Foundations of Financial Planning

 

Project Cover Sheet

This document includes:

  • Project instructions
  • Submission instructions
  • Project result, result summary and feedback
  • Project checklist
  • Project questions and suggested topics or bullet points that should be covered in responses (including fact finder templates, cash flow templates and managed funds calculations).

Student identification (student to complete)

Please complete the fields shaded grey.

Student number INT######
Student name [name]
Telephone number [phone no.]

 

Project instructions

Only Microsoft Office compatible projects submitted in the template file will be accepted for marking by Kaplan Professional Education (KPE). PDF projects will not be accepted. Do not delete/remove any sections of the template.

The project must be COMPLETED before submitting it to KPE. The maximum file size is 5MB. Once you submit your project for marking you will be unable to make any further changes to it.

You will have 12 weeks from the date of your enrolment in this subject to submit your project. Should your project be deemed ‘not yet competent’ you will be give an additional 4 weeks to resubmit your project.

Your project must be submitted to KPE on or before your project due date.
Please check KapLearn for the due date.

Project submission instructions

Please refer to the Project submission/resubmission instructions (pdf) in the Assessment section of KapLearn for details on how to submit your project.

Project result (assessor to complete)

Result – first submission
Questions that must be re-submitted:
 
Result – re-submission (if applicable)

Result summary (assessor to complete)

  First submission Re-submission (if required)
Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9

Feedback (assessor to complete)

[insert assessor feedback]

Foundations of Financial Planning

[FP1B-1SN1-2] Project

This project contains nine sections based on the information provided on your clients, Ria and Adam Jacobs, and their family. Complete all sections.

The following checklist is provided as a guide to ensure you have completed the project requirements.

Project checklist (student to complete)

Step Action Completed?
Prior to Commencing the Project
1.               Read the Study Guide

Go to the What you need to know section and read the advice in the Study Guide on preparing your project.

 
2.               Familiarise yourself with the project
Think about the project questions while reading your learning materials and completing the activities and review questions.
 
3.               Download the Sample Case Study <insert link>

The Sample Case Study that accompanies your course notes provides a model to help you prepare your Statement of Advice. You should refer to the Case Study as you work through the learning materials, then download the worked Case Study and compare how the SOA matches with the goals and objectives identified in the case study, and consider what information has been included in the SOA and why. This will help to ensure that you include all the important information in this Project and that you address all of the clients’ goals.

 
Completing the Project
4.               Answer Sections 1 – 4
Ensure that you complete the fact finder and risk profile templates for Section 3 Part A and Section 3 Part C.
 
5.               Answer Section 5 – Part A & B

Part A Statement of Advice

·       Complete the SOA using the Template provided. All sections of the template must be completed. You may add more information if you believe it is needed but you must not remove any section.

·       You should ensure that your recommendations cover all of the clients’ goals and objectives. You may need more or less recommendations than the number provided in the template, it will depend upon you advice. Just remember to address all of the clients’ goals.

·       You do not need to provide advice on insurance, but must cover your reasons in your SOA.

·       You must recommend a product for a wealth accumulation strategy. You may use one of the products from Section 4 Part D.

·       You do no need to obtain or create any PDS to go with the SOA

·       You should complete the projections in Appendix 3 using an excel spreadsheet.

 

 
6.               Answer Sections 6 to 9  
7.               Upload your completed project.
You must submit the following completed items in this template:

·        the project cover sheet and completed student declaration

·        answers to all nine project sections

·        the completed Statement of Advice Preparation Checklist

·        the completed Statement of Advice and appendices.

 

 

Case Study Background — Ria & Adam Jacobs

You have recently commenced your career in financial planning after completing your Diploma of Financial Services, and have now accepted a role as a junior financial planner in a small financial planning practice. The practice operates under the name Attain Financial Planning Pty Ltd and you are an authorised representative of Reach Financial Services who holds the AFS Licence. Thomas, the firm’s senior financial adviser, has agreed to mentor you while you gain experience in the industry.

Attain Financial Planning Pty Ltd specialises in investment and insurance advice but does not provide stockbroking, real estate evaluations and advice, income tax preparation, superannuation fund accounting, superannuation fund administration or the preparation of legal documents such as Wills or trusts.

Your first clients are Ria and Adam Jacobs who were recommended to Attain Financial Planning by a current client who is very happy with the service and advice she has been receiving.

