Storm founder defends company

Posted by LC Team, Wednesday, January 28, 2009

Pointing the fingerThe founder of Queensland investment firm Storm Financial has blamed banks for the company’s collapse.

Speaking for the first time since Storm Financial was closed by administrators, founder Emmanuel Cassimatis said the company was not at fault and it did not advise clients to go too heavily into debt.

The collapse has affected the savings of thousands of investors, mostly in Queensland.

Mr Cassimatis said he was also facing financial ruin and the banks were to blame for the company’s failure.

“I feel a huge moral responsibility. Our clients trusted us implicitly, we trusted the system, we trusted all the players in the system, we trusted the bank. It went horribly, horribly wrong,” he told ABC television.

Storm Financial has said it called in administrators earlier this month after receiving a notice from Commonwealth Bank of Australia Ltd that gave the financial planning firm one day to repay its debt.

All 115 staff at Storm Financial lost their jobs after administrators closed the firm on January 15.

“My finger points squarely at the Commonwealth Bank,” Mr Cassimatis earlier told the Nine Network.

“The cause of what has happened is where they dropped the ball.”

Nine says the Commonwealth Bank has denied any wrongdoing.

Mr Cassimatis said he was devastated by the events.

“We’re devastated, (wife) Julie and I are absolutely devastated.”

Customers will gather in Townsville to hear options for action against the company and associated banks on Wednesday.

AAP

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Filed Under: Economics, Lender News

7 Comments

Ted January 28, 2009

I read in the media recently that this mob were charging entry fees of somewhere around 7% - if this is true then anyone with half a brain could see danger ahead!!

steve January 28, 2009

Marvelous rhetoric, it’s their fault…this type of comment (from someone who is responsible for convincing 1000’s of people to invest millions,) does little to belay the thought this ning-nong little or no knowledge of what he was doing. He seen the highs and must have thought, ‘wow, how easy is this.’ The collapse of his float should have raised the eyebrows of smart investors. I have a friend who is 63 yrs old, they made strong requirements that she sell one of her homes and gear the other. This put her personal input to $250k and margin loans up to $800k (remember, she’s 63…)so you tell me folks, when Cassimatis said he did not put peoples money at risk of take high risk chances, was he talking about this client? As I said earlier, she is a friend of mine who worked her whole life for nothing, she still does not know what happened, ‘why have I lost money,’ ‘how can they make a call on my shares’ ‘why are they saying I have to come up with more money.’ Are these questions the questions a high risk taker would ask? not in any way, shape or form. I know who’s devastated…

James January 28, 2009

The banks in Australia are not to blame for the market crash. Being an adviser, I have already seen and spoken to Storm clients looking for a new adviser as they are no longer able to contact their adviser they dealt with at Storm. The problem really is the advice was inappropriate for many people who were seen through the door. Additionally, an entry fee of 7.5% was levied on all clients undertaking Storm’s main strategy. This in itself meant that the client needed to acheive a return of 8.1% or greater to break even! The sales technique used by storm mainly consisted of promising excellent returns, confusing the client with jargon, taking their time to show they cared, using well presented offices and then reassuring clients they were doing the right thing. Most Storm clients probably know very little about what was actually recommended or actioned for them. The legal compliance standards within their advice documents were questionable at best, with some basic practices being ignored. Gearing and double gearing are very effective for a limited section of financial planning clients. These people are typically high income earners in their 20’s, 30’s & 40’s with good equity and/or excellent cash flow. As a general rule it is not appropriate for anyone even close to retirement. Strategies should fit the client, not the other way around which is what Storm appears to be guilty of….

James January 28, 2009

Additionally, Emmanuel Cassimatis is blaming the banks for not notifiying them and their clients early enough about margin calls. This shows a distinct lack in duty of care by Storm’s advisers and administration staff to use their initiative and check client’s gearing positions on their own through the second half of last year. This is part of the service that advisers should offer to clients using margin loans which is to moniter gearing positions on a weekly, fortnightly or monthly basis depending on market conditions. All these things being laid onto the banks are actually part of what should have been done by the advisers. I highly doubt the fees charged by Storm could be justified by the services offered.

steve January 28, 2009

Hi James, yes you are right on all accounts. In your second comments where you touched on monitoring the margins/gearing positions…in a bull market, you could be excused if you did a 2-3 day check, this might sound excessive but with so many clients with the same or similar scenario, I think it would have been prudent (however 99.9% of good financial planners would not have done what this firm has done to their clients.) If the clients had completed a fact finder/risk analysis before attending Storms (Wonderland) seminars, I am absolutely sure the amount of clients putting so much at risk would have been less. I hope ASIC have a serious look at how Storm convinced so many to lose so much. The fact finders are there to avoid this type of scenario…go figure.

James January 29, 2009

Steve, unfortunately, only a basic fact find was completed by these clients. Risk profiles were not properly established meaning the strategy was open to a lot more people than it should have been. The risks of gearing were only briefly explained and it definately was not adequate. Clients from Storm I have spoken to all thought gearing and double gearing was a reletively low risk strategy. Advice documents had a brief section on risks but it did not cover the risks in great detail. If a potential client had a warning telling them they could lose their home in the event of a catastrophic downturn in the share market, most would not have proceeded. Personally, I would like to see all directors and staff involved at an executive level within Storm be subject to a lifetime ban from working within any area of the financial services industry. This should go for anyone else in the industry who actively participates in this level of negligence!

Chris March 3, 2009

When oh when are people going to learn that’s no such thing as a get rich quick scheme that works for all? All these schemes rely in the short term on the transfer of wealth between individuals, with the newcomers funding the spoils of those who get in first. In the longer term, provided the market keeps on increasing in value, it’s possible for all investors to see a return. But when the market dives sharply downwards, as has just happened globally, then many recent investors will end up taking a very cold bath. It doesn’t have to be this way. No one has to allow themselves to be gulled by the likes of Cassimatis and his mob. Instead of going for implausibly high returns, the cautious investor chooses instead to invest broadly across a wide range of investments - either by investing in low fee super funds managed by a fund manager, or if they have enough know how, setting up their own super fund. The only way for an investor to end up losing everything in this fashion is if they are greedy, or gullible or ignorant. Fools and their money are soon parted. Harsh? Yes, but some one has to point this out.

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