Storm Financial clients detail the aftermath of bad advice

storm financial parliamentary joint committee mortgage insurance commonwealth bank macquarie bank

8 April 2009
| By Lucinda Beaman |
image
image
expand image

Submissions made by former clients of failed financial planning group Storm Financial to the Parliamentary Joint Committee on Corporations and Financial Services reveal the damage caused by bad advice.

The submissions from former clients of the group will form part of the joint committee’s inquiry into financial products and services in Australia.

One former client describes the anguish he now feels as a result of his involvement with Storm, saying “my health has suffered and I cannot see any future for me to carry on”.

Another former client describes being “in a state of shock at the sudden and inexplicable collapse of that organisation”.

The submissions also provide more detail around the financial position Storm clients were in when the company collapsed, and the advice that led to their position today.

One former client was granted loans of $584,000 and $580,000 from the Commonwealth Bank of Australia (CBA) and Macquarie Bank respectively.

“In 2007, when these loans were approved, we had a combined income of less than $60,000 gross per year,” the client’s submission said.

“In 2007 we owned two homes and had $200,000 in cash plus three life insurance policies. I also put my wages into this plan for two years. Today we have lost all of our cash, we have one house on the market to sell and we will still have a large mortgage over our own home. The investment home is not selling because of the economic downturn,” the client’s submission states.

“The Commonwealth Bank charges us $4,530 in interest only every month and we only earn $4,400 between us,” the statement said.

“If we throw everything at our debt we’ll have it paid off in 31 years and 11 months. We’re both 60 this year.”

The client also describes the anguish at being separated from family overseas, and the stress associated with the financial loss.

“Today, we wait for our children to ring from overseas knowing that we can never visit them or their families again. We are grieving for a life and lives that could have been.”

In their submission the clients say they want to ensure “that nobody ever has to suffer the way we have suffered and will continue to suffer for the rest of our lives”.

“You can never recover from a huge loss like this, you just learn to exist.”

Storm Financial: a client case study

Another former client describes their financial situation prior to their involvement with Storm. This client was a self-funded retiree, a debt-free home owner with four income producing investment properties (no mortgages), a five acre block of land, almost $100,000 in cash, almost $80,000 in shares and $150,000 in superannuation.

“Today we are unemployed and have a $1,500,000 debt,” the client’s submission states.

The client has sold their five-acre block of land and three investment properties. The family home is mortgaged as is the final investment property. The superannuation and $200,000 in shares remain.

“We are currently seeking employment to try and pay the mortgage so we can stay in our family home. We have had to sell off other assets that we owned without debt … just to give us breathing space with our loan repayments,” the client states.

This couple say they have “generally reduced our activities to the point of non existence”.

“Unfortunately for us, we have also encouraged my parents (aged 72 and 68) and our son (aged 19) into [the] Storm Financial investments along the way and they have also suffered because of this.”

The clients’ parents were also self-funded retirees who were debt free and owned their own home.

“They now are pensioners with a $305,000 debt [and] no income apart from the pension. They are faced with selling their home and moving into our home to exist.

“Our life as we had it no longer exists. Carrying on day-to-day is hard, sleeping is hard, trusting is hard and trying to move forward in an environment where there is no longer respect for those experts is incredibly difficult.

“How do we invest for our future when investing got us into this position in the first place? Who are the experts we are to trust now?”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

JOHN GILLIES

tHOSE 989 WHO ARE CEASED WILL GO ON TO LIVE A LONG AND HEALTHY LIFE JG...

4 days 13 hours ago
Chris Cornish

What a sticth-up. Looks like Labor Senator Jess Walsh follows Stephen Jones who follows what the industry super funds ...

4 days 10 hours ago
Peter Swan

This report is a blatant display of far-left factional partisanship, treating superannuation funds as state property and...

4 days 11 hours ago

ASIC has cancelled the AFS licence of a Sydney wealth firm, the fifth Sydney firm to see a cancellation since the start of the year....

2 weeks 5 days ago

More than 20 winners from the funds management industry have been crowned at this year’s awards....

1 week 5 days ago

ASIC has obtained interim orders from the Federal Court to freeze the assets of a registered managed fund and prevent its former director from leaving Australia. ...

6 days 10 hours ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND