CASE

Robert and Katie are recently married couple; they are referred to you by John Stevens who is a close friend of theirs. Robert was born on 22 March 1986 in Sydney, while Katie was born on March, 1988 in Melbourne. Robert is a fulltime IT manager and earns around $95,000 p.a. He presently works for SunSystems PTY LTD, and he has been with his employer for 5 years. Katie is a fulltime English teacher and works for the NSW Department of Education she has been with her current employer since she graduated from university. Her salary is around $67,000.00 p.a. They are newlyweds and don't have any children.

Robert and Katie live at unit 7, 255 Ocean Street, Woollahra, NSW, 2025. The home telephone number 02 9360 3927 and Robert's mobile is: 0418 262 622, . Robert can be contacted at work on 02 9888 2777 and his work fax is: 02 9888 2778

Katie's mobile number is: 0421 986 471, her email address . Katie can be contacted at work on 02 9564 8650, but only between 12pm and 1pm when she is not in class. Katie can be reached by fax on 02 9564 8652

Robert and Katie are young and healthy; there are no major medical concerns. However just in case of an emergency they do have health insurance with MBF which covers hospital and ancillary options. They are health fanatics and neither of them smokes.

Robert and Katie have an accountant, Mike Smith from M.S Accounting Services PTY LTD, who is located on level 4 / 695 Pitt Street, Sydney NSW. Mike does their personal tax returns, he can be contacted on the following numbers Office: 02 9289 6688 Fax: 02 9289 6689.

For their legal advice they seek the services of Don Archibald who is their lawyer. He is situated at Martin Place Chambers, level 45, 26 Martin Place, Sydney, NSW, 2000. His contact details are telephone: 02 9229 6387 Fax: 02 9229 6388.

Robert has a close friend that is an equities broker Joseph Green who works for PG Marsh Securities LTD. Their offices are on Level 7, 295 George Street, Sydney, NSW, 2000. Telephone: 02 9299 3648 Fax: 02 9299 3649. However, they haven't used his services at this stage.

Robert and Katie do not have any Wills or Powers of Attorney. They have neglected estate planning because they are young and this was not a priority for them. However, they do wish to discuss with you the importance of estate planning, and whether they need to have an effective estate plan strategy in place.

Robert and Katie provide you with the following financial details:

Mortgage repayments $ 2761.00

Groceries $ 520.00

Home & Contents Insurance $ 100.00

Health Insurance $ 180.00

Electricity $ 185.00

Water $ 100.00

Telephone $ 160.00

Furniture $ 50.00

Appliances $ 50 .00

Maintenance $ 100.00

Car Registration $ 27.00

Fuel $ 240.00

Car repairs & maintenance $ 50.00

Public transport $ 100.00

Parking $ 60.00

Car insurance $ 70.00

Credit Card repayments $ 700.00

Donations to world Vision $ 40.00

DVD hire $ 20.00

Entertainment e.g. eating out $ 200.00

Clothing $ 40.00

Hair and Beauty $ 50.00

The above expenses are costed per month.

Robert has $105,000 in a Westpac at call account paying 4% interest p/a and Katie has $10,000 in a Westpac saving account paying 0% interest p/a. They would like advice on what to do with the money in their savings accounts and any surplus saving from their budget.

Robert has a 2008 Commodore V Series sedan which he bought for $25,000.

Robert and Katie's home is valued at $650,000. Their mortgage is with Westpac, they have a 30 year home loan of $393,000 and they are paying an interest rate of 7.55% Variable. Robert also has a Credit card debt of $35,000, and is paying off his credit card monthly (Westpac Visa Gold Card) the interest rate is 18.55% p/a. Katie has a HEC'S debt valued at $ 25,000. They have home contents valued at about $100,000. They do have house and contents insurance.

Robert has $35,000 in superannuation with Australian Super, in the Conservative Balanced Fund. Roberts Super fund has term life and Total Permanent Disability Insurance (TPD) valued at $120,000. He has no salary continuance insurance.

Katie has $15,500 in superannuation with State Super in the balanced fund, she has term life insurance and Total Permanent Disability with a $67,000.00 benefit attached to her superannuation but no salary continuance insurance.

In your discussion with Robert and Katie regarding their ability to sustain risk, you ask Katie the level of risk or periods of poor returns she is prepared to take in arranging her financial affairs.She tells you she takes a more balanced approach to investing. She started to be more cautious since the global financial crisis.

Katie says she is familiar enough and experienced enough to understand the importance of diversification.

Katie tells you that she is unsure with the term "investment markets" because it brings with it so many variables; you are never certain what return you will achieve. Katie is willing to take some risk in the short term to improve returns over the medium to long term.

When you consult Katie that the greatest returns are generally obtained from more volatile investments, she says she expects some unpredictability in returns. When you ask Katie if she had an investment strategy and it was not meeting her expectations how long would she continue with it? She confides in you that she would leave the investment strategy in place for at least 18 months before contacting her adviser. You say to Katie, when seeking higher long term returns from your investments, from time to time, you will also increase the likelihood of poor performance from time to time. What is your view on this? She say's a balance of both investment income returns and capital growth are expected over the long term and accepting the possibility of periods of poor performance.

You ask Katie what she knows about the history of the share market, you explain to Katie the share market has experienced rapid rises and falls in value. What do you think you would do if your investment experienced a fall by as much as 30% in value in a very short period of time i.e. a year or less. Katie says she experienced this during the global financial crises with her superannuation, and that she wouldn't perform anything, she would sit it out and hope for things to improve. You ask Katie if she iswilling to experience the ups and downs of the market for the potential of greater returns. Katie states that she neither agrees nor disagrees with that statement; she says it's hard to know what the markets will be from day to day.

