Part C: Professional Financial Planning Advice

Part C has 2 case studies related to financial planning advice.

Case Study C1: [15 Marks] Toby is aged 42 and married to Melanie. He recently inherited $180,000 from his uncle's estate and is looking to invest in a diversified portfolio of managed funds. He wants to invest the funds outside of his superannuation account in order to provide access to some liquidity if required i.e. he is planning to use $60, 000 of the invested funds to build a swimming pool in around 4 years.

You have determined that he is a balanced investor and he is prepared to take on some investment risk with an expectation of a higher rate of return.

Other information:

Toby and Melanie salary: $120, 000 p.a. $52 000 p.a., respectively.

Disposable income: $10, 000 p.a. after all expenses.

Dependents: 2 children aged under 16

Debt: Minimal

Investments: $40, 000 held in their bank account

$55, 000 held in a term deposit.

Toby's superannuation $320, 000 and invested in a conservative option. [Note: Toby wants more certainty

with his retirement planning and therefore wishes to minimise the risk associated with his

superannuation monies.]

give advice to Toby, based on the following discussion questions:

I. What are the advantages, disadvantages and benefits of Toby investing the inheritance into managed funds compared to making direct investments i.e. direct shares or property investment?

II. Given his risk profile and financial situation, how would you construct an appropriate asset allocation for Toby? Provide recommended proportions across the various asset classes.

III. How does this asset allocation for the managed funds differ from his a conservative superannuation fund profile?

Case Study C2: [5 Marks] Sally has a small amount of life insurance provided through her superannuation fund. She is thinking of applying for additional coverage but is worried about filling in an application form and/or having to attend a medical examination.

Six months ago Sally was diagnosed with hyper-tension and in response to this she gave up smoking. She is quite confident that her health has improved as a result although she has not been back to a doctor to confirm this.

Given her improved health, Sally's partner has suggested that she not mention the hyper-tension in any application. But Sally is unsure of the consequences of failing to declare her medical history correctly. Advise Sally.