Six months ago Ria received a $450,000 inheritance from her late grandmother, and she and Adam would like to ensure these funds are invested wisely in order to secure their future, and provide for their children while they are at home. You have obtained the following information from discussions you have had with Ria and Adam so far:

Personal Information

  Client 1 Client 2
Name Adam Jacobs Ria Jacobs
Salutation Mr Mrs
Age/Date of birth 1 July 1975 17 August 1976
Status Married Married
Home address 10 Carlisle St., Martins Hill 10 Carlisle St., Martins Hill
Health Good Good
Smoker No No
Occupation Warehouse Manager Receptionist
Employer Dalkeith International Medical Clinic
Work Arrangement Permanent Full-time Permanent Part-time
Start date 2002 2011
Retirement age 65 63

Family relationships and dependants

Dependant Relationship Date of Birth Number years Dependent
Amy Daughter 4-Mar-04 15 years (Ria and Adam hope she will go to university)
Nicholas Son 7-Jul-05 16 years (Ria and Adam hope he will go to university)

Professional relationships

Solicitor Carolyn Williams
Time span of relationship 10 years
Quality of relationship Good
   
Accountant Julia Charters
Time span of relationship 7 years
Quality of relationship Excellent

Annual income details

  Client 1 Client 2
Salary $58,000 $20,000
Interest $197.50 $13,697.50
Dividends (fully franked) $3,000 N/A

Notes:

Adam and Ria’s salaries are excluding superannuation guarantee (SG) contributions, which are currently paid at 9% per annum.

Adam is happy in his current role and does not foresee any changes to his employment circumstances at this stage.

Ria has just returned to work part-time working 5 hours a day (10am to 2pm) 4 days per week. She expects to stay in this role for the foreseeable future.

Annual expenditure

Mortgage (Joint) $17,256.00 (Interest is 6.15% variable over 25 years)
General living expenses (Joint) $45,000.00 (includes insurances, utilities etc.)
Car Expenses (Adam) $5,400.00 per annum
School fees (Joint) $7,000.00 (for both children)
Donations (Joint) $250.00
Annual holidays (Joint) $3,000.00

Assets and investments

Principle residence $520,000.00 This is the estimated current value. There is a mortgage of $220,000 outstanding. The clients’ currently pay both principal and interest on the loan.
Home contents $50,000.00 The value of their contents is the replacement value for insurance purposes.
Motor vehicle $32,000.00 The family car has an outstanding loan balance of $22,000. The monthly repayments are $450.00 currently paying interest only.
Motor vehicle $25,000.00 This car was also left to Ria by her grandmother. They believe they can manage without the extra car and have agreed to sell it to their neighbour.
Bank Account

(Joint)

$12,000.00 This is Ria and Adam’s savings account for daily cash access. This account earns 1% per annum.
Bank Account

(In Ria’s name)

$450,000.00 These are the funds recently inherited from her grandmother and are currently held in a savings account earning 3% per annum.
CMT (Joint) $5,000.00 Earning 5.5% per annum.
Superannuation:

Adam:

Ria:

 

$110,000.00

$45,500.00

Both Accumulation funds. MER’s 1.5%, 2% contribution fee, and $0 withdrawal fee.

Invested in the balanced option. Eligible start date is 1 August 1996.

Invested in the conservative option. Eligible start date is 1 July 1998.

Share portfolio

‘In Adam’s name

$50,000.00 Earns 6% per annum – fully franked dividends. Currently this is not being reinvested as dividends are required to enhance family cash flow. Does not wish to sell. All shares are liable for 50% CGT if sold. Cost base of entire portfolio is $45,000.

Current share portfolio

Number of shares Company ASX Code
480 Bendigo and Adelaide Bank Ltd BEN
518 ANZ Banking Group ANZ
219 Commonwealth Bank CBA
895 Qantas QAN
2,460 Telstra TLS
377 Westpac Bank WBC

Investment objectives

Adam has rated his investment objectives, using a scale ranging from 1 (not concerned) to 5 (very concerned).

Income to keep pace with inflation 2 Legal logical and appropriate tax relief 5
Easy access to your capital 1 Regular income from your investments 1
Easy to administer 3 Capital growth 5
Volatility 2    

Ria has rated her investment objectives, using a scale ranging from 1 (not concerned) to 5 (very concerned).

Income to keep pace with inflation 3 Legal logical and appropriate tax relief 3
Easy access to your capital 4 Regular income from your investments 3
Easy to administer 3 Capital growth 3
Volatility 4    

Estate planning

Ria’s Will was last updated in 2000 and states that all her assets are to pass to Adam. Adam’s Will was last updated in 2001 and states that all his assets are to pass to Ria. They have not reviewed these Wills since the children were born.

