I need help with Section 4 part A please look at the case study Assignment Tier 1
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I need help with Section 4 part A please look at the case study
Assignment Tier 1 Financial Planning (Tier1FPPA_AS_v1A3) Page 2 of 92 Student identification (student to complete) Please complete the fields shaded grey. Student number 10374502 Page 3 of 92 Assignment result (assessor to complete) Result first submission (Details for each activity are shown in the table below) Parts that must be resubmitted: Result resubmission (if applicable) Page 4 of 92 Result summary (assessor to complete) Case study assignment questions First submission Resubmission (if required) Section 1 Demonstrated Demonstrated Section 3 Demonstrated Demonstrated Section 4 Demonstrated Demonstrated Section 6 Demonstrated Demonstrated Demonstrated Demonstrated Statement of Advice Demonstrated Demonstrated Cash flow tables Demonstrated Demonstrated Five-year projections Demonstrated Demonstrated Section 7 Page 5 of 92 Feedback (assessor to complete) [insert assessor feedback] Page 6 of 92 Before you begin Read everything in this document before you start your assignment for Tier 1 Financial Planning (Tier1FPPAv1). Page 7 of 92 About this document This document includes the following parts: Part 1: Instructions for completing and submitting this assignment Part 2: The case study Appendix 1: Fact finder and risk profile Appendix 2: Financial planning questions (assessment workbook): - Case study questions - Statement of advice (SOA) template - Cash flow tables (financial position after implementation of strategy) - Five-year projection table Appendix 3: Assumptions. Page 8 of 92 How to use the study plan We recommend that you use the study plan for this subject to help you manage your time to complete the assignment within your enrolment period. Your study plan is in the KapLearn Tier 1 Financial Planning (Tier1FPPAv1) subject room. Page 9 of 92 How to use the sample case study and SOA in KapLearn The sample case study provides a model to help you prepare your SOA for this assignment. The case study explains the process that is undertaken to develop the SOA with reference to an example and it is a very useful resource. Download the sample SOA and refer to it as you work through the learning materials for this subject. Before you start work on this assignment, go back to the sample SOA and: compare how the SOA matches with the goals and objectives identified in the case study consider what information has been included in the SOA consider why this information has been included. This exercise will help your prepare an SOA for this assignment that addresses your client's goals. Please bear in mind that not all SOAs are exactly alike in their construction, but all have common heading topics within them. Accordingly, there may be minor differences between the sample SOA and the SOA template in this assignment. However, all the required compliance elements will be included in both formats. Page 10 of 92 Part 1: Instructions for completing and submitting this assignment Page 11 of 92 Completing the assignment For this assignment you are required to complete the following tasks: In your assessment workbook: answer the assignment questions as they relate to sections 1, 3, 4, 6 and 7 of the case study complete the template SOA for your client, using the data in the case study, the fact finder and risk profile complete the two (2) cash flow tables calculate the five year projection. The information and resources that can assist you in answering the questions in this assignment can be primarily sourced from the Foundations of Financial Planning text and the sample case study. Some data will have to be externally sourced, but the assignment template will clearly indicate where this is necessary. You are expected to analyse the 11 areas covered in the data analysis stage, explained in Topic 2, as well as review the sample case study and sample SOA. Additionally, you will need to weigh up the client's opinion against your own analysis to determine the important areas that need to be addressed for the client. Although the case study may indicate that the client does not wish to have advice provided about a specific area, you need still to evaluate the situation, provide clear reasons as to why, or why not, review the area, and make referrals to specialists if necessary in the relevant sections of the template. You do not have to provide retirement planning calculations and recommendations. However, you must consider the appropriateness of all the investments held by Sharon. If you recommend any change to her current asset allocation (including those in her superannuation fund), you must explain why this action is appropriate. That is, why there is a need to change the asset allocation, or to replace or sell an investment. With regard to insurance, you are not expected to provide a detailed analysis of Sharon's needs. However, this area still needs to be examined. If your analysis shows that she requires additional insurance and could benefit from a review, you should advise her of this. Alternatively, clearly explain why you believe her current cover is sufficient. More information regarding requirements for providing advice is included throughout the assignment. Page 12 of 92 Word count The word count shown with each question is indicative only. You will not be penalised for exceeding the suggested word count. Please do not include additional information which is outside the scope of the question. Page 13 of 92 The Sharon Elsom case study The case study steps you through the financial planning process, from initial contact with Sharon Elsom, to the development and documentation of a financial strategy as an SOA to meet her needs. Page 14 of 92 Fact finder and risk profile The fact finder for Sharon and her risk profile are provided. You will find these in Appendix 1. The data in these documents has been used to complete some of the sections in the SOA. You will need to refer to these documents to complete the financial position tables for your client. Page 15 of 92 Additional research When completing this assignment, assumptions are permitted although they must not be in conflict with the information provided in the Case Studies. You may also be required to source additional information from other organisations in the finance industry to find the right products or services to meet your client's requirements, or to calculate any service fees that may be applicable. Page 16 of 92 Saving your work Download this document to your desktop, type your answers in the spaces provided and save your work regularly. Use the template provided, as other formats