Now, you can call that a black and white summary of what happened, but it’s accurate nevertheless.
Yes, I do realize there were other aspects to the case, such as what the banks are alleged to have done, who had the responsibility to advise of margin calls etc.
These matters will be dealt with in court.
But I know, and you know and have admitted, that your average Storm client had already sustained huge losses by the time their accounts got into margin call territory.
Yes, of course they were duped by Storm – the ‘safe and conservative’ strategy that Storm offered them was a farce.
Do I expect people to be wise after the event? Not really – I expect them to be wise before the event.....
* wise enough to look into the history of the stock market, (since that’s what they were investing in)
* wise enough to learn from the lessons of the 1987 market crash
* wise enough not to put all their eggs in one basket
* wise enough not to hand over astronomical upfront fees that were far in excess of normal
* wise enough to do a bit of research on the investment product being recommended (index funds) to find out that you can easily invest in them yourself without paying some bushranger 7% upfront for the privilege
* wise enough to read up on margin loans so they understood exactly how they work
* wise enough not to accept loans so big that they were going to struggle with the loan commitments
* wise enough to check out and compare a number of financial planning firms
* wise enough to heed the old adage ‘If it sounds too good to be true, it probably is’.
* wise enough not to place their trust in a corporate regulator that had a publicly documented track record of failures and incompetence over many years
* wise enough to have availed themselves of the readily available opportunities to acquire some basic knowledge of investment and financial matters
* wise enough not to invest in something which they didn't understand
* wise enough not to sign blank documents and then trust others to fill in the details
* wise enough to get a copy of everything they signed
* wise enough to take the simple, common sense precautions that you outlined so well in your post No.7222 on page 362 of this thread......precautions that you yourself admit you should have and could have taken.
In fact, Frank, that post No. 7222 of yours is one of the best on this thread because it tells future investors how they can be wise before the event so they don’t fall into the same traps that ensnared you. Below in red is a brief extract from that post......
I now firmly believe, we ‘Stormies’ should have sought a second and indeed a third opinion from other financial advisers as to the merit of Storm’s financial model and, for those that had an accountant, run it past him or her as well. Yes, it would have cost us more money and financial advice does not come cheap but with the amount of money we were investing, it would have made little difference to us. After all, if one can’t afford the small amount of money it would have cost, one shouldn’t be in investing anyway.
Often, when you consult with more than one professional you pick up some useful advice anyway in your search for the best solution to your particular needs, whatever they may be. This is commonsense after all! As it was, our failure to apply some commonsense and test Storm’s plan independently cost us all that we had in the end.
Even when dealing with tradesmen, you don’t accept the first quote submitted but obtain two or more others as well. We all know this! The fact that we ’Stormies’ never went down this path was a major failing on our part and one that is inexcusable
So my first first advice to any would-be investors out there is not to take anyone’s word for it but rather to get a second or third opinion. Someone said on this forum some time ago, “If something sounds too good to be true, it normally is!” It’s a well known maxim and one we should have been mindful of before we signed up with Storm.
When you say "our ranks" I assume you mean a group formed for legal action? I only know a couple such groups and they both have ex-storm staff and directors among them.. maybe even helping coordinate them that much I don't know but also wouldn't be surprised. This is partially legit of course because some staff were also clients and maybe have equal right to take legal action. There could be plenty more groups for all I know but maybe it could be another thing that explains the groundswell of support for Storm you mention as well as the existing and ongoing relationships clients built with their advisers as I already mentioned.
I'd say I have second-hand proof that's also only in my memory and its probably mild compared to what they should already be facing. I'm not really interested in getting involved. I just have a few friends who worked at Storm and some other friends and their families who were clients - together you overhear a passing question or comment from time to time and they tend to add up.
"I refuse to join any club that would have me as a member." Quote Groucho Marx
More by Christine Flatley @ www.smh.com.au"Storm staff urged to chase clients always
Storm Financial employees were encouraged to spend "every working, living, breathing minute" chasing more investors, a court has heard.
Former Storm adviser David McCulloch told the Federal Court in Brisbane today that Storm fostered this attitude among its workers from the moment they joined its ranks.
"It was drilled into us that every working, living, breathing minute should be dedicated to getting people to attend workshops," Mr McCulloch said.
"It was built into the culture of Storm that getting people to attend workshops was your number one task."
Storm Financial clients told investment model 'fail proof', Brisbane Federal Court hears
"Under questioning by counsel for the corporate regulator, Mr McCulloch said he was trained by Storm head Emmanuel Cassimatis to tell wavering clients that "the biggest risk" was themselves."
Read more: http://www.news.com.au/business/comp...#ixzz2AqBwe6Kv
It quite amazing to me that some people still seem to feel that we investors that relied solely on Storm’s expertise because they were professional financial advisers should be held to account by some members of the public for not seeing through Storm’s scheme. Yet, ASIC, the CBA, the Macquarie Bank, the BOQ, the FPA and no one in the financial sector including Uncle Tom Cobbly failed to do just that! Is it reasonable to suppose that Storm's investors should have been more astute than them? Of course not! The assertion is downright stupid!
“31 January 2000 - ASIC ESTABLISHES KEY TRAINING ADVISORY BODY FOR FINANCIAL SERVICES INDUSTRY
The Australian Securities and Investments Commission (ASIC) today announced the establishment of an advisory body to provide guidance on education and training issues in the financial services sector.The Committee will provide input from the financial services and training industries on ASIC’s policies for education and training of licensees and principals and their authorised representatives.
The roles of the new Training Advisory Committee will include:
· assessing and making recommendations to ASIC about the accreditation of professional and industry associations that want to become authorised assessors of training courses, in accordance with ASIC Interim Policy Statement 146 - Training of Authorised Assessors;
· providing guidance on the consistency of training programs accredited by the various types of authorised assessors;
· advising ASIC on education and training issues generally associated with the regulation of licensees and authorised representatives.”
Seven years later the Regulator not only gave Storm’s financial model a “clean bill of heath” in 2007 but actually held it up as a model of excellence?
High ranking executives from the CBA, the Macquarie Bank and the Bank of Queensland attended Storm seminars during which the Storm financial model was explained to them. This has come out in Court by the way so it cannot be denied. No one said at the time that Storm's scheme could contravene the Bank's codes or they might be breaking statutory regulations? Why? Because there was no way of knowing this unless you were one of the enlightened ones on this forum! Don't you still get it? It was sold to us at minimal risk and on a long term basis. This too can be found in the Court transcripts.
Incidentally, I know of no instance where the 'Financial Planning Association' alerted anyone to the fact that Storm was operating illegally? Isn't one of its key roles to “set and enforce professional and ethical standards for members to make sure that they conduct business to the highest quality.” Where was the FPA when all this was going on. For that matter where was ASIC, the Regulator' and the so-called responsible people in the financial sector that now claim that Storm Financial was a maverick that broke every rule in the book.
Some people on this forum are talking through their backside. Storm Financial and the Banks involved with that advisory firm are the wrongdoers because they used misleading and deceptive conduct in their dealings with their clients in respect of Storm and their customers in respect of the banks. With all that is going on in the Court at the moment and all the evidence that is being presented, anyone that still believes that Storm’s clients are partly to blame need their heads examined. To hold such a view, you must really feel that anyone that has any money to invest should avoid financial advisers like the plague because this really is all anyone can expect that seeks advice from a financial adviser. You must also hold the view that we should have seen through Storm's scheme when so-called professionals within the financial sector could not! That's ridiculous and you know it!
Do yourself a favour. Get a few law books from the library dealing with consumer law and also spend some time sitting in the Brisbane court. It may help you to understand that any agreement with any other party that is legally binding must be entered into where both parties have been “aboveboard" in their dealings and have not misrepresented what they are offering. That’s fundamental! That is the law! That allows for a society where the law applies rather than opinion.
If some of you were running the joint, to me Afganistan would seem like a good option!
Thought I'd come back and check this forum for updates on the status, as it had been a long since I last did so.
I think those are very good points you make, Frank, regarding ASIC & FPA's lack of action before the crash. If they couldn't see the risk, how could Storm clients? Or, if they could, why were Storm allowed to continue business?
Also, nowhere have I heard that any Storm clients were told the investment funds were not registered. Whether or not it is proven to be an illegal unregistered MIF or not, I think if Storm or the banks alerted their clients to the fact that the funds were unregistered with ASIC records (or where ever it has to be registered), they would be unlikely to invest with Storm.
At any rate, the banks would surely have known the funds were not registered. That's just basic due diligence to check that out! Or negligence not to check it out!
I'll be very interested to see how that pans out in court.
And given the apparent lack of due dilligence that so many investors undertook in taking on the "failproof" strategy, i seriously doubt it being registered or unregistered would have made one iota of difference to most.
Now I'm NOT saying there wasn't the odd individual that run because they thought it was a Scam , but I really think putting the figure at 75% is just a myth. The rest were simply Window Shopping nothing more nothing less.
The concern that I'm having now is more investors , mainly in that same age group that most Storm clients fell into, are being drawn into taking unforeseen risks in what they perceive to be safe investments. For example on the Banksia thread and Equitrust thread. The lower the interest rates go on term deposits and combined with extremely poor returns on Superannuation ect. the more of these vulnerable people will be drawn into trying something that offers a better return for their hard earned dollar.
Lets hope we can all put the word out before anyone else comes across this Website and Forum in the same circumstance as the people above.
As for the responsibility of ‘basic due diligence’ that you mention – did that responsibility extend to Storm clients, or were they exempt from any such responsibility?
Was it negligence on the part of Storm investors that they failed to thoroughly look into the strategy?
As an experienced investor myself, I can tell you that before proceeding with any investment it’s essential to conduct a thorough evaluation of the pros and cons of that investment to minimize the risk of getting burnt.
It doesn’t matter if we call it due diligence or research or whatever. The simple fact is that people who don’t do it before investing money are greatly stacking the deck against themselves. Nowhere has this been shown more clearly than in the Storm debacle.