They have no powers of attorney (POA) of any kind, or guardianship arrangements for their children.

Insurance and risk management

Adam and Ria have private health insurance for the family (premiums are included in the living expenses above). Adam has life and total and permanent disability (TPD) insurance cover in his superannuation fund of $300,000 and income protection insurance, which will provide 75% of his monthly income if he is ever unable to work through illness or injury until age 65. Ria also has life and total and permanent disability (TPD) insurance cover in her superannuation fund of $300,000 and income protection insurance, which will provide 75% of her monthly income if she is ever unable to work through illness or injury until age 65.

At this time they are not requesting any advice on their insurance cover. They have agreed that they will talk to your insurance advice specialist about this and you have diarised a meeting with your insurance specialist for them in one month.

They also believe their general insurances are the correct amounts required. On this basis they have not provided any further details of their insurance situation.

Planning issues

  • Ria has recently inherited $450,000 from her grandmother.
  • Ria and Adam would like to maximise their income earning capacity and reduce debt.
  • They are seeking a long-term tax effective investment plan which will provide for their future income needs and their children’s education.
  • They expect school fees to remain at $7,000 per annum for both primary and secondary years.
  • They would like to maintain $15,000 in cash for emergencies.
  • They would like to help both children if they go to university, and expect that to cost at least $80,000 in total for both to complete their degrees.
  • They would like to continue to have their annual family holiday to North Stradbroke Island.
  • Ria and Adam would like to upgrade some of their home contents (e.g. white goods and furniture) and possibly their car in the future. They believe that this can be funded from their cash buffer.
  • They would like to retire on approximately $50,000 per annum, in today’s dollars, however they are not interested in contributing more to superannuation at the moment and do not wish to change their superannuation funds as they are happy with the returns, service and insurance.
  • They would consider reducing or repaying their loans.

As their financial planner, your task is to prepare a Statement of Advice (SoA) that will include strategies to meet Ria and Adam’s goals.

The Project (student to complete)

Section 1      Establish relationship with client

Ria and Adam have not previously met with a financial planner, although they have heard good things about your company from the company’s current client Julia. However, they have also seen a lot of bad publicity about the financial planning industry in the media.

Section 1 Part A

Preparation by both the client and the planning team is essential to a successful client meeting. Describe the preparation that should be made to ensure the success of the initial interview, which will be held in your office. (250 words)

[insert student response]

Section 1 Part B

List the documents that will be used and/or provided to Ria and Adam during, or prior to, the initial meeting. Explain the contents of each document and why it is necessary. (200 words)

[insert student response]

Section 1 Part C

Outline how you would develop rapport with Ria and Adam during your first meeting. (200 words)

[insert student response]

Section 1 Part D

Explain to Ria and Adam the role of the adviser and the relationship with the licensee, Reach Financial Services. Ensure that you use language that Ria and Adam would understand. (250 words)

[insert student response]

Section 1 Part E

Explain to Ria and Adam how you maintain your knowledge of the industry and your obligations under the relevant legislation (150 words)

[insert student response]

Section 1 Part F

It is important that Ria and Adam understand your company’s dispute resolution procedure. Explain, step-by-step, the internal and external complaints resolution processes available to them. (150 words)

[insert student response]

Section 2      Identify client objectives, needs and financial situation

Before you are able to make any recommendations to Ria and Adam, you must gather sufficient information to identify their objectives, needs and financial situation.

Section 2 Part A

Explain why effective communication skills are important to a successful fact finding interview. Discuss the different skills that can be used to help ensure you understand what your client is saying. (350 words)

[insert student response]

Section 2 Part B

Identify three questions that you could ask Ria and Adam to encourage them to clarify and/or elaborate on the short, medium and long-term goals and objectives they would like to achieve. (100 words)

[insert student response]

Section 2 Part C

During the interview, Ria and Adam express concern about the personal information they are being asked to provide. Explain to Ria and Adam the difference between qualitative and quantitative information and justify the need to collect their personal and financial information. Ensure that you use language that Ria and Adam would understand. (250 words)

[insert student response]

Section 2 Part D

Identify two tools or techniques that you could use when determining Ria and Adam’s risk profile and outline what you perceive to be the advantages and disadvantages of each approach. (100 words)

[insert student response]

Section 3      Analyse client objectives, needs, financial situation and risk profile

The initial meeting with Ria and Adam went well and you have collected the information provided above in the background information.