will not be accepted for these assignments. Name your file as follows: Studentnumber_SubjectCode_Submissionnumber (e.g. 12345678_DFP1B_Submission1). Include your student ID on the first page of the assignment. Before you submit your work, please do a spell check and proofread your work to ensure that everything is clear and unambiguous. Page 17 of 92 Submitting the assignment You must submit your completed assignment in a compatible Microsoft Word document. You need to save and submit this entire document. Do not remove any sections of the document. Do not save your completed assignment as a PDF. The assignment must be completed before submitting it to Kaplan Professional Education. Incomplete assignments will be returned to you unmarked. The maximum file size is 5MB. Once you submit your assignment for marking you will be unable to make any further changes to it. You are able to submit your assignment earlier than the deadline if you are confident you have completed all parts and have prepared a quality submission. Page 18 of 92 The assignment marking process You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment. Should your assignment be deemed 'not yet competent' you will be give an additional four (4) weeks to resubmit your assignment. Your assessor will mark your assignment and return it to you in the Tier 1 Financial Planning (Tier1FPPAv1) subject room in KapLearn under the 'Assessment' tab. Page 19 of 92 Make a reasonable attempt You must demonstrate that you have made a reasonable attempt to answer all of the questions in your assignment. Failure to do so will mean that your assignment will not be accepted for marking; therefore you will not receive the benefit of feedback on your submission. If you do not meet these requirements, you will be notified. You will then have until your submission deadline to submit your completed assignment. Page 20 of 92 How your assignment is graded Assignment tasks are used to determine your 'competence' in demonstrating the required knowledge and/or skills for each subject. As a result, you will be graded as either competent or not yet competent. Your assessor will follow the below process when marking your assignment: Assess your responses to each question, and sub-parts if applicable, and then determine whether you have demonstrated competence in each question. Determine if, on a holistic basis, your responses to the questions have demonstrated overall competence. Page 21 of 92 'Not yet competent' and resubmissions Should sections of your assignment be marked as 'not yet competent' you will be given an additional opportunity to amend your responses so that you can demonstrate your competency to the required level. You must address the assessor's feedback in your amended responses. You only need amend those sections where the assessor has determined you are 'not yet competent'. Make changes to your original submission. Use a different text colour for your resubmission. Your assessor will be in a better position to gauge the quality and nature of your changes. Ensure you leave your first assessor's comments in your assignment, so your second assessor can see the instructions that were originally provided for you. Do not change any comments made by a Kaplan assessor. Units of competency This assignment is your opportunity to demonstrate your competency against these units: FNSASICZ503 Provide advice in financial planning FNSFPL501 Comply with financial planning practice ethical and operational guidelines and regulations FNSFPL502 Conduct financial planning analysis and research FNSFPL503 Develop and prepare financial plan FNSFPL504 Implement financial plan FNSFPL505 Review financial plans and provide ongoing service FNSFPL506 Determine client financial requirements and expectations FNSINC401 Apply principles of professional practice to work in the financial services industry BSBITU402 Develop and use complex spreadsheets FNSASIC301 Establish client relationship and analyse needs FNSASIC302 Develop, present and negotiate client solutions FNSIAD301 Provide general advice on financial products and services We are here to help If you have any questions about this assignment you can post your query at the 'Ask your Tutor' forum in your subject room. You can expect an answer within 24 hours of your posting from one of our technical advisers or student support staff. Page 22 of 92 Part 2: The case study Introduction You are a financial planner for NANCA Financial Planning and authorised to provide financial product advice on a range of investments (excluding direct shares), superannuation and retirement planning, and insurance and risk protection. You are also able to provide taxation information that is incidental to the advice provided. In other words, you can provide information about any potential tax savings or tax benefits that could result from your recommendations, but you must refer the client to a tax professional for specific tax advice. You do not have the authority to provide estate planning or property advice and you must refer clients to suitable professionals should you identify they need advice in areas for which you have not been appropriately authorised and trained. (Refer to the sample SOA and the wording used regarding tax, estate planning and real estate, as well as the summary of what advice areas are covered, and what are not, at the beginning of the sample SOA.) Page 23 of 92 Section 1: Meeting your client The first phone call Sharon Elsom has agreed to speak with you following a suggestion made to her by her bank's personal lending officer who knows you and is respectful of the quality advice you provide to your clients. She was in the process of successfully organising a loan to purchase her car at the time. Sharon is unsure of what is involved in personal financial planning, but concedes that planning for her future financial objectives could be of value. She agrees to have her contact details passed on to you by the bank's lending officer so that you can tell her about what is involved in the financial planning process, what the possible benefits might be to her, and costs involved. When you phone Sharon, you provide her with details about the financial planning process, and why you will need to ask her for certain types of financial information. You stress that you work for a licensee (a person authorised by the Government to deal in financial products) any information she gives you will be treated confidentially. You let her know that this information will only be used to provide the financial advice you consider will meet her needs. You tell her all this information is in the Financial Services Guide (FSG) that you will send her. Sharon is reassured by your