Recovering from financial oblivion

Mark and Ann Weir were just two of more than 3000 Storm Financial investors whose life savings disappeared after the GFC. They are now facing foreclosure on their family home. So what lessons have they learned from this stressful life event?

When the Global Financial Crisis (GFC) hit at the end of 2008, Storm Financial had captured the imagination the banking industry to the extent that the Commonwealth Bank (CBA) had established a dedicated BSB and branch number for Storm clients who wanted to tap into the equity in their family home and to take out margin loans to invest.

An agreement had been reached with the CBA to confirm that the bank would work with Storm to ensure the safety of its investors. This gave Storm investors like us consolation that, if the markets turned sour, we wouldn’t lose our homes.

But the volatility of the GFC was something to which the young Turks in the banks hadn’t previously been exposed; they weren’t around in 1961 or 1987 and didn’t understand that such volatility could occur.

The first we knew of the closure of the Storm fund was from a phone call in December 2009 from the geared investments department of Colonial, telling us, “Your portfolios has been sold, but there was insufficient equity to cover the margin loan”.

Put simply, we owed the bank $170,000. It was a massive shock as, all through the previous year, we had been in constant contact with our financial planner and were told not to worry, that ‘everything was under control’.

Luckily we still had a self-employed superannuation policy from my days in the taxi industry and we hadn’t placed these funds into the Storm investment. We closed this fund to pay our debt and, by selling at the bottom of the market, ensured we lost another several hundred thousand dollars.

We had drawn down further equity in our home to invest in Storm and so had a further debt of $580,000. Since then we have used our remaining superannuation and a part pension to cover our obligation to Westpac bank. I maintain that Westpac was complicit in the Storm collapse. It had a ‘Storm-specific’ envoy in the Townsville branch, whose designated role was to help people ‘gear up’ to invest in Storm.

I believe that Westpac is now trying to foreclose on my home loan because of my activity with the Storm Investors Consumer Action Group. Ann and I are accumulating debt of $1000 per month, even though we had paid off 60 per cent of this loan back in July 2012. It is only the interest which is accumulating.

Click NEXT to read the life lessons that Mark learnt during his financial ordeal and the advice that he has to offer.

So what is my life lesson?

If I never again have to engage in a dispute with a bank or enlist the services of a lawyer again, it will be too soon. Across 40 years of marriage, including raising two sons, my wife and I had never had to contend with any single issue as stressful as this. I was the second youngest of nine children of a dairy farmer. There wasn’t much to go around and I resolved I wouldn’t be in the same position. So my working life has been devoted to ensuring that we would have a financially independent retirement and we would leave something for our children.

I still have great faith in the financial planning profession. Life is not always kind to you. Our mantra, first and foremost, is to set an example for our children. We have needed to dredge the depths of our characters to get up every day and carry on. But neither of us has become cynical.

Yes, our circumstances have changed profoundly. We have been robbed of a range of options. But this has simply reinforced the importance of family. Our two sons have given us five grandkids in five years – an immensely grounding experience. They are our lifeblood and our lifeline.

I believe that the financial services industry, in particular the banking sector, has a stranglehold on community and the fact that it is allowed to operate this way is scandalous. We need to have a people’s bank capable of delivering a better level of social justice.

My advice to others is simple. Seek out the services of a reputable financial planner so that you can put your savings to the best use possible. Look after your health. And always approach life in moderation.

At the time of writing, Mark had received a final letter from Westpac stating it would send documents for foreclosure. He has since joined a class action against the bank, filed in April 2013.

Storm Investors Consumer Action Group was formed in 2009 to seek justice and restitution form the banking and financial services industry for those who felt they were misinformed or mistreated by banks and/or advisers.

Written by Kaye Fallick