The collapse of Storm Financial has left a trail of unpaid bills, with the worst hit being the financial planners who sold their businesses to the group during its expansionary era and who are yet to be paid.
Storm Financial owes $28.4 million to the vendors of financial planning businesses acquired by the group, the administrators have found. This is the most substantial amount owed by the group, with the Commonwealth Bank of Australia (CBA) owed $27.09 million.
Between 2000 and 2007 Storm acquired at least 11 financial planning practices along the East Coast of Australia, with the aim of converting as many clients as possible to its controversial model. During its expansionary phase Storm said it paid “top dollar” for the practices it acquired. But the vendors of these businesses must now await the sale of the group’s assets before finding out how much might be recovered and if they might be paid.
In the last six months of trading Storm paid preferred dividends of $3.4 million to unpaid vendors of businesses acquired by the group. The unaudited books of the group show that at December 31 last year, the group had a deficiency in net assets of $4.3 million.
Money Management reported yesterday that in the 18 months following the onset of the global credit crunch, and the subsequent fall in share markets, Storm Financial earned more than $80 million in fees and commissions from the investments of its clients, many of whom are now in financial distress.
Those fees and commissions were taken from investments managed by Storm’s 34 financial planners, who the group said were the beneficiaries of Australia’s highest volume of profit per planner.
Control of Storm’s business and records has now passed from the voluntary administrators — Worrells Solvency and Forensic Accountants — to the receivers, KordaMentha.
Clients who believe they are creditors of Storm must submit a proof of debt form to Worrells.
A meeting for the creditors of the collapsed financial services group was held in Brisbane yesterday. Storm now owes funds to creditors totalling $78 million, the administrators said.