introduction so you proceed. You explain you need her to contribute to the compilation of a financial profile in order to help you work out how she can best meet her financial goals. This means that she will need to tell you what she owns, what she owes, what she earns and her living expenses. She can record all this information in the fact finder you will send her with the FSG. You inform Sharon that the fact finder also includes a risk profile section and the information she provides you will give you sense of her appetite for different financial planning strategies. You make a date and time with Sharon to come to your office and take down her address and phone numbers. You ask Sharon to bring along to the meeting her completed fact finder and as much financial information as she can, such as income details, expenses, superannuation, insurance details, etc. When you have concluded the call, you make a file note about the conversation including the date, the potential client's name, and the name of the person who referred her to you. This is the start of your paper trail. You also complete some of the initial details in your data collection form so that it looks like Table 1. Finally you write to Sharon, as promised during your initial conversation, and include the fact finder, the FSG and a checklist of the information she needs to bring to the meeting. Table 1 Personal details Client 1 Client 2 Title Miss Surname Elsom Given & preferred names Sharon Home address 16/118 Gloucester St, Brunswick East, Vic. Business address n.a. Contact phone (03) 7766 5544 Date of birth 15 September 1986 Sex Male Female Page 24 of 92 Male Female Smoker Expected retirement age Yes No Yes No Haven't really thought about it, but probably 62 The first meeting Sharon arrives at your office for the meeting. After greeting her and offering her a glass of chilled water, she confirms that she received your package of documents and that she has filled in the fact finder and the risk profile. You then take her through the key elements of the FSG, including your role and capacity to assist her with her planning needs and your company's fees. You make sure that Sharon understands this information before you proceed to the next step. Collecting the data You learn the following information about Sharon through a process of thorough and polite questioning. From time to time she provides you with a relevant document to confirm her financial situation. You confirm the details in the fact finder as you proceed. Sharon's current situation Sharon, born 15 September 1986, is single with no dependants, and lives in a rented flat for which she pays rent of $490 per week. Sharon is a sales manager for a small solar panel manufacturing company and has been with that firm for three years. Sharon earns $82,000 p.a. and receives superannuation guarantee (SG) contributions from her employer in addition to this. Sharon owns a new Mazda CX5 that she recently borrowed $37,000 from her bank to purchase. The loan is over five years at a fixed rate of 8.9% p.a. with the repayments being $770 per month. There is a prepayment fee of $175, though this fee is waived if the loan is refinanced to another product with the same bank. The car has full comprehensive insurance with an annual premium of $1300. Page 25 of 92 Sharon's needs and objectives During your conversation with Sharon it becomes apparent that her principal financial objective is to purchase her first home and to receive advice from you as to the appropriate investment strategy to achieve this. At this stage she is unsure of the location where she would like to buy but it would most likely be a unit or townhouse. On her own calculations, based on what she feels comfortable in borrowing and with her savings, she could afford a unit up to a purchase price of $620,000. She also said that she would like to have saved at least 15% of the purchase price and, if possible, be able to purchase her home in no more than 5 years' time. She is also concerned about the debt she has incurred buying her car and would like to know the benefits and ramifications of paying it off early, particularly in terms of her primary objective of saving for, and purchasing, her first home. Sharon admits that she knows very little about the sharemarket, how it works, or what it actually means to own shares. However, she is keen to learn more about it following her success with the purchase of Westpac Banking Corporation shares. Sharon is in good health and believes the insurances within her superannuation fund provide adequate cover. She does not place superannuation and retirement planning as a priority at the moment, saying that retirement is a long way off and her employer looks after her superannuation anyway. Sharon does not have a will or powers of attorney in place, and appears to you to be not overly concerned about the adequacy of her estate planning. Superannuation Sharon has $32,000 in her employer's default superannuation fund, the ABXY Industry Super Fund, and is invested in the 'balanced' portfolio option. Sharon joined the fund on 19 January 2008. Sharon does not make any additional contributions to her superannuation fund. The fund has returned the following, after fees and tax: 2009/10 2010/11 20011/12 2012/13 2013/14 2014/15 8.9% 10.2% 2.1% 11.3% 9.8% 7.0% The investment objective of the fund is to achieve returns after tax and fees that exceed the inflation rate by 4%, as measured by the CPI, over rolling five-year periods. The asset allocation for Sharon's balanced superannuation fund is: Cash 7% Australian fixed interest 12% International fixed interest 10% Australian equities 30% Property 18% International equities 23% Page 26 of 92 Insurance Sharon's superannuation fund provides a death and total and permanent disability (TPD) benefit of $50,000 in addition to her accumulated superannuation value. The premium is $1.50 per week for this level of cover and is deducted from her fund. Sharon has no other personal insurance cover. Sharon's car has full comprehensive insurance with an annual premium of $1300. Sharon also has home contents insurance cover of $20,000 with an excess of $100 including legal liability cover of up to $20 million. Sharon pays $28 per month from her credit card for this policy. Sharon has adequate private health insurance cover that she pays $120 per month for on her credit card. This premium includes the private health insurance rebate. Sharon has advised you that she is comfortable with the insurances she has in place and does not believe that she requires any further advice at this time. Investments Sharon has $45,000 in a soon to mature, one year, term deposit earning 3.25% p.a. She plans to use these funds