1.Identify, define, and explain the heuristics driving the investment decisions made by Jack and Emily. Your response should also compare the difference between cognitive and emotional heuristics, while discussing the personality traits, emotions and behaviours that are driving Jack and Emilys situation.

2. How would you classify their risk profile? Your response should provide a definition of risk profile. Further your response should provide reasons to support your classification and highlight the range of returns to be expected by their. Additionally, explain any differences between your classification and the classification offered by the Risk Profile Workbook.

Jack and Emily commenced their retirement with approximately $1.9 million within their SMSF.

Current they hold approximately $1.2 million within their SMSF, after 5 years of retirement.

- Jack and Emilys cashflow situation indicates that their lifestyle expenditures exceed their income

(investment returns). Additionally, they are making poor investment decisions, based on recommendations and advice from friends

Jack and Emily are couple. Prior to retirement, Jack worked as an employee, with the same company for 35 years. He has

traditionally been fairly risk averse, and enjoyed the security associated with receiving a regular salary.

Jack has always been provided with a company car, that was updated every 3 years.

- Excluding their family home, Jacks investment experience consists mainly of term deposits. He does not have a thorough understanding of listed shares.

- To make investment decisions, Jack has increasingly relied on the advice and guidance of his friends from their golf club. Jack stated that the investment recommendations are for sure things from those who know. Unfortunately, this advice has not yielded the desired returns and has contributed to the decline of their asset base.

- Emily has limited involvement with the couples major financial and investment decisions. Emily

stated that she is unfamiliar with the SMSF and that she wouldnt know what to do if something happened to Jack.

- Emilys experience with money relates primarily to making the household budget cover their expenses.

Both Jack and Emily grew up in the less affluent suburbs of South Brisbane. They have always wanted

to get ahead financially.

- Emily is concerned about their current financial situation as she does not want to run out of money or

become reliant on the Pension. This is particularly significant as Emilys mother struggled financially

on the Age Pension.

- Emilys concerns have been amplified recently following the death of their close friend, Bob. From the

outside, Bob and his wife Beryl appeared to be extremely wealthy. Jack and Emily would accompany

Bob and Beryl on international trips. Jack was particularly impressed by Bobs travel experience,

business acumen and investment success. - Bob was extraordinarily successful and made all investment and expenditure decisions for himself and Beryl. However, following Bobs death, Beryl was shocked to discover the true state of their financial situation and the limited resources remaining.

Jack enjoys living within their apartment complex, which has numerous wealthy residents, as it makes him feel successful and important.

- Although Jack and Emily are in a strong financial position, they have significantly fewer financial resources when compared to their friendship group. As such, Jack feels under pressure to keep up with the group. The result is Jack regularly spending beyond their means.

- Emily appears prepared to adjust their standard of living and reduce their expenditure requirements to something more modest, while Jack believes that they have worked hard and deserve to enjoy themselves.

- With the guidance and advice of his golfing friends, Jack began actively buying and selling shares, with the intention to beat the market. Jack has allocated a growing amount of their SMSF towards more alternative, speculative investments.

- Emily stated that Jacks mood varies significantly as the value of his shares change. When Jacks shares increase in value, his mood becomes excited, energetic, and euphoric. When his shares drop in value, Jack immediately becomes angry, sad, and anxious. This is of particular concern as the shares Jack holds are volatile and tend to fluctuate in value significantly several times per day.

- Emily is extremely concerned about their situation. Jack has assured Emily that everything will be fine and that she should not worry.