Section 3 Part A

Record the information you have gathered from your clients in the fact finder below.

[insert student response]

Section 3 Part B

Identify any gaps in your data collection form as well as any other issues that would need to be followed up with Ria and Adam. Include any documentation you would ask the clients to supply. (200 words.)

[insert student response]

Personal and employment details

Personal details
  Client 1 Client 2
Title    
Surname    
Given & preferred names    
Home address    
Business address    
Contact phone    
Date of birth    
Age    
Sex   Male   Female   Male   Female
Smoker   Yes   No   Yes   No
Expected retirement age    
Dependants (children or other)
Name Date of birth Sex School Occupation
         
         
         
Employment details
  Client 1 Client 2
Occupation    
Employment status   Self employed   Employee   Self employed   Employee
    Not employed   Pensioner   Not employed   Pensioner
    Permanent   Part time   Permanent   Part time
    Casual   Contractor   Casual   Contractor
    Other   Government   Other   Government
Business status   Sole proprietor   Partnership   Sole proprietor   Partnership
    Private company   Trust   Private company   Trust
Notes
Any other person to be contacted? E.g. accountant, bank, solicitor, etc.

 

Income, expenditure and net worth

Cash flow statement

Tax calculations
  Client 1 Client 2 Notes
Income from employment
Salary $58,000 $20,000  
Salary sacrifice $0 $0 (state % if applicable)
Salary after salary sacrifice $58,000 $20,000  
Other income
Rental income      
Interest $198 $13,698 (state % return if applicable)
Unfranked dividends      
Share dividends $3,000   (state % return if applicable
Imputation credits $1,285 $0 Fully franked
Other income liable for tax
(e.g. taxable benefits)
     
Capital gains < 1 year Not in case study Not in case study  
Capital gains > 1 year Not in case study Not in case study  
Tax-free component of capital gains Not in case study Not in case study  
Total assessable income $62,483 $33,698  
Deductable expenses $125 $125 Donations to charity.
Rental expenses, repairs, etc $0 $0  
Taxable income $62,358 $33,573  
Income tax on taxable income $11,813 $2,920 2012/13 rates used
less tax offsets (e.g. LITO/SAPTO) 65 $445 Both qualify for LITO
plus Medicare levy $935 $503  
plus Medicare levy surcharge $0 $0  
less Imputation credits $1,285 $0  
Less refundable tax offsets Not in case study Not in case study  
Net tax payable $11,398 $2,978  

 

Cash flow calculation:
Family cash flow
  Client 1 Client 2 Combined Comment
Salary less any salary sacrificed amount $58,000 $20,000 $78,000  
Interest income $198 $13,698 $13,896  
Dividends received (excluding franking credits) $3,000   $3,000  
Other income        
Total income received before tax $61,198 $33,698 $94,896  
General living expenses $22,500 $22,500 $45,000  
Mortgage $8,628 $8,628 $17,256 Interest is 6.15% variable over 25 years.
Car expenses $5,400 $0 $5,400  
School fees $3,500 $3,500 $7,000  
Donations $125 $125 $250  
Annual holidays $1,500 $1,500 $3,000 Joint
Total expenses $41,653 $36,253 $77,906  
Total income received before tax less expenses $19,545 -$2,555 $16,990  
Net tax payable from tax table above $11,398 $2,978 $14,376  
Total net cash flow $8,147 -$5,533 $2,614  

 

 

Assets and liabilities
Asset Owner Value Liabilities Net value Notes
 
           
           
           
           
Total          
 
Superannuation Adam       Invested in the balanced option. Eligible start date is 01 August 1996.
Superannuation Ria       Invested in the conservative option. Eligible start date is 01 July 1998
Total          
 
           
           
           
           
           
Total Net worth          

Liabilities
Loan Current debt Percentage deductible Interest only Repayment
Mortgage        
Car Loan        
Total        

Goals and objectives

Details Comments
   
   
   
   
   
   
   
   
   
   
   
   
   

 

Estate planning
Do you have a Will?   Yes   No
When was it last updated: / /

 

Do you have Powers of Attorney?   Yes   No

Current superannuation, insurances & investments

Superannuation details

 

Super member Policy type Company Policy number Current value Death benefit Disability benefit Annual premium
               