and future savings towards the purchase of her own home in about 5 years' time, or earlier if possible. Following advice from her uncle at a family barbecue, Sharon purchased 70 Westpac Banking Corporation shares on 25 November 2008 at $16.93. The full dividend received for the most recent year was $1.86 per share fully franked. Dividends received are not reinvested. Sharon also has a small transaction account where her pay is deposited. This account is used to pay various expenses and her credit card. The account, on average, would have $1500 and it does not receive any interest. Other information Sharon has a credit card with a limit of $8000 that she uses for all her general expenses and entertainment. However, she does not spend up to her limit and her average expenses are $950 per month, (including home contents and health insurance), which she repays within the interest free period. Each year Sharon goes on a two-week cruise with a friend, which costs $2500. In addition, she usually spends two weeks with her family during her employer's Christmas leave period. Sharon is very healthy and has taken very little sick leave and has accumulated 27 days sick leave. Other expenses include a donation to the McGrath Foundation of $50 per month, tax deductible 'bucket' donations of $10 per month to various registered charities, and accountant's expenses of $175 p.a. Sharon does not have any dependants and both her parents are well, fit and active. She has an older brother who is married with two young children and a younger sister who still lives with her parents. Risk profiling With your assistance, Sharon completed the risk profile section in the fact finder prior to attending the meeting. Following discussions with Sharon she confirmed that she was closest to the balanced investor profile. The completed fact finder and risk profile are in Appendix 1 of the assignment. Page 27 of 92 Closing the interview Prior to concluding your meeting with Sharon, you review the information provided to her to check that it is complete and accurate. Sharon is naturally curious about the next step in the process. You answer some additional questions she has about what happens next. You explain that with her agreement you will prepare a written report, an SOA, based on the information she has just shared with you. The SOA will be a financial plan detailing a number of actions she could take to meet her financial goals Sharon agrees to proceed to the next stage of the financial planning process, and you make an appointment with her to present the plan in a fortnight. Note: There is a series of questions relating to Section 1 in the assessment workbook that you need to answer. Your answers to these questions are your opportunity to demonstrate your ability to establish a relationship with a client. Page 28 of 92 Section 2: The fact finder and risk profile After this meeting and when you are in professional practice you would normally take the time now to complete a fact finder. However, this template has already been prepared for you based on the information given by Sharon. You will find that fact finder and risk profile in Appendix 1. Take some time now to familiarise yourself with Sharon's fact finder and risk profile to confirm that all the information recorded is correct. You will need to refer to this data when you are completing the SOA, the cash flow tables and the five-year projections. Page 29 of 92 Section 3: Analysing the data The next step in the financial planning process is to analyse the data provided by Sharon. You do this to ensure that you can fully understand her financial situation and needs and are therefore in a position to design a plan that addresses her goals and objectives. By analysing the data provided under the following headings you can now start thinking of the strategic options that may be appropriate for Sharon, leading you to then preparing a financial planning strategy that is designed to meet her needs: current position debt management risk/protection savings investment retirement funding future income stream social security issues (if any) and implications present and future taxation issues estate planning. Note: There is a series of questions relating to Section 3 in the assessment workbook that you need to answer. You will use your answers for Section 3 to help you decide on your recommendations for Sharon. Your answers to these questions are your opportunity to demonstrate your ability to analyse a client's needs in preparation for developing a strategy that aligns with their requirements. Page 30 of 92 Section 4: The strategy Now that you have analysed the data and selected strategies that could be appropriate, you are in a position to start drafting the preferred strategy you believe is appropriate for Sharon. You will then be able to research and select possible products that can support the implementation of that strategy. All of this information you will use in your SOA for her. Note: There is a series of questions relating to Section 4 in the assessment workbook that you need to answer. You will use your answers for Section 4 to help you decide on your recommendations for Sharon. Your answers to these questions are your opportunity to demonstrate your ability to develop a strategy that aligns with her requirements. Strategy tips Students should note that there may be more than one strategy or group of strategies that could be appropriate in Sharon's circumstances. In fact it would be unusual in developing strategies for any clients where one specific strategy or set of strategies could be classified as 'the best' or 'perfect'. The ultimate test is that the strategies selected can be justified and explained in terms of the client's stated goals, financial situation and profile. In Sharon's case, there are certain variables to consider, such as: 1. In dollar terms, what appropriate house deposit is she aiming to accumulate and over what time period? 2. What would be the ramifications if the car loan was paid off using her maturing term deposit savings? In this case, how should she invest her remaining capital and future savings to reach her house deposit goal over a maximum five-year period? 3. What would be the ramifications if the car loan was not paid off (or only paid off in part)? In this case, what could be an appropriate investment strategy for Sharon's maturing term deposit and future savings to reach her house deposit goal? 4. How does her risk profile fit into the time horizon she has selected to purchase her first home and for point 2 and 3 above? 