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More details regarding the circumstances of the former clients of Storm Financial have emerged in the business profile created by business brokers Kenyon Prendeville, which is preparing to sell the failed group’s remaining client book.
The business profile is being given to the many businesses now bidding for the remaining client book of the failed financial planning group. The information contained in the profile was provided by the receivers of the group, KordaMentha, to Kenyon Prendeville, which was appointed by the receivers.
The report shows that between 2006 and 2008, the clients of Storm Financial almost tripled their exposure to margin loans, from $630 million in 2006 to $1,752 million in 2008.
In that same time period Storm’s clients also nearly doubled their cash amounts. But cash levels in the failed financial planning group have now jumped from $100 million in 2008 to $957 million at January 19, 2009. During that same period, clients’ exposure to equities and other investments fell from a peak of $2,947 million in 2008 to $494 million.
As at January 19, the fund manager with the greatest share of Storm Financial clients appears to be MLC, with more than 7,500 clients with funds under management of more than $214 million. Meanwhile, the estimated number of Storm clients invested with Challenger Financial Services is around 1,500, with funds under management of more than $160 million. Colonial First State, at January 19, maintained 989 Storm clients with more than $97 million in funds under management.
Other products from various funds management companies account for a further $20 million in funds under management.
An entity named in the document as MLC L/S paid commissions of $154,212 to Storm in January this year. MLC was also listed as paying more than $15,000 in commissions to Storm, in addition to almost $10,000 paid by MLC Invest. This is a total of $179,000 in commissions from MLC-related entities. However, it should be noted that the investments in MLC products are believed to be largely cash, super and insurance, and therefore have not been drawn down at the level of the margin lending and direct equity products offered to Storm clients from groups including Colonial, Challenger and Macquarie.
In January this year, Storm Financial received more than $113,000 in commissions from Macquarie, while an entity listed as ‘MIML’ paid $1,140.
Colonial is listed as paying $31,627 in commissions to Storm (excluding GST) in January, while a company listed as ‘CGI’ paid more than $5,000 in commissions. A company listed as ‘CFS’ also paid $4,875 in commissions during January this year.
Meanwhile, Challenger is reported to have paid $56,852 in commissions to the business in January.
One entity listed as ‘National ML’ also paid $2,594 in commissions.
Other payers include Aviva, with more than $10,000 in commissions going to the group, and ING Life, with commission payments of more than $9,000 made in January.
AXA paid more than $7,000 into Storm over the same period, while a company listed as ‘FSP’ paid more than $5,000 in commissions during the month.
Over the same period Zurich paid $2,867, Asgard paid $2,862 and Tower paid $1,669.
This remaining client book – of more than 10,000 clients located in Sydney and various Queensland locations – holds $494 million in equity/investment funds, $957 million in cash accounts, $914 million in margin lending, and a total of $2,365 million in funds and loans under advice.
As at January 19, Storm clients had $914 million in margin loans, though while the bulk of funds under management in previous years were in investment funds, it is now “held in cash and is generally securing outstanding margin lending debts”, the report said.
The brokers said the expected recurring revenue is approximately $3 million to $5 million per annum, with the net recurring revenue in January this year sitting at more than $450,000.
For sale is $403,520 net recurring revenue, though the brokers said this figure may be “subject to variations due to expected client movements over the coming months”.
The deadline for submissions of interest is this Friday, March 20.