               
Date of joining fund    
Type of fund   Accumulation   Defined benefit   Accumulation   Defined benefit
    Pension   Pensioner   Pension   Pensioner
Contribution (e.g. 5% of salary)   By employer   By yourself   By employer   By yourself
Is there provision for you to top up or salary sacrifice?   Yes   No   Yes   No
Non-concessional contributions Amount   Year  
  Amount   Year  
  Amount   Year  
  Amount   Year  
Spouse contributions received Amount   Year  
  Amount   Year  
  Amount   Year  
  Amount   Year  
Concessional contributions Amount   Year  
  Amount   Year  
  Amount   Year  
  Amount   Year  
Any other contributions Amount   Year  
  Amount   Year  
  Amount   Year  
  Amount   Year  

 

 

Life insurance details
Life insured R’ship to client Policy type Company Policy number Death benefit Other benefit Annual premium
               
               
               
               
General insurance details
Item covered Owner Policy type Company Policy number Cover Amount Other benefit Annual premium
               
               
               
               
Investment details
Investment type Company Purchase date Units held/fixed rate Current value Owner
           
           
           
           
           
           

 

 

Risk needs
Insurance needs — life and TPD
  Client 1 Client 2
Gross annual income (before tax)    
Less business expenses    
Number of years income required    
Property repayment    
Other debts    
Sub-total = (income × years) + debts    
Less existing realisable assets (Insurance/savings/super)    
Insured benefit shortfall (before tax)    
Gross income is the total of earned income, i.e. before tax earnings derived from personal exertion, including salary, fees, commission, bonuses, fringe benefits or similar payments that would cease on disablement.
Business expenses are expenses incurred by you in the process of earning income from your profession, business or partnership.
Insurance needs – Income protection/trauma
Income protection Client 1 Client 2
Gross annual income    
Employer superannuation contributions    
Other employer fringe benefits    
Maximum allowable benefit
(75% of annual income)
   
Monthly income    
Less existing insurance    
Monthly benefit required (pre-tax)    
Waiting period to be served    
Trauma    
Medical costs
(to cover out-of-pocket health costs)
   
Additional expenses of a permanent nature, wheelchairs, home alterations etc.    
Additional income: income protection only covers 75%, would you need extra?    
Total funds required    
Less cash available or assets that can be readily cashed    
Shortfall/surplus    

 

 

Acknowledgment
The information provided in this financial fact finder is complete and accurate to the best of my knowledge.
I understand that a policy purchased without the completion of a fact finder, or following a partial or inaccurate completion, may not be appropriate to my needs. I also understand that a policy purchased that differs from that recommended by the Adviser may not be appropriate to my needs. I acknowledge that the Adviser has provided me with the completed financial fact finder, signed by me.
Customer(s) signature(s)  
Adviser’s name  
Adviser’s signature   Date 25/02/2016

 

Section 3 Part C

Now that you have determined the Jacobs’ needs and objectives you need to identify their likely risk profile based on the information they have provided. Complete the risk profile below.


Investment attitude details
Please answer the following questions regarding your attitude to financial issues.
 
Are you concerned about the amount of tax that you are paying? Yes/No
Why?  
 
How important is liquidity (i.e. funds available) to you? Very/Moderately/Not
Why?  
 
If you had funds available for investing, how would you choose to invest them? Why?
 
 
Are there certain sorts of investment that you wish to avoid? Yes/No
Which ones?  

 

RISK PROFILE
   
Determining your investor risk profile Points
This investor risk profile questionnaire has been designed to help you understand the type of investor you are, so that with the help of your adviser, you can choose the investments that best match your financial objectives.
Which of the following best describes your current stage of life? Client 1 Client 2
   
Single with few financial commitments. You are keen to accumulate wealth for the future. Some funds must be kept available for enjoyment, such as cars, clothes, travel and entertainment. 50 50
   
A couple without children. You may be preparing for the future by establishing and furnishing a home. There are a lot of things you need to buy. You are probably better off financially now than you may be in the future. 40 40
   
Young family. This is the peak home purchasing stage. You have a mortgage and a very small amount of savings. Probably dissatisfied with your financial position and the amount of money saved. 35 35
 
Mature family. You are in your peak earning years and have got the mortgage under control. Many partners also work and any children are growing up and have either left home or require less supervision. You are starting to think about retirement, although it may be many years away. 30 30
   
Preparing for retirement. You probably own your own home and have few financial commitments; however, you want to ensure that you can afford a comfortable retirement. Interested in travel, recreation and self-education. 20 20
   
Retired. No longer working you must rely on existing funds and investments to maintain your lifestyle. You may be receiving the pension and are keen to enjoy life and maintain your health. 10 10
   
What return do you reasonably expect to achieve from your investments? Client 1 Client 2
   
A return without losing any capital. 10 10
   
3–7% p.a. 20 20
   
8–12% p.a. 30 30
   
13–15% p.a. 40 40
   
Over 15% p.a. 50 50
   
If you did not need your capital for more than 10 years, for how long would you be prepared to see your investment performing below your expectations before you cashed it in?
   