5. Could a valid strategy potentially have Sharon in a position to purchase her first home within five years? How much risk would she need to accept to achieve her declared savings goal? A number of strategy options may appear available to Sharon to achieve her primary goal. Whatever strategy you select however, must be seen to be appropriate, including being within Sharon's tolerance to risk, and satisfy minimum requirements under the best interests test. It is important that you discuss the reason, risks, advantages and disadvantages of each recommendation. Page 31 of 92 Section 5: Completing the SOA When you have determined the financial planning recommendations you believe are appropriate for Sharon's needs, you then need to prepare her SOA. Use the SOA template provided in the assessment workbook. Page 32 of 92 Section 6: Presenting the SOA You meet with Sharon as arranged to present her SOA. You take the time to outline the proposed strategies and recommendations, confirming throughout that Sharon understands the plan and how it has been designed to meet her needs. Satisfied with your explanation of the plan and responses to each of her questions, Sharon agrees to go ahead with your recommendations. Note: There is a series of questions relating to Section 6 in the assessment workbook that you need to answer. Your answers to these questions are your opportunity to demonstrate your ability to continue to engage your client. Page 33 of 92 Section 7: Providing ongoing service Sharon is not sure she will have time for regular reviews of her financial plan. She expresses the opinion that the advice seems comprehensive with no need at this stage to commit to scheduled reviews. There is a series of questions relating to Section 7 in the assessment workbook that you need to answer. The questions are your opportunity to demonstrate your ability to work with a client to implement a plan over the longer term. Page 34 of 92 Appendix 1: Fact finder and risk profile Sharon Elsom Page 35 of 92 Important notice to customers Your planner must act in your best interest and provide appropriate advice when making an investment or insurance recommendation. Before making a recommendation, the planner needs to ask you about your investment objectives, financial situation and your particular needs. The information requested in this form will be used strictly for that purpose. Warning The planner could make inappropriate recommendations or give inappropriate advice if you fail to fully and accurately complete this form. Personal and employment details Personal details Client 1 Client 2 Title Miss Surname Elsom Given & preferred names Sharon Home address 16/118 Gloucester St, Brunswick East, Vic Business address n.a. Contact phone (03) 7766 5544 Date of birth 15 September 1986 Sex Male Female Male Female Smoker Yes No Yes No Expected retirement age Haven't really thought about it, but probably 62 Dependants (children or other) Name Date of birth Sex School n.a. Page 36 of 92 Occupation Employment details Sharon Elsom Occupation Sales Manager Employment status Business 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 Sole proprietor Partnership Sole proprietor Partnership Private company Trust Private company Trust Notes Any other person to be contacted? e.g. accountant, banker, solicitor, etc. Page 37 of 92 Income, tax and cash flow Tax calculation Sharon Client 2 Combined Comments Income from employment (figures rounded to the nearest dollar) Salary Salary sacrifice Salary after salary sacrifice $82,000 nil $82,000 Rental income n.a. Unfranked dividends n.a. Franked dividends Franking (imputation) credits Interest $130 $56 $1,463 Other income (e.g. taxable benefits, trust income, investment income) n.a. Capital gains 1 yr n.a. Tax-free component of capital gains n.a. Assessable income Westpac Banking Corporation dividends $45,000 @ 3.25% $83,649 Deductible expenses $175 Accountant's fees Donations $720 $600 McGrath Foundation $120 bucket donation Other nil Taxable income $82,754 Tax on taxable income $18,566 Non-refundable tax offsets (e.g. LITO/SAPTO) Medicare levy n.a. $1,655 Medicare levy surcharge n.a. Less franking rebate $56 Less refundable rebates and offsets n.a. Total tax $20,165 Page 38 of 92 FY 2014/15 Cash flow Sharon Client 2 Combined Comment Cash flow Salary less any salary sacrificed amount Non-taxable income $82,000 nil Rental income n.a. Unfranked dividends received n.a. Franked dividends received Interest Other income (e.g. taxable benefits, trust income, investment income, social security benefits, etc.) Total income received before tax Investment expenses $130 $1,463 nil $83,593 nil Expenses Mortgage n.a. School fees n.a. Utilities n.a. Personal insurance Car insurance Home contents Insurance nil $1,300 $336 Paid from credit card Paid from credit card Includes legal liability Health insurance $1,440 Paid from credit card Living expenses $9,624 Expenses through credit card Holidays $2,500 House maintenance Motor vehicle Other n.a. Unknown $25,480 $9,240 Paid as part of the expenses through credit card Rent Car repayments $720 Donations $175 Accountant's fees Total expenses $50,815 Total income received before tax less total expenses $32,778 Total tax payable from tax table above $20,165 Total net cash flow $12,613 Page 39 of 92 Assets and liabilities Asset Owner Value Liabilities Net value Notes Insured value and includes legal liability cover Personal assets Family home n.a. n.a. Home contents Sharon $20,000 $0 $20,000 Car Sharon $37,000 $37,000 $0 $57,000 $37,000 $20,000 $32,000 n.a. $32,000 Total Superannuation Employer superannuation Sharon Total $32,000 $32,000 Other assets Investment property n.a. n.a. n.a. Savings account Sharon $1,500 nil $1,500 Term deposit Sharon $45,000 nil $45,000 Shares Sharon $2,100 nil $2,100 $48,600 nil $48,600 $137,600 $37,000 $100,600 Total Net worth Transaction account Westpac Banking Corporation assumed current price $30.00 Liabilities Loan Current debt Percentage tax deductible Home loan n.a. n.a. Investment property n.a. n.a. Investment loan n.a. n.a. $37,000 nil Other n.a. n.a. Total $37,000 $0 Personal loan Page 40 of 92 Interest only Repayment No $770 per month Needs and objectives Details Comments Save for her own home Has been saving towards it using on line savings accounts and term deposits. Has estimated that she could afford purchase price of up to $620,000 using mortgage and savings. Would like to have saved at least 15% of the purchase price and be in a position to buy in no later than 5 years' time Decrease debt Concerned about debt interested in paying off early but requires guidance on the effect (if any) to her primary desire to purchase her first home Cruise with friend $2500 annually Increase sharemarket knowledge Current knowledge is low Maintain lifestyle in the event of prolonged illness To be reviewed Other Estate planning