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Create a mutual fund investment plan for Nancy Williams assuming that she has net after tax cash flow of $2,300 per month in conjunction with her wealth accumulation and retirement objectives below.

The plan should be typed and include a cover page, engagement letter (assume you are mutual fund licensed and prepare a letter that lays out the services you will be providing and how you will get paid for the investment plan), an introduction (providing a brief overview of what the investment plan will entail), analysis and recommendations section (address each objective in the order below by analyzing what the client wants to achievefollowed by specific mutual fund recommendations within the context of her financial profile), conclusion (this will summarize the investment plan and prepare the client for the next step of implementation).

Make sure that your analysis and recommendations are consistent with her objectives and investor profile based on the "Know your client" requirements.

Part 1: Wealth accumulation age 25 to 65

Investment Growth Objectives:

i.Nancy recently won $100,000 in the BC lottery but she has not yet decided what to do with the money. Recommend a suitable mutual fund where Nancy can invest the proceeds until such time as she has formulated a long-term financial strategy. Indicate the specific mutual fund(s) you recommend for this objective and why? (2 marks)

ii.Nancy wants to invest $300 per month into her RRSP and she wants to earn 7% compounded annually for the next 40 years. Recommend two specific mutual funds for this objective with reasons supporting the recommendation. (4 marks)

iii.Nancy wants to take advantage of a TFSA but she needs to know how much she can invest monthly into this account. She has never invested in a TFSA and wants to contribute the maximum amount for 2017 (2 marks) Recommend an appropriate mutual fund for her TFSA ( 2 marks) Assume that her primary objective with this account is to shelter investment income that will otherwise be subject to full tax at her marginal tax rate of 30%.

iv.She would also like to start an RESP for her niece, Iris, as soon as possible and invest an amount that will maximize the use of the current education grant. Assume that no other contributions are being made to the Iris' RESP and that the beneficiary does not qualify for the additional learning grant of Canadian learning bond. Also assume that the grant is received immediately on any purchase Nancy makes. Do not worry about unused grant room for purposes of this calculation. Iris is currently eight years of age. Nancy will want to earn 10% per year on the RESP to maximize growth over the next nine years. Determine the value of the RESP in nine years (4 marks). Recommend at least two specific mutual fund(s) for this objective with reasons why they are suitable? ( 4 marks)

v.Nancy has decided to invest $50,000 of her lottery winnings into a tax advantaged non-registered open account other than a TFSA. She will keep the remaining $50,000 in an emergency account. She wants to earn 6% annually on this account and she plans on investing the funds for the next 40 years so that she can use them to supplement her retirement. Recommend at least two specific mutual funds and determine the future value in 40 years. (5 marks) Her primary objective is growth on this account and she does not want to generate any investment income.

Part II: Retirement and income generation age 65 to death

Retirement income objectives:

i.If Nancy retires at age 65 how much will she have accumulated in her RRSP? ( 2 marks) What annual gross income can she expect to generate if she converts to a RRIF at age 65 and takes only the minimum required amount? ( 2 marks) If she wants to ensure the RRIF lasts for as long as possible what should the target yield be on her funds? (1 mark)

ii.How much gross annual income can Nancy expect from her defined benefit pension plan at age 65? ( 4 marks) If the underlying funds in the pension plan decline will this affect the annual pension amount? ( 1 mark) If Nancy needs to withdraw a lump sum amount from the plan in excess of the maximum monthly payment can she do so? If so how much? ( 1 mark)

iii.How much gross annual income can Nancy expect to receive at age 65 from her RRIF (assume minimum amount), defined benefit pension plan, CPP (assume maximum under new rules) and maximum OAS? (4 marks) Will there be a claw back to her OAS? If so how much? (2 marks).

iv.If Nancy dies at age 100 what is the total capital gain on her non-registered account which has continued to grow at 6% per year since Nancy invested the $50,000 at her age 25? (2 marks) What is the taxable capital gain on the fund assuming a tax rate of 43.7%? ( 3 marks)

Be sure to include in your analysis and recommendations the following:

1.The specific mutual funds you are recommending (name and type of fund).

2.Why you are recommending these mutual funds.

3.Expected rates of return on these funds.

4.A summary of main types of risk the client will be exposed to using these funds. This must not be copied from the fund prospectus and must be in your own words.

5.What it will cost the client to invest in these mutual funds both directly and indirectly. These costs will be based on your fee and/or commission and also the MER of the fund. Be specific and provide a redemption schedule if selling funds on a DSC basis. These costs should be laid out in the planner client engagement letter.

ADDITIONAL INFO:

Age: Nancy is currently 25 years old

Income: Gross income of $60,000 per year; net $40,000

Pension: Defined benefit plan. Benefit factor of 2% on salary and total years of service

Risk Tolerance: Nancy is currently an 8 on the 1 low to 10 high risk scale and considers herself a medium to high risk investor. Your assessment of her risk shows that she can tolerate a maximum decline of 25%.

Occupation: Nancy is a Nurse working in Nanaimo.

Investment Knowledge: Low as she has never done any investing.