You would cash it in if there were any loss in value 10 10
   
Less than 1 year 20 20
   
Up to 3 years 30 30
   
Up to 5 years 40 40
   
Up to 7 years 45 45
   
Up to 10 years 50 50
   
How familiar are you with investment markets?  
   
Very little understanding or interest 10 10
   
Not very familiar 20 20
   
Have had enough experience to understand the importance of diversification 30 30
   
Understand that markets may fluctuate and that different market sectors offer different income, growth and taxation characteristics 40 40
   
Experienced with all investment sectors and understand the various factors that may influence performance 50 50
   
If you can only obtain greater tax efficiency from more volatile investments, which balance would you be most
comfortable with?
   
Preferably guaranteed returns, before tax savings 10 10
   
Stable, reliable returns, minimal tax savings 20 20
   
Some variability in returns, some tax savings 30 30
   
Moderate variability in returns, reasonable tax savings 40 40
   
Unstable, but potentially higher returns, maximising tax savings 50 50
     
Six months after placing your investment you discover that your portfolio has decreased in value by 20%, what would be your reaction?
     
Horror. Security of capital is critical and you did not intend to take risks 10 10
     
You would cut your losses and transfer your money into more secure investment sectors 20 20
     
You would be concerned, but would wait to see if the investments improve 30 30
     
This was a calculated risk and you would leave the investments in place, expecting performance to improve 40 40
     
You would invest more funds to lower your average investment price, expecting future growth 50 50
     
Which of the following best describes your purpose for investing?
     
You want to invest for longer than five years, probably to the age of 55–60. You are mainly investing for growth to accumulate long-term wealth 50 50
     
You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-term wealth from a balanced fund 40 40
     
You have a lump sum, e.g. an inheritance or an employment termination payment from your employer, and you are uncertain about what secure investment alternatives are available 30 30
     
You are nearing retirement and you are investing to ensure that you have sufficient funds available to enjoy retirement 20 20
     
You have some specific objectives within the next five years for which you want to save enough money 20 20
     
You want a regular income and/or totally protect the value of your savings 10 10
     
Investor profile total points

 

INVESTOR RISK PROFILE SUMMARY
 
0–50        Defensive
You are a conservative investor. Risk must be very low and you are prepared to accept lower returns to protect capital. The negative effects of tax and inflation will not concern you, provided that your initial investment is protected.
 
51–130    Moderate
You are a cautious investor seeking better than basic returns, but risk must be low. Typically an older investor seeking to protect the wealth that you have accumulated, you may be prepared to consider less aggressive growth investments.
 
131–210  Balanced
You are a prudent investor who wants a balanced portfolio to work towards medium to long-term financial goals. You require an investment strategy that will cope with the effects of tax and inflation. Calculated risks will be acceptable to you to achieve good returns.
 
211–300  Growth
You are an assertive investor, probably earning sufficient income to invest most funds for capital growth. Prepared to accept higher volatility and moderate risks, your main concern is to accumulate assets over the medium to long term. You require a balanced portfolio, but more aggressive investment strategies may be included.
 
301–350  High growth
You are an aggressive investor prepared to compromise portfolio balance to pursue potentially greater long-term returns. Your investment choices are diverse, but carry with them a higher level of risk. Security of capital is secondary to the potential for wealth accumulation.

 

(Section 3 Part D commences on the next page)

Section 3 Part D

Assess Ria and Adam’s likely risk profiles and discuss what information in the background information led you to this conclusion. (250 words)

[insert student response]

Section 3 Part E

Prepare a statement of Ria and Adam’s goals, needs and objectives. These should be categorised into short, medium and long-term timeframes. They should be specific, measurable and have a nominated dollar value where possible. (250 words)

[insert student response]

Section 3 Part F

Given the information you have collected regarding Ria and Adam’s current situation and future requirements, identify the areas that need to be analysed in order to develop an appropriate strategy for them and any areas that require specialist advice. (150 words)

[insert student response]

Section 4      Develop appropriate strategies and solutions

Section 4 Part A

Prepare strategies for Ria and Adam and provide a detailed explanation as to why you consider them to be appropriate. (400 words)

[insert student response]

Section 4 Part B

The following three products have been identified as potential investments that could be used to
meet Ria and Adam’s objectives with regard to wealth accumulation. They are all on your
Approved Product List.

