm collapsed. I wonder why?

Your attitude towards consumers seems to be shared by many in the financial industry who merely see consumers as a means to an end - THEIR END!

[pilots]

Frank, how true, you must NEVER for get that financial advisers or ONLY sale people, first and for most, WHATS IN IT FOR ME. Look at it this way, xyz give me 5% commission, abc gives me 10%, now who am I going to sell most.

[bunyip]

Your attitude towards consumers seems to be shared by many in the financial industry who merely see consumers as a means to an end - THEIR END!

Frank

I have no doubt you're correct in saying that consumers are seen as a means to an end by many in the financial industry.
Clearly, those who receive a commission on the financial products they sell would have an incentive to sell the products that pay the highest commissions. Obviously this is good for the salesman but the consumer may not be getting the best product for his purposes.

But on the other side of the coin, let's be fair by acknowledging that there are many in the financial industry, such as Doobsy for example, who do not operate on a commission-based fees structure, but rather are paid a set fee for their services. These advisers are not chasing commissions, and are therefore in a position to look after the best interests of both themselves and their clients.

This tendency among some advisers to see clients as a means to an end is not limited to the financial services industries either, as you well know.
You said yourself in one of your posts that your experience in business management showed you that businesses often put their own interests first and their client's interests second.

Given your awareness of this culture of 'business interests first, client interests second', it's rather surprising that you didn't pick up on the fact that this was exactly the way that Storm operated. I'm sure you can see that now, but I wonder why your experience didn't alert you to it when you were in discussions with Storm prior to signing up.

[Frank Ainslie]

How did they get it wrong?

As mentioned, the strategy is perfectly legit. Nothing illegal. It was a strategy that I understand many non Stormers also employed. The problem isn't the strategy itself...it is how it was sold to the clients, the clients it was sold to and further on, how Storm's advisers managed everything when the **** hit the fan during the GFC.

For all intents and purposes it is a sound strategy provided the client understands it and is prepared to accept the risks they are taking for the potential returns they are getting. Just like any legal financial strategy.

No professional when reviewing the strategy could be expected to identify that Storm were completely unable (or unwilling) to do what they said they would and properly manage your investments as they fell down the drain. Noone could have forseen that, and it is a separate issue.

But they should be able to identify that this is not a conservative strategy that will protect your hard earned as some have claimed they thought it was, and that the strategy itself is on the high risk side of things because shares and gearing, by their very nature, are high risk....no matter how you use them.

Did the professionals point this out to you, or could they not even see this themselves?

Hi SJG 1974

Nice to see you back!

"As mentioned, the strategy is perfectly legit. Nothing illegal. It was a strategy that I understand many non Stormers also employed. The problem isn't the strategy itself...it is how it was sold to the clients, the clients it was sold to and further on, how Storm's advisers managed everything when the **** hit the fan during the GFC"

Exactly! You’ve just about got it spot on this time!

As for people being able to see that it was ‘high risk’, in our case, bearing in mind that we had 1.5 or more in unencumbered assets, the policy never seemed risky because we thought we had plenty of capital to back up the loans and the safe guards that Storm said it had in place would allow us to sell down if those limits were reached. We were only in Storm for 15 months and in that time Storm managed to over-leverage us needlessly because they saw us and many other clients as cash cows for them. Fees and commissions were everything to Storm and we, Storm’s customers, ran a poor second.

No professional ever pointed out to us the dangers of over-leveraging. Not our accountant or others whom we approached. I think we must all remember that over-leveraging was the norm in those days. Storm was hardly the exception as everyone here would have us believe. Everyone did it from banks right the way through. See the movie “Too Big To Fail!” which is doing the rounds at the moment.

Storm was not alone though in deceiving us. The Banks involved were fully complicit in the deception and they will be exposed in Court.

From tomorrow, I will be unavailable until Monday week so if anybody addresses any postings to me, don’t be surprised if you don’t get a response until then.

[Frank Ainslie]

Frank

I have no doubt you're correct in saying that consumers are seen as a means to an end by many in the financial industry.
Clearly, those who receive a commission on the financial products they sell would have an incentive to sell the products that pay the highest commissions. Obviously this is good for the salesman but the consumer may not be getting the best product for his purposes.

But on the other side of the coin, let's be fair by acknowledging that there are many in the financial industry, such as Doobsy for example, who do not operate on a commission-based fees structure, but rather are paid a set fee for their services. These advisers are not chasing commissions, and are therefore in a position to look after the best interests of both themselves and their clients.

This tendency among some advisers to see clients as a means to an end is not limited to the financial services industries either, as you well know.
You said yourself in one of your posts that your experience in business management showed you that businesses often put their own interests first and their client's interests second.

Given your awareness of this culture of 'business interests first, client interests second', it's rather surprising that you didn't pick up on the fact that this was exactly the way that Storm operated. I'm sure you can see that now, but I wonder why your experience didn't alert you to it when you were in discussions with Storm prior to signing up.