Do you have a will? Yes When was it last updated? No / Do you have powers of attorney? Yes / No Current superannuation, rollovers, insurances and investments Superannuation Member Sharon Fund name ABXY Super Fund Date of joining fund 19 January 2007 Type of fund Contributions (e.g. 5% of salary) SG Accumulation Defined benefit Accumulation Defined benefit Pension Pensioner Pension Pensioner By employer By yourself By employer By yourself Current value of your superannuation fund $32,000 Amount of death and disability cover $50,000 Is there provision for you to top up or salary sacrifice? Yes No Page 41 of 92 Yes No Superannuation taxation details Sharon Current value $32,000 Tax-free component $0 Taxable component: Taxed element $32,000 Untaxed element $0 Preservation: Preserved $32,000 Unrestricted non-preserved $0 Restricted non-preserved $0 Contributions: Non-concessional contributions: Year 1 $0 Year 2 $0 Year 3 $0 Year 4 $0 Concessional contributions: Year 1 SG only Year 2 SG only Year 3 SG only Year 4 SG only Page 42 of 92 Nominated beneficiaries: Name Binding Yes/No Non-binding (Yes/No) Amount Trustee discretion (Yes/No) None noted Yes Is there any current flags or splits on a superannuation benefit of yours following a marriage breakdown? Yes/No N Details Are you a beneficiary of any current flags or splits of a superannuation benefit following a marriage breakdown? Yes/No N Details Life insurance details Life insured Owner Policy type Company Policy number Death benefit Comments Annual premium Sharon Superannuation fund Life ABXY Super Fund XTP1234 $50,000 Within superannuation From superannuation Disability insurance details Life insured Owner Policy type Company Policy number Death benefit Comments Annual premium Sharon Superannuation fund TPD ABXY Super Fund XTP1234 $50,000 Within superannuation From superannuation Income protection insurance details Life insured Owner Policy type Company Sharon n.a. nil n.a. Policy number Page 43 of 92 Benefit amount Waiting period Benefit payment period Annual premium General insurance details Item covered Owner Policy type Company Combined policy number Cover amount Other benefit Total annual premium Car Sharon Comprehensive Ourcover 234907MV Market Value nil $1,300 Contents Sharon Contents Ourcover 438129HC $20,000 nil $360 p.a. deducted monthly from credit card Health Sharon Full health Ourcover 6978/967PH $1,440 p.a. deducted monthly from credit card Investment details Investment type Company Purchase date Term deposit East Antipodean National Wealth Bank Shares Westpac Banking Corporation Savings account East Antipodean National Wealth Bank Units held/fixed rate n.a. 25 November 2008 n.a. 70 shares Current value Owner $45,000 Sharon $2,100 Sharon $1,500 Sharon Note: An insurance needs analysis is not required for this assignment. These risk needs tables have been included to provide a realistic example of the fact-finder process. Page 44 of 92 Risk needs Insurance needs life Sharon C Clean-up fund Settle all outstanding accounts, including credit cards, bills and funeral costs I Income fund The lump sum required to produce a level of regular income that maintains the family's living standard for a defined period M Mortgage fund The amount necessary to discharge any existing mortgages E Education fund Lump sum determined by calculating each child's education costs and multiplying by the number of years of school and/or university remaining R Retirement fund The lump sum necessary to provide adequate funding for retirement less value of realisable assets less existing life insurance cover Recommended sum insured Recommended sum insured (rounded up to the nearest $10,000) Page 45 of 92 Insurance needs TPD Sharon C Clean-up fund Settle all outstanding accounts, including credit cards, bills and funeral costs I Income fund The lump sum required to produce a level of regular income that maintains the family's living standard for a defined period M Mortgage fund The amount necessary to discharge any existing mortgages E Education fund Lump sum determined by calculating each child's education costs and multiplying by the number of years of school and/or university remaining R Retirement fund The lump sum necessary to provide adequate funding for retirement less value of realisable assets less existing life insurance cover Recommended sum insured Recommended sum insured (rounded up to the nearest $10,000) Page 46 of 92 Insurance needs Trauma Sharon Funds required to pay out home mortgage Estimated medical and rehabilitation costs (including cover out-of-pocket health costs) Other debts Other expenses less existing realisable assets Recommended sum insured Recommended sum insured (rounded up to the nearest $10,000) Insurance needs Income protection Sharon Gross annual income SG Total insurable income Monthly income (i.e. total insurable income / 12) Recommended monthly benefit (i.e. 75% of total monthly insurable amount) Benefit payment period Waiting period to be served 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 planner may not be appropriate to my needs. I acknowledge that the planner has provided me with the completed financial fact finder, signed by me. Customer(s) signature(s) Planner's name Planner's signature Date Page 47 of 92 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? Why? Yes/No I think that I should be able to structure things better to pay less tax like other people seem to do. How important is liquidity (i.e. funds available) to you? Why? Very/Moderately/N ot I would like the money available so I can buy a property in the future. If you had funds available for investing, how would you choose to invest them? Why? Term deposits, but don't know what else is available or how it works. Are there certain sorts of investment that you wish to avoid? Which ones? Yes/No I don't really know. 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 planner, you can choose the investments that best match your financial objectives. Which of the following best describes your current stage of life? 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 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 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 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 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 selfeducation. 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 What return do you reasonably expect to achieve from your investments? A return without losing any capital. 