Provide a summary of your analysis of the three funds and in particular, their suitability to meet Ria’s objectives. Explain which product and option you would recommend for Ria and why. (250 words)

[insert student response]

Key Information for 3 Managed Funds

Managed Fund Name: GrowFast Accumulator Builder
Investment Choices 5 12 14
Manager Style Passive Active Active
MultiManager No Yes Yes
 5 year Returns Conservative Fund 0.80% 2.17% 0.90%
Balanced Fund -0.55% -0.51% -0.60%
Growth Fund -2.00% -1.98% -1.90%
1 year Returns Conservative Fund 6.00% 7.35% 6.3%
Balanced Fund 7.90% 8.15% 7.30%
Growth Fund 7.00% 12.13% 7.70%
AA (% Defensive/Growth) Conservative Fund 60/40 70/30 70/30
Balanced Fund 40/60 50/50 35/65
Growth Fund 15/85 30/70 20/80
Income Distribution Frequency All funds 6 monthly Quarterly Quarterly
Income Distribution Last 12 months (cents per unit) Conservative Fund 1.1 2.4 0.76
Balanced Fund 0.95 1.6 0.56
Growth Fund 0.75 2.0 0.32
Unit Price Conservative Fund 1.02212 1.1188 0.92544
Balanced Fund 1.04914 1.2162 0.88208
Growth Fund 1.18736 1.5310 0.84372
Entry Fee All funds 0.0% 1.5% 1.0%
Withdrawal Fee 2.0% 0.0% 0.0%
MER 1.30% 1.25% 1.25%
Switching Fee 0% for 2 per year 0% for 1 per year 0% for 2 per year
Minimum Investment $50,000 $100,000 $50,000
Minimum Additional $100 $100 $100
Withdrawal Minimum No No No
Withdrawal time 7days 3 business days 3 business days
Fund Commentary
S&P Fund Manager Rating 3 stars 4 stars 4 stars
Lonsec Fund Manager Rating Recommended Highly recommended Recommended
Chant West Fund Manager Rating 3 apples 4 apples 5 apples
Internal Research Team (at Reach Fin Services Pty Ltd) Hold Buy Buy

 

Section 5      Present appropriate strategies and solutions to client

Section 5 Part A: Document your advice (Prepare a Statement of Advice)

Based on the information in the case study and your analysis of the clients’ objectives in Section 3 and the proposed recommendations in Section 4, use the template provided to produce your Statement of Advice (SOA).

The SOA must be of a standard that is compliant and would be suitable to present to a client.

Important instructions

  1. Use the SOA and cash flow writable templates provided to answer this Question.
  2. SOA preparation software: The use of financial planning software and dealer templates to prepare your Statement of Advice is not permitted. Submissions that exhibit excessive reliance on SOA templates may be considered a case of plagiarism or collusion and may not be considered to be a reasonable attempt at the assessment.

iii.      You must list the assumptions made in your SOA in your submission.
These will generally include:

  • assumptions you have made regarding missing background information on the clients
  • assumptions you have used to calculate future income from your recommended investments
  • assumptions you have used for fees relating to the products you have recommended.
  1. You must provide strategy recommendations in the following areas:
  • personal investment
  •     debt management
  1. You must also cover the following areas and, if you are not making recommendations,
    explain why:
  • personal insurance
  • superannuation
  • estate planning
  1. Product recommendations for any insurance, superannuation and estate planning recommendations are not required. However, you should recommend an appropriate investment product. You may use the fund you chose in Section 4 Part B if you wish, or a suitable alternative. It is not necessary to include Product Disclosure Statements in your response for any products you may recommend in your SOA.

vii.     You must prepare an implementation schedule detailing all of the recommendations in the SOA.

viii.    You must include detailed cash flow tables using the templates provided to show Ria’s and Adam’s situation before and after your recommendations. These should be submitted as part of your SOA.

  1. You should use the Microsoft Excel spreadsheet template provided to project the balance of the clients’ investment portfolio for seven years before and after your recommendations. To show the effect of your strategy you should show the comparison between the investment growth for the current investment (e.g. the CMT) and the investment strategy that you recommend.