You question Katie, when she invests her hard earned money if her main concern is security. Is keeping money safe more important than earning higher returns? Indifferent, she says, there is some concern about security but not the only concern. Katie confides in you that when it comes to investing, she is somewhat experienced and has some knowledge about investing.

She also tells you if her investments go down in value she would be concerned. She also makes quiet clear that the effect of taxation on her investment is a concern and having a tax effective investment would be a good idea and extremely important.

Robert has been patient and listening tentatively and can't wait to have his turn. He starts with at tirade on how up and till this moment his wife Katie has been holding him back from taking a more active approach with their finances and if she had listened to him a long time ago they would be much better off financially than they are currently. Katie intervenes abruptly and says she has never held Robert back at all, and adds that he has not learnt from his experiences, especially when it came to the effects of the global financial crises. Katie say's he can invest his money any way he chooses, and that she has their family's financial well being at heart.

You then ask Robert how familiar he is with investment markets he tells you that due to his line of work he is very experienced in all investment sectors and the various factors which may influence investment performance. You ask Robert when you say the words "investment markets" what's the first thing that come to your mind he says wide possibilities. Robert also confides that he is willing to take more risks of the short term negative performance, than most to improve long term returns. You pass a historical investment chart to Robert, he has a look, and you say to Robert that the greatest returns are obtained from volatile investments. What do you feel comfortable with? He says that with greater unpredictability the returns are potentially higher. When you ask Robert how long are you likely to continue with an investment strategy that is not meeting your expectations? Robert says up to three years then I would discuss my concerns with my adviser.

You say to Robert when seeking higher long term returns from your investments, from time to time, you will also increase the likelihood of poor performance. Robert answers that growing his assets over the long term and he does not require income returns to support his living needs and he accepts that the value of his investment may fluctuate materially from year to year.

You ask Robert what he would do in the situation that due to the rapid rises and falls in the share market, his investment value was to drop by as much as 30% in a shortperiod of time i.e. a year or less. Robert looks very excited and says he would borrow money to buy more of the investment. "What a perfect opportunity to buy the investments at a discount."

You say to Robert "Can you assume that he willing to experience the ups and downs of the market for the potential of greater returns." "I strongly agree," he says, "markets can come back very strong after a fall in their value."

You ask Robert if his main concern is security. Keeping money safe is more important than earning higher returns. He says he strongly disagrees with that, and that he is willing to sacrifice security for potentially higher returns, you can't earn good money from being very cautious.

You question Robert when it comes to investing, you would describe yourself as? "I am Very experienced and knowledgeable considering I have invested before." he says.

You say to Robert, "The next question is very important. How do you feel if your investments go down in value?" "Very indifferent not concerned at all. I know sooner or later that the investment value will recover from negative territory."

You say to Robert "Is the effects of taxation a main concern when choosing an investment." He strongly agrees and says "The effect of taxation is extremely important considering I Pay enough tax already."

You ask both Robert and Katie if there is anything that they might have been missed.

Robert and Katie are looking for advice on investment options, and at this stage they would like a managed fund, whole sale preferably. They would like to keep up to date with their portfolio and want web access. They are happy to rollover their super as long as there is a benefit for the change

Robert and Katie want your advice on their superannuation fund - whether they should change their options or move to other funds they think the returns aren't that good.Their accountant has suggested that he set up their own self managed superannuation fund, but they want your advice on this. They want to know if they should get more life, total permanent disability, and trauma insurance. And they also want your advice on Income protection insurance.

Robert and Katie would like to have approximately $20,000.00 to be at call in case of an emergency. Their objectives are to minimise the effects of taxation and inflation

Robert and Katie are seeing a Financial Planner for the first time and have had no experience with Financial Planners in the past. They have only dealt with their accountant when it comes to financial matters.

Key Information

• One of Robert and Katie's goals is to purchase a new car for Katie with in twelve months. They estimate the motor vehicle will cost approximately $16,000.00. Katie has had enough of taking Public transport to work because she believes it to be unreliable.
• One of Roberts's personal goals is to get promoted to project manager with his current employer; he expects this will happen in 3 years time.
• They want to start a family in 10 years
• Robert and Katie would like to go on regular holidays and they estimate this is going to cost them approximately $5,000 pa.
• When asked about his goals, Robert and Katie said they wanted to live comfortably and save sufficient money for a comfortable retirement. They estimate that they would need approximately $60,000 pa in today's value.
• Robert and Katie Want to build on what they have, they want to know what to do with the capital that they have in their bank accounts and any excess savings.
• Their accountant has suggested a self managed superannuation fund but want your advice if this would be the correct way to go.
• They also want to know if they are contributing enough money in superannuation to retire comfortably or do they need to make more super contributions. Robert has heard of salary sacrifice but doesn't know how it works and would like your advice.
• Katie is concerned with the level of debt that they have, and wants to know if they are adequately insured in the event of an emergency.
• Robert has had an investment property previously and wants to know if it would be a good idea to purchase one at this stage.
• Both Robert and Katie have given you the authority to contact any of their professional advisers and superannuation funds.
• They would like to have $20,000 available to them at call in the event of an emergency.

Robert and Katie have consented to the privacy policy, have agreed with the risk profile, acknowledged that the information is true and correct to the best of their knowledge, and are happy to receive information electronically.

Question

1. What are Robert and Kates financial objective and their short, medium and long term goals.
2. What is the risk profile for Robert and Katie and determine the assets allocation strategy for both of them
3. What are the suitable products to recommend for Robert and Katie and explain why these products are suitable for them.
4. What should I recommend to Robert and Kate about the self-managed superannuation funds.
5. What should I recommend to them to achieve their financial objectives and goals.
6. Develop a fee structure to disclose the full information about your fees for developing and implementing the plan.
7. What can impact their financial plan.