Assessment Activity 6

Case Study

Statement of Advice - Insurance Elements

The need to articulate your advice clearly, and comprehensively cover all the key issues for a client via a Statement of Advice (SOA) is a critical part of the advice process.

This next assessment requires you to prepare different elements of an advice document (i.e. parts of an SOA) for a fictitious couple.

IMPORTANT: This assessment has prescribed minimum word lengths that must be adhered to. Grammar, punctuation and accuracy of information delivered will form part of the assessment criteria in the context of determining competence for this assessment. The use of bullet points is allowable.

Background Information

Laura and John are married and are aged 33 and 36 years respectively.

Laura is a chemical engineer and works full-time and John is a freelance journalist.

Laura is 4 months pregnant with their first child and intends to take 6 to 12 months off work.

They have a balanced risk profile from an investment standpoint.

Laura earns a gross salary of $85,000 per annum and John currently earns income of $65,000 per annum. John's income fluctuates due to being a self-employed freelance journalist.

Laura and John own their own home valued at $750,000 and have an associated mortgage of $450,000.

John inherited a portfolio of shares from his grandmother valued at $110,000. He chose to set up a margin lending portfolio 2 years ago. His current margin loan is valued at $50,000 and his current share portfolio is valued at $218,000.

Laura has a car valued at $30,000 and has an associated loan of $22,000.

John and Laura have combined credit card debt of $8,500.

Laura has a superannuation balance of $80,000, which is invested in a balanced fund. Note, Laura has Life Insurance and TPD Insurance (Any Occupation definition) of $120,000 held within superannuation.

John has a superannuation balance of $65,000 which is invested in a balanced fund. John has Life Insurance and TPD Insurance (Any Occupation definition) of $180,000 held within superannuation.

Required:

Laura and John come to you seeking scaled advice about their insurance needs in light of their changing circumstances (i.e. their forthcoming baby).

You are required to complete elements of an SOA for Laura and John covering your insurance recommendations. Please note, you are NOT required to research actual insurance companies for this project. Your task will involve:

Summarising the client's situation

Providing scaled advice covering the amounts of insurance required

Articulating the basis for your recommendations.

Assessment - Part 2

You are to document your "Recommendations" as part of the SOA documentation. This must be uploaded as a separate document into the Monarch Student Management System (LMS). Your recommendations should be written in paragraph form. Use the following headings (below) and remember all written recommendations should be;

Our insurance recommendations

Use the Insurance Calculator provided on the LMS (instructions and details below) to determine the recommended sums required for each client, based on the information provided. You can also make assumptions in regards to the level of income they may require if either were to pass away and the potential earning rate the clients would be comfortable with. Please include these assumptions.

Insurance types explained

In this area you are required to explain each insurance type 'generally'.

That is, explain what each type of insurance provides and some general information about the type of cover. In a SOA this area is general information which is not specific to a client. This information could be used across the board for any client with an insurance recommendation

The basis for our recommendations

Do not assume the sample SOA provided in the Module 1 appendix provides a sufficient 'basis' for the recommendations provided. Use the information in Module 4 course materials to clearly link the key issues and recommendations back to Laura and John's specific scenario as part of your recommendations to demonstrate a sufficient basis.

Note - when using the Insurance Calculator, please note there is not onecorrect answer.Rather, there are a number of possible correct answers, dependant on assumptions you make in regard to the length of time benefits are to be paid, annual income required or rate of return. Please document all assumptions made. The insurance calculator MUST be uploaded with your assignment.