Gullible?

Many have concluded that the Storm investors must have been very gullible because it is quite evident from the evidence to hand that the Storm Financial 'Statement of Advice' and that firm’s approach to financial planning was unsound. Indeed, some of Storm’s clients who lost their lifesavings when Storm collapsed also share this view, blaming themselves for being foolish enough to be duped. Yet, I believe it is a fallacious assumption with little foundation.People went to Storm Financial for financial advice because it was a reputable financial advisory firm with a track record, and it was endorsed by some of the major banks in this country. For some years people had prospered with Storm so there were no indicators that Storm was about to go "off the rails”. Calling us, the investors that went to Storm for financial advice, ‘gullible’ in such circumstances, is doing a disservice to all those financial advisers out there that are providing a genuine and above-board financial service. Why? Because it implies that anyone that seeks financial advice from someone in the financial sector is gullible! None of them can be trusted, so to speak!

Hindsight is a wonderful thing but few, I'm afraid, are blessed with the ability to foresee the future. To claim that 3,000 or so investors were gullible and should have known better is easy enough to do, but such an opinion is uninformed! People in reproving Storm’s clients in this way tend to forget a number of important facts:

If we are considered 'gullible', how gullible then are all those  various bodies and individuals mentioned above in the scheme of things? They have no excuses whatsoever because they are suppose to be financial experts!

If this were just a “get rich” scheme as many have suggested, why was it allowed to go on for so long and why were the aforementioned parties so readily involved? The truth of the matter is that whatever was going on beneath the surface, there was nothing outwardly that could possibly alert unwary investors, or savvy ones for that matter, in advance of the dangers inherent in the system. 

People ask, , “How could you consider mortgaging your house to further invest when such a policy is fraught with danger?” This question deserves an answer because it is one that is often raised. We paid Storm Financial $145,000 to obtain what we thought was the best financial advice available. Why pay this sort of money to a financial adviser, and then ignore the very advice you have paid good money to hear?  

It’s easy to say now that borrowing on one’s house is a recipe for disaster, but people should remember that ASIC and the banks at that time condoned such a policy. In fact, the banks enthusiastically promoted this strategy along with Storm. How then could we simple investors be expected to identify that such an approach was unsound when our financial advisers and the banks were urging us to invest in this way? I was under the impression that these people were supposed to be looking after our interests!

At times we have been referred to as "unsophisticated investors" which has some derogatory undertones. That's exactly what we were though!  If we had the expertise to invest ourselves in the share markets, why would we need to have sought financial advice in the first place? We realised our limitations at the time and we did the prudent thing by seeking professional financial advice! Now people label us 'gullible' for having done so when, in fact, we only did what sensible people would do by seeking financial advice. If it was considered to be the right thing to do then, why are we being condemned now for doing so? 

Our only mistake was putting our trust in the wrong people.

People tend to forget that some of those that invested in Storm were sophisticates in their own field, be it in ‘management’ as in my case, ‘business ownership’, 'careers' and  so on. What Storm offered us in the beginning seemed sound enough to even the most discerning among us. How were we to know then that Storm's financial model and its assurances were merely “window dressing” and Storm had no intention of doing what it said it would? How were we to know that Storm had no real systems in place to protect our financial portfolios? How were we to know that they had secret deals with certain banks that would ultimately lead to our losses when the global financial crisis hit in late 2008? 

We had no way of knowing any of these things and it is therefore unreasonable to assume that we should have known better.

Some members of the PJ-C at one stage during the Committee's investigations suggested that would-be investors should take a course in financial investing prior to their investing their money. "Then this sort of thing wouldn’t occur!" This is just another loopy suggestion that has no practicality in a modern world. Does one have to learn how a piston engine works in order to drive a car? Does one have to learn about the law in order to employ a lawyer? Doesn’t this defeat the whole purpose of the exercise when professionals are available for the sole purpose of giving you advice in these various areas? 

Perhaps instead investors in the future should take a course in criminology so they can spot criminal types in the financial system before they think about entrusting their life savings to financial advisors and banks? 

No! The people who invested using the services of Storm and the banks were not gullible. They were simply victims of inveterate liars and greedy organisations that came in the guise of Storm Financial and its partners in deception; namely the banks that assisted them in fleecing their Storm clients. These Storm investors were people who placed their trust in a financial system and the people that operate within only to find that the financial sector and some of the people that inhabit it are flawed from go to woe! The Storm  investors fell through the cracks when the global financial crisis occurred at the end of 2008 because no one, be it Storm Financial, the banks associated with them, ASIC or this Government, bothered to check for any structural failure.

Not one former Storm Financial investor out there should blame himself or herself for anything these financial criminals have done to them. We are victims! No more, no less! We placed our trust in people, financial institutions, and a financial system that was deplorable. We paid a fortune to obtain the best financial advice possible and we got monkeys instead! We deserved better! We deserved more! 

We are not ashamed of what has occurred because it was not our fault in any way. We were sold a financial plan that we had no way of knowing was flawed. No one else involved, such as Storm’s own financial advisers, the banks, ASIC and this government picked up on its defects so why should we now take the rap for their obvious failings. We do not accept such a proposition! Nor should we! We are not to blame! Rather, they are!

In business, one should be able to trust those to whom one entrusts money, particularly if they are financial institution such as banks. 

"DAVID SAY, 71, is no fool. The now-retired, former managing director of James Hardie and former chairman of HSBC Bank Australia is a smart, well-travelled and successful businessman but even he had trouble choosing the right financial adviser. He eventually settled on David Gibson and Larry Fingleson of Priority Planners in Sydney in 2005 but not before losing "heaps of money" at the hands of a private bank adviser." See "INVESTORS BEWARE" "'A little knowledge is a dangerous thing' attachment for full article.

Was Mr. Say gullible? I wouldn't think so! Were we therefore gullible who had far less knowledge in financial investing? No, we were not! Were we trusting? Too bloody right!

All the parties involved in the Storm Financial debacle, other than the Storm investors, were found to be wanting in every way! They should now be made to pay both in compensation and 'under the law' for what they have done. Only then will they learn that crime doesn't pay!

Frank Ainslie 11th June 2011