10 3-7% p.a. 20 8-12% p.a. 30 13-15% p.a. 40 Over 15% p.a. 50 Page 48 of 92 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 Less than 1 year 20 Up to 3 years 30 Up to 5 years 40 Up to 7 years 45 Up to 10 years 50 How familiar are you with investment markets? Very little understanding or interest 10 Not very familiar Would like to know more 20 Have had enough experience to understand the importance of diversification 30 Understand that markets may fluctuate and that different market sectors offer different income, growth and taxation characteristics 40 Experienced with all investment sectors and understand the various factors that may influence performance 50 If you can only get greater tax efficiency from more volatile investments, which balance would you be most comfortable with? Preferably guaranteed returns, before tax savings 10 Stable, reliable returns, minimal tax savings 20 Some variability in returns, some tax savings 30 Moderate variability in returns, reasonable tax savings 40 Six months after placing your investment you discover that your portfolio has decreased in value by 20%. What would be your reaction? 50 Horror. Security of capital is critical and you did not intend to take risks 10 You would cut your losses and transfer your money into more secure investment sectors 20 You would be concerned, but would wait to see if the investments improve 30 This was a calculated risk and you would leave the investments in place, expecting performance to improve 40 You would invest more funds to lower your average investment price, expecting future growth 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 You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-term wealth 40 You have a lump sum, e.g. an inheritance or an eligible termination payment from your employer, and you are uncertain about what secure investment alternatives are available 30 You are nearing retirement and you are investing to ensure that you have sufficient funds available to enjoy retirement 20 Page 49 of 92 You have some specific objectives within the next five years for which you want to save enough money 20 You want a regular income and/or totally protect the value of your savings 10 Investor profile total points 200 INVESTOR RISK PROFILE SUMMARY 60-120 Conservative 70% Defensive and 30% Growth 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 120-180 Moderately Conservative 55% Defensive and 45% Growth 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 180-240 Balanced 40% Defensive and 60% Growth 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 240-270 Growth 20% Defensive and 80% 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 270-300 High growth 20% Defensive and 80% 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 Page 50 of 92 Appendix 2: Financial planning questions Page 51 of 92 Case study questions Section 1: Questions Establishing relationships with clients Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to establish a relationship with a client. 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 held in your office. (250 words) Assessor feedback: Resubmission required? No Section 1 Part B List the documents that you would provide a client during, or prior to, the initial meeting. Explain the contents of each document and why they are necessary. (200 words) Assessor feedback: Resubmission required? No Section 1 Part C Outline how you would develop rapport with a client during your first meeting. (200 words) Assessor feedback: Resubmission required? No Page 52 of 92 Section 1 Part D Explain to a client the role of the adviser and the relationship with the licensee. Ensure you use language that your client would understand. (250 words) Assessor feedback: Resubmission required? No Section 1 Part E What ways would you use to maintain and develop your knowledge and advising skills, and your obligations under the relevant legislation? (150 words) Answer here Assessor feedback: Resubmission required? No Section 1 Part F It is important that your clients understand your company's dispute resolution procedure. Explain, step-by-step, a typical internal and external complaints resolution processes available to a client. (150 words) Answer here Assessor feedback: Resubmission required? No Page 53 of 92 Section 2: The fact finder and risk profile There are no questions for this section. Section 3: Questions Analysing the data Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to analyse a client's needs in preparation for developing a strategy that aligns with their requirements. Section 3 Part A List what you understand to be Sharon's goals, needs and objectives. Categorise them into short, medium and long-term time frames. They should be specific, measurable and have a nominated dollar value where possible. (250 words) Goalseed/objectives Time frame Dollar value Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Answer here Assessor feedback: Resubmission required? No Page 54 of 92 Section 3 Part B Analyse the data provided by Sharon by answering the following questions. The questions are designed to help you think about the possible issues that any client may have and enable you to show your skill in analysing a case study across the 11 general headings in the data analysis section of the text, and strategy development steps of the financial planning process (refer to Topic 2 and the sample case study and sample SOA). Think carefully about your responses and do not assume that you are in a position to provide detailed answers to every question. You may not have enough information, it may be outside of your licensee's designated authority for this case study (i.e. the matter needs to be referred to a specialist adviser), or it is not one of Sharon's goals or objectives. In addition, the question may not apply to Sharon's current situation. Where any of the above apply, you still need to make a comment and explain why the question is not relevant at this time. Make sure you constantly refer to the data you have on Sharon so your responses accurately reflect the information she has provided you. a. The questions Your response Does Sharon need a debt management solution? Answer here If yes, why? Answer here The assessors feedback If no, why not? b. Sharon has stated that she is comfortable with her current insurance arrangements; however, does Sharon have adequate risk protection? Answer here Provide reasons for your answer. c. Does Sharon have sufficient savings to meet her goals? Answer here If yes, why/how? Answer here If not, how much does she need? And by when? d. e. Does Sharon have any investments currently, and what is her appetite for different types of investment? Answer here What will this mean for any strategy you might recommend? Answer here Are there any present and/or anticipated future taxation issues? Answer here If yes, why and what are they? Answer here If no, why not? f. Has any provision been made for estate planning? Answer