Storm Financial clients offered free advice

Distressed clients of Storm Financial will be referred to financial planners outside of the Storm group for free advice as part of a service to be offered by the Financial Planning Association (FPA).

As reported by Money Management online yesterday afternoon, FPA members have volunteered their services to assist clients of Storm Financial who have faced margin calls and, in some cases, financial ruin, as a result of the group’s aggressive gearing strategy.

FPA chief executive Jo-Anne Bloch said 50 Queensland FPA members had been matched with around 100 investors negatively impacted through their involvement with Storm.

A statement from the FPA said the industry body is “conducting preliminary enquiries with Storm” — which is also a member of the FPA — to understand the situation. The FPA said Storm, headed up by Emmanuel Cassimatis, is “co-operating fully”.

“It’s important that we provide clients who have been affected with professional advice during a time when they’re no doubt experiencing extreme anxiety and confusion,” Bloch said.

Stories emerging from Storm Financial clients are creating increasing concern, while correspondence sent to the group’s clients, the details of which Money Management published on November 13, prompted financial planning industry figures to question whether the group’s advice was appropriate. The big question is whether or not Storm’s advice is tailored and customised to client needs and objectives.

The Australian Securities and Investments Commission (ASIC) is yet to make a statement about whether or not it is investigating Storm’s affairs. An ASIC spokesperson said the regulator generally doesn’t comment on whether or not it is investigating a certain company until a charge is made, but exceptions have been made to this rule in the past.

A spokesperson for the Financial Ombudsman Service (FOS) said the ombudsman does not comment on whether or not complaints have been made against its members — and Storm Financial is a member of the FOS.

Money Management reported last week that the ombudsman had seen a 55 per cent increase in financial planning disputes and a 152 per cent increase in managed investment disputes in the six months to June 30 this year. Two of the main areas of dispute within financial planning and managed investments in the period were inappropriate advice and misrepresentation.

Storm’s model was to encourage the use of debt, or margin lending, to ‘optimise’ its clients’ personal balance sheets, with Storm clients geared into indexed products developed in conjunction with Colonial First State and Challenger.

This year’s dramatic fall in investment markets has led the group’s clients into seriously stormy waters. Money Management has sought an explanation from Storm Financial regarding its operations, but Storm has not responded to interview requests.

Last year the group said it had 13,000 clients with $4.5 billion of funds and loans under administration (at June 2007).