Statement of Advice

SOA section Action Completed?
Overall structure Refer to the Case Study, particularly:

·  the breakdown of an SOA, and

·  the sample SOA and SOA appendices.

 
i.      Cover sheet The following elements should appear on the cover sheet:

·  the words ‘Statement of Advice’

·  the client’s name

·  the authorised representative’s name, AR number and contact details (if different to the licensee)

·  a statement that the authorised representative is an authorised representative of the licensee

·  the licensee’s name, ABN number, AFSL number, address and contact details

·  the date of issue of the SOA

·  a warning about the importance of the document

 
ii.     Table of contents Check that the pages in the table of contents agree with the page numbers in the completed SOA.  
iii.    Executive summary Headings should include:

·  Summary of our recommendations

·  Summary of expected outcomes if you implement our advice

·  Risks in our advice

·  Summary of our fees and commissions

·  Your next steps

 
iv.    Present position — information about the client Headings should include:

·  Important information about you

·  Your reasons for seeking advice

·  What you would like to achieve

·  Your personal and financial information

·  Personal information

·  Your existing insurance

·  Your existing estate planning

·  Financial information

·  Current income and expense details

·  Warnings

 
v.     Risk profile Heading:

·  Your risk profile

 
vi.    Strategy recommendations (analysis of the investment strategies) Headings may include:

·  Recommended action:

– personal investment

– personal insurance

– superannuation

– estate planning

·  Reasons for recommendations:

·  Things you should consider (risks)

 
vii.   Product selection You are only required to provide a personal investment product recommendation – do not provide product recommendations for personal insurance, superannuation or estate planning. You may use one of the products from Section 4 or develop, or source alternative products for your recommendations.

Headings should include:

·  Product recommendations

·  Cooling off period advice

 
viii.  Recommended asset allocation Headings should include:

·  Recommended asset allocation

·  Comments on proposed asset allocation versus your risk profile

 
ix.    Disclosure of fees, commission and/or benefits Headings should include:

·  How are we paid

·  Commission and fees — upfront, ongoing commissions and financial planning advice fees

·  Product management and/or operational fees

·  Other benefits

 
x.     Ongoing service and review Headings should include:

·  Ongoing services

·  Implementation (You must include an implementation schedule in your SOA)

 
xi.    Authority to proceed Headings should include:

·  Authority to proceed

·  Consent to ongoing contact

 
xii.   SOA Appendix 1 Complete the family cash flow template included in the SOA template.

Heading:

·  Financial position before implementation of strategy

 
xiii.  SOA Appendix 2 Complete the family cash flow template included in the SOA template.

Heading:

·  Financial position after implementation of strategy

 
xiv.  SOA Appendix 3 Use an excel spreadsheet, to calculate your projections.

Heading:

·  Cash flow projections for personal investment recommendations

·  include assumptions made in the projections

 

 

 

Section 5 Part B

The Statement of Advice has been completed and a meeting has been organised with Ria and Adam to present the recommendations and, if they agree, to implement them.

Outline the steps that should be followed in presenting this advice to Ria and Adam. In your answer, you should address at least four relevant requirements regarding presentation of advice. (250 words)

[insert student response]

Section 6      Negotiate financial plan/policy/transaction with client

Section 6 Part A

Identify two concerns that Ria and Adam may have with the advice that you have provided. Prepare responses to these concerns. Ensure that you use language that Ria and Adam would understand. (100 words)

[insert student response]

Section 6 Part B

Outline the techniques that could be used to ensure that Ria and Adam understand the advice being provided and to gain their agreement to implement the plan. (150 words)

[insert student response]

Section 7      Coordinate implementation of agreed plan/policy/transaction

Section 7 Part A

According to organisation and legislative requirements explain how you would present your fee and cost structure to Ria and Adam. (100 words)

[insert student response]

Section 8      Complete and maintain necessary documentation

Section 8 Part A

List the documentation, if any, that you need to present to Ria and Adam at this stage. (100 words)

[insert student response]

Section 8 Part B

Provide a summary of all the documentation that you need to keep in the clients’ file. (150 words)

[insert student response]

Section 9      Provide ongoing service where requested by client

Section 9 Part A

Ria and Adam are not sure that they will have time for regular reviews of their financial plan. They express the opinion that the advice seems comprehensive and that they believe they could take a ‘set and forget’ approach once it is implemented.

Discuss how you would respond to Ria and Adam, highlighting why reviews are important. In addition, provide details of the type, form and frequency of the ongoing service that would ideally be provided and the fees/costs associated with this service. (500 words)

[insert student response]

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