here What could be put in place now for any anticipated requirements? Answer here Page 55 of 92 Section 4: Questions Developing a strategy Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to analyse a client's needs and develop a strategy that aligns with their requirements. Section 4 Part A Based on your analysis of the data, describe in general terms, the strategies you think will best meet Sharon's needs describing the reasons why such strategies are adopted. Include what other specialist advice Sharon should source so that her financial plan is comprehensive. (400 words) Answer here Assessor feedback: Resubmission required? No Section 4 Part B You are now in a position to research some products that might meet Sharon's needs. Information on different products are readily available on the internet. For example, for managed funds, http://www.morningstar.com.au provides a fund screener tool that you can use to select funds based on a number of different criteria, (located under 'Tools' on the homepage). For term deposits and other investments, go to www.canstar.com.au. To ensure the appropriate product(s) for your client, you are expected to research a number of products from different product issuers (more than two). The URL link should be supplied. List the investment products you have researched here, and indicate why you think each investment you have researched may or may not be suitable for Sharon. At the conclusion of this process you will need to have found at least two (2) products to meet your client's needs. The product (name and URL link) Why you think it may or may not be the 'best fit' for Sharon. Indicate which product/s you will use in your plan Answer here Answer here Yes No Answer here Answer here Yes No Answer here Answer here Yes No Answer here Answer here Yes No Page 56 of 92 Section 5: Completing the SOA When you have determined the financial planning recommendations you believe will meet Sharon's needs then you need to prepare her SOA. Use the SOA template provided in this assignment to produce your SOA for Sharon. Tip: The assessor is looking for an SOA that is of a professional standard and is suitable for presentation to a client. This means your spelling and grammar needs to be correct and that you have written your recommendations so the client can understand them. Remember: the SOA is an important communication tool you can use to engage your client. A hastily written and poorly presented SOA does not engender client trust or confidence in your expertise or professionalism. Important instructions for completing the SOA 1. Use the SOA template provided. SOA preparation software: The use of financial planning software and dealer templates to prepare your SOA 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. 2. Your SOA must include strategy recommendations for: debt management personal investment and savings asset allocation (including superannuation). 3. You must prepare an implementation schedule detailing all of the recommendations in the SOA and provide the details in the implementation schedule within the SOA. 4. You must also prepare, using an Excel spreadsheet, a table showing the projected balance of Sharon's investment portfolio, over a five-year period, before and after your recommendations. This task will be important in showing how your strategies may satisfy Sharon's primary financial objective. 5. List any assumptions you have made to complete your SOA on the assumptions page at the end of the SOA. Assumptions will generally be made: regarding missing background information on the clients in regards to calculations of future returns from your recommended investments for clarity in relation to any of your recommendations for fees relating to the products you have recommended. 6. While you are not required to provide specific recommendations in the following areas for this assignment, you will need to provide, in the 'Things you need to consider' section of your SOA, appropriate comments about any issues you have identified. Those areas are: personal insurance superannuation estate planning. 7. Your investment product recommendations will need to be based on the research you conducted in section 4 Part B. Please do not include any product disclosure statements (PDSs) with your assignment submission. Page 57 of 92 Section 6: Questions Presenting the SOA Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to work with a client to present a financial plan, and then take the necessary steps to gain their consent to implement your recommendations. Section 6 Part A Identify two (2) concerns that Sharon may have with the advice that you have provided. Prepare responses to these concerns. Ensure that you use language Sharon would understand. (100 words) Answer here Assessor feedback: Resubmission required? No Section 6 Part B Outline the techniques that could be used to ensure that your client understands the advice being provided and to gain their agreement to implement the plan. (150 words) Answer here Assessor feedback: Resubmission required? No Section 6 Part C According to legislative requirements, explain how you would present your fee and cost structure to Sharon. (100 words) Answer here Assessor feedback: Resubmission required? No Page 58 of 92 Section 6 Part D List the documentation, if any, that you need to present to your client at this stage of the financial planning process. (50 words) Answer here Assessor feedback: Resubmission required? No Section 6 Part E Provide a summary of all the documentation that you need to keep in the client's file. (150 words) Answer here Assessor feedback: Resubmission required? No Page 59 of 92 Section 7: Questions Providing ongoing service Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to work with a client to implement a plan over the longer term. Section 7 Part A Sharon is not sure she will have time for regular reviews of her financial plan. She expresses the opinion that the advice seems comprehensive and she believes she could take a 'set and forget' approach once it is implemented. Describe how you would respond to Sharon, 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. (400 words) Answer here Assessor feedback: Resubmission required? No Page 60 of 92 The SOA template An SOA has been commenced for Sharon Elsom, using the data collected in the interviews, her fact finder and risk profile. You will need to complete the remaining sections in the SOA as directed. The SOA starts on the following page. Please review the sample case study and the text as a guide to completing your SOA. Page 61 of 92 Statement of advice Prepared for Page 62 of 92 Sharon Elsom Prepared by Expert Answer:
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