In-class Assignment Investment Planning

You are a Certified Financial Planner and you are meeting with a brand new client today, John Q. Public. He booked an appointment with you because he is unhappy with his investment returns and he would like a second opinion. He is 40 years of age and he is planning on retiring in 25 years. He is divorced and has a son that is 22 years old and just graduated from George Brown College.

He has his investment assets at two difference financial institutions. He has the majority of his assets with Scotiabank iTRADE. He was managing these assets on his own and with advice from friends. He has not been happy with the performance and does not have the time to manage his investments properly. He realizes that he does not have the knowledge to manage his own assets and only some of the advice that he has received from friends has not been good. He also has a smaller account with XYZ Financial. He would like to consolidate his assets with one Financial Planner and put a long term plan in place.

He was married for 12 years but has recently divorced. He has bought a small condo close to work and he plans on staying their long term now that he is on his own. The condo is valued at $575,000 and his mortgage is $300,000. John has worked as a network administrator in a small manufacturing company for the last 12 years and makes a gross annual income of $72,000. He lives on a tight budget as he is trying to pay off his mortgage on the condo before he retires. He wants to ensure that he has enough savings to retire at age 65 and he is willing to take more risk with his investments to achieve this goal. At the end of each month he has a surplus of about $500. He has no other assets or liabilities than what was mentioned above.

Requirements:

1. Identify the Know Your Client information that the client has shared with you.

(4 marks)

1. What asset allocation would you recommend based on the KYC information that was provided? (2 marks)
2. Analyze the clients current financial situation. (Prepare the consolidated asset allocation) (5 marks)
3. Discuss the opportunities and constraints that you have identified based on Johns current asset allocation and the recommended asset allocation. (2 marks)
4. What recommendations would you make to John regarding his investments? Explain the benefits and drawbacks of your recommendation. (2 marks)