Professional Application Questions

15.2 'Knowing your client' is of paramount importance if a financial planner is to be able to satisfy the best interests duty imposed under the Corporations Act. How might a planner develop a comprehensive insight and level of knowledge about the client in order to be able to provide appropriate advice?

15.3 What is 'scaled advice' and what are the advantages and risks for a client?

15.8 An SOA should be developed to accommodate a client's aims and goals. On the basis that these goals are likely to change over a client's lifetime, by what means can a financial planner ensure the goals continue to be achieved?

15.11 Explain the purpose of an executive summary in an SOA.

15.13 What are the conditions that allow an ROA to be prepared instead of an SOA?

Professional Application Exercises

15.16 Type of disclosure advice statement**

Jonathon is an existing, long standing client aged 49. In 2011 you established a self-managed super fund for Jonathon with recommendations documented in an SOA dated 23 February 2011. The fund now has $500 000 of assets. In 2007, Jonathon stated that he intended to retire in 10 years' time and that he would not expect to access the funds before then. The plan provided an asset allocation strategy for the fund. Jonathon was made aware at the time that there may be a need to change some of the managed funds from time to time.

Since 2011 you have provided Jonathon with a review of the managed funds every 6 months. These reviews have included changes to the investment portfolio by way of portfolio reweighting and changing fund managers from time to time. The risk profile and asset allocation strategy has not changed.

For each of the following situations occurring this financial year, explain whether you could provide the client with a ROA or whether an SOA would be required.

(a) In July, the fund has available cash of $40 000 to invest. You recommend that Jonathon allocates the cash among his existing investment products based on maintaining his agreed asset allocation.

(b) In August, your research provider issues a sell on the State Australian Share fund. During your next review you recommend that Jonathon sells his holding in the share fund, worth $50 000, and invest the proceeds into the Capital Australian Share Fund which hasn't been used before.

(c) In September, during discussions with Jonathon he expresses a desire to reduce the tax he pays and undertake some sort of gearing strategy (he hasn't previously geared before). You recommend a protected structured loan through the ANZ.

(d) In November, upon turning 56 years of age, you recommend to Jonathon that he implements a transition to retirement strategy. This involves him rearranging his affairs to salary sacrifice to the super fund and to commence drawing a pension from the fund.