Hi Bunyip,

This tendency to put self-interest first manifests itself in the financial sector (financial advisers and Banks) I believe, far more than it does in other service industries because of its very nature. At its centre investors assets act as a light that attracts the harmless and the unsavory that operate within. In my own industry, if we did not provide a service, clients would simply switch to another forwarder. Because we knew this, service was everything although we always ensured that the service was cost effective to both our company and the clients involved. Nobody gave us secret commissions or incentives to use their particular airlines or shipping companies, but rather any incentives that were offered were always passed on to our clients. A completely different mindset seems to exist in the financial sector. Certainly, my business experience was a far cry from what I have now discovered about the financial sector in general.

In other words, we had to put our clients interests first or we would not retain their business. We always worked on the premise that our service fees would give us the necessary profit to operate effectively with a decent bottom line, not an outrageous one! Clients knew up front what they were getting and we knew what we were getting.

The way financial advisers like Storm operated is something else again! I had no experience of such methodology because it is an alien concept in my industry.

Ethics and integrity in the financial advisory industry, it would seem, very much depend on the individual financial adviser concerned. Unfortunately, as we have seen over the years, many in that industry that have failed the test. To my mind, it is an indictment of the advisory industry and the way it functions.

Whatever, it is not something my past business experience would prepare me for! If it had, I wouldn't be in this position today!

[Solly]

No I do not condone criminal activity, but if you had ever been in business you would know that the wheels WONT turn if you don't grease them. One of the sad things with Storm was the old people that was conned in to investing millions of dollars that they could have lived on with out getting conned in to this scam, you could say a lot of the people that got coned here was just plain GREEDY. Whats that old saying, if it looks to good to be true????????????????????????????

It is refreshing that you do not condone criminal activity. Regarding your statement, "wheels WONT turn if you don't grease them", the greasing of wheels is either lawful or unlawful. I have gained the understanding from your words that you would only endorse "greasing" if it was lawful. If people were "conned", should not that allegation be fully examined ? I also ask the question, is being "GREEDY" unlawful ?

[pilots]

It is refreshing that you do not condone criminal activity. Regarding your statement, "wheels WONT turn if you don't grease them", the greasing of wheels is either lawful or unlawful. I have gained the understanding from your words that you would only endorse "greasing" if it was lawful. If people were "conned", should not that allegation be fully examined ? I also ask the question, is being "GREEDY" unlawful ?

Solely, it is not unlawful to be GREEDY, but some of storms wood ducks was just to GREEDY, as to the people getting conned, it Is real easy to con a wood duck. I read some place that 75PC of the investors that went to storm walked away, bet they are real happy today. Looked at TV tonight and saw a sad case of what looked very much it could have been a storm deal gone wrong, now they believed the adviser and what have they got now???.

[Frank Ainslie]

Solely, it is not unlawful to be GREEDY, but some of storms wood ducks was just to GREEDY, as to the people getting conned, it Is real easy to con a wood duck. I read some place that 75PC of the investors that went to storm walked away, bet they are real happy today. Looked at TV tonight and saw a sad case of what looked very much it could have been a storm deal gone wrong, now they believed the adviser and what have they got now???.

Sorry but your argument falls down once you accept that the people in Storm were conned. People went to Storm for financial advice and were deceived. That's the issue here, not their motivation for using the services of Storm which you have assumed was greed. Incidentally, this is an assumption rather than a fact! The law doesn't work on assumptions although the CBA resolution scheme seems to be one exception.

There is no excuse for conning thousands of elderly people out of their life savings! If people in our society can condone such behavior, then I'm afraid they are as morally bankrupt as the rogues that are in the dock.

At the end of the day this is about wrongdoing, pure and simple. I can just see the Judge's face if one of the lawyers from the Banks were to stand up and say, "The fact of the matter, my lord, is that these people that invested in Storm were just plain greedy and should have known that financial advisers and banks can't be trusted! After all, common sense and history tells us that greed is good! My clients (the banks) just acted on their primal instincts! After all, why do old people need money at their age? They'll all be dead shortly anyway!"

Silly? Exactly! So let's stay focused on what really happened rather than make it up as we go along!

[ASICK]

http://static.justchristians.com/abu.../061997/5.html

"The truth is, few of us are "satisfied with . . . a little silver and a little gold." We want new cars, new homes, new clothes, new toys, new this and new that."

(I'm not religious - just thought some of the content was pertinent)

[Ijustnewit]

This from 2007 , Areas of interest Section 4 and Section 5.

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Submission-Inquiry%20into%20older%20people%20and%20the%20law. pdf/$file/Submission-Inquiry%20into%20older%20people%20and%20the%20law. pdf

Just might add some substance as to why elderly investors have been taken in by the likes of Storm.
Seems Asic and the Government where quite aware that elderly Australians knew little about finance and the risks in 2007 , and yet they where driving business to the doors of the like telling them they should do something about there finances rather than rely on pensions. In allot of cases it wasn't greed, it was trying to do the thing for there future and there grand kids futures. Little understanding about money and finances as backed up in the report of 2007. As I think Bunyip has said, "an accident waiting to happen".