Total Marks:

Engagement Letter (clearly stating the fees you will be charging)5

Introduction 2.5

Analysis and recommendations relating to the case objectives45

Conclusion2.5

Overall format and presentation of the plan5

Total Marks60

INVESTMENT PLAN: PARTS 1 AND II - FNCE 344 DUE NOVEMBER 16th, 2017 Create a mutual fund investment plan for Nancy Williams assuming that she has net after tax cash flow of $2,300 per month in conjunction with her wealth accumulation and retirement objectives below. The plan should be typed and include a cover page, engagement letter (assume you are mutual fund licensed and prepare a letter that lays out the services you will be providing and how you will get paid for the investment plan), an introduction (providing a brief overview of what the investment plan will entail), analysis and recommendations section (address each objective in the order below by analyzing what the client wants to achieve followed by specific mutual fund recommendations within the context of her financial profile), conclusion (this will summarize the investment plan and prepare the client for the next step of implementation). Make sure that your analysis and recommendations are consistent with her objectives and investor profile based on the \"Know your client\" requirements. Part 1: Wealth accumulation age 25 to 65 Investment Growth Objectives: i. ii. iii. iv. v. Nancy recently won $100,000 in the BC lottery but she has not yet decided what to do with the money. Recommend a suitable mutual fund where Nancy can invest the proceeds until such time as she has formulated a long-term financial strategy. Indicate the specific mutual fund(s) you recommend for this objective and why? (2 marks) Nancy wants to invest $300 per month into her RRSP and she wants to earn 7% compounded annually for the next 40 years. Recommend two specific mutual funds for this objective with reasons supporting the recommendation. (4 marks) Nancy wants to take advantage of a TFSA but she needs to know how much she can invest monthly into this account. She has never invested in a TFSA and wants to contribute the maximum amount for 2017 (2 marks) Recommend an appropriate mutual fund for her TFSA ( 2 marks) Assume that her primary objective with this account is to shelter investment income that will otherwise be subject to full tax at her marginal tax rate of 30%. She would also like to start an RESP for her niece, Iris, as soon as possible and invest an amount that will maximize the use of the current education grant. Assume that no other contributions are being made to the Iris' RESP and that the beneficiary does not qualify for the additional learning grant of Canadian learning bond. Also assume that the grant is received immediately on any purchase Nancy makes. Do not worry about unused grant room for purposes of this calculation. Iris is currently eight years of age. Nancy will want to earn 10% per year on the RESP to maximize growth over the next nine years. Determine the value of the RESP in nine years (4 marks). Recommend at least two specific mutual fund(s) for this objective with reasons why they are suitable? ( 4 marks) Nancy has decided to invest $50,000 of her lottery winnings into a tax advantaged non-registered open account other than a TFSA. She will keep the remaining $50,000 in an emergency account. She wants to earn 6% annually on this account and she plans on investing the funds for the next 40 years so that she can use them to supplement her retirement. Recommend at least two specific mutual funds and determine the future value in 40 years. (5 marks) Her primary objective is growth on this account and she does not want to generate any investment income. Part II: Retirement and income generation age 65 to death Retirement income objectives: i. If Nancy retires at age 65 how much will she have accumulated in her RRSP? ( 2 marks) What annual gross income can she expect to generate if she converts to a RRIF at age 65 and takes only the minimum required amount? ( 2 marks) If she wants to ensure the RRIF lasts for as long as possible what should the target yield be on her funds? (1 mark) ii. How much gross annual income can Nancy expect from her defined benefit pension plan at age 65? ( 4 marks) If the underlying funds in the pension plan decline will this affect the annual pension amount? ( 1 mark) If Nancy needs to withdraw a lump sum amount from the plan in excess of the maximum monthly payment can she do so? If so how much? ( 1 mark) iii. How much gross annual income can Nancy expect to receive at age 65 from her RRIF (assume minimum amount), defined benefit pension plan, CPP (assume maximum under new rules) and maximum OAS? (4 marks) Will there be a claw back to her OAS? If so how much? (2 marks). iv. If Nancy dies at age 100 what is the total capital gain on her non-registered account which has continued to grow at 6% per year since Nancy invested the $50,000 at her age 25? (2 marks) What is the taxable capital gain on the fund assuming a tax rate of 43.7%? ( 3 marks) Be sure to include in your analysis and recommendations the following: 1. 2. 3. 4. The specific mutual funds you are recommending (name and type of fund). Why you are recommending these mutual funds. Expected rates of return on these funds. A summary of main types of risk the client will be exposed to using these funds. This must not be copied from the fund prospectus and must be in your own words. 5. What it will cost the client to invest in these mutual funds both directly and indirectly. These costs will be based on your fee and/or commission and also the MER of the fund. Be specific and provide a redemption schedule if selling funds on a DSC basis. These costs should be laid out in the planner client engagement letter. ADDITIONAL INFO: Age: Nancy is currently 25 years old Income: Gross income of $60,000 per year; net $40,000 Pension: Defined benefit plan. Benefit factor of 2% on salary and total years of service Risk Tolerance: Nancy is currently an 8 on the 1 low to 10 high risk scale and considers herself a medium to high risk investor. Your assessment of her risk shows that she can tolerate a maximum decline of 25%. Occupation: Nancy is a Nurse working in Nanaimo. Investment Knowledge: Low as she has never done any investing. Total Marks: Engagement Letter (clearly stating the fees you will be charging) Introduction Analysis and recommendations relating to the case objectives Conclusion Overall format and presentation of the plan 5 2.5 45 2.5 5 Total Marks 60