Storm Financial - How did it happen?
Predictably, Storm Financial is to be wound up. Not too many people will shed tears about that no doubt. The loss to investors from this will be significant and nothing short of a disaster for many. Should the Storm advisers be accountable, or is it just bad luck, the stockmarket is to blame?
It is obvious that the investors trusted their adviser, and they should be able to do this. The financial services industry runs on trust, indeed couldn’t function without it. The failure here was the model. The Storm model was a one size fits all model which was built for the good times and good times don’t always last. Any adviser worthy of the name should have recognised the risks in the model. Certainly there were warning signs, but are we expecting too much from “unsophisticated” investors to recognise these. The adviser is required by law to take into account each client’s individual circumstances and tolerance to risk. It appears that this didn’t happen here and the advisers must be held accountable.
It will be up to the courts to sort the liability issues out and in the meantime, ASIC must step up to the plate and call the advisers to account. Neither of these actions will give much joy to those whose financial future is in tatters, however.
POSTED: 20-Jan-2009