Task 1

Based on the Case Study below, you are to prepare a Statement of Advice (SOA) for your clients Mr and Mrs Johnson.

How?

Apply the template Statement of Advice prepared by ASIC which is called Regulatory Guideline 90. To obtain a copy of this document refer to the learner program for this topic in SAKAI or download from www.asic.gov.au

As a guide your document should not exceed 12 A4 typed pages. Upload your completed answer (word format) to your allocated SAKAI site.

It is suggested that you read the relevant parts of Regulatory Guideline 90 and the case study. Save the Statement of Advice document as a word file and delete any text that relates to the ASIC case study but retain all the text headings for populating with the facts contained in your fact find.

Your Statement of Advice should resemble the format, presentation and layout of RG90 and make all of the appropriate disclosures required by ASIC.

As a minimum the Statement of Advice should include and relate to the clients in the case study provided in this assessment:-

• Statement of Present Position (i.e. Overview of personal and financial details)
• Client Investment Risk Profiles
• Approximate after tax surplus income after all expenses This should be a based on the most recent personal tax tables www.ato.gov.au Medicare levy and low income tax offset if applicable.
• Your recommendations,
• The reasons for your recommendations. Explain how the recommendations achieve the clients stated goals.
• State any risks associated with your recommendations
• Outline the Limitations of your advice (i.e. what advice have you provided and what advice is not provided)
• Your Statement of Advice must include an Authority to Proceed page with appropriate room for any changes that your clients may decide to make when you present the document to your clients.
• Fees and charges should be clearly disclosed in a table:
  • Preparation of Statement advice fee $880
  • Contribution fee percentage and dollar amount 1 per cent per annum
  • CFS management fee percentage and dollar amount as per fund selected
  • On-going service fee per annum dollar amount $650
  • Financial plan review fee $950

The facts in the case study do not cover all of the issues that would apply to a real life client. Where necessary you may add facts to the Statement of Advice to suite the client scenario.

Your Authorized Product List or APL is limited to the Colonial First State (CFS) First Choice personal investment platform and all funds within that platform.

Your clients are seeking investment advice and have a balanced risk profile. For the purpose of this case study, investment recommendations must be selected from the Colonial First Choice platform of managed funds. www.colonialfirststate.com.au

To assist with the analysis of your clients circumstances it is recommended that you complete a fact find for your clients. This will highlight the clients goals, income, expenditure, assets and liabilities. All provided client facts should be included and any facts that you wish to add to the client scenario.

Please Note: You are not required to include the fact find or risk profile questionnaire with your statement of advice.

Client Facts

Carlos Johnson (01/05/1960) and Susana Johnson (01/06/1967) would like to meet you and discuss the construction of an investment portfolio outside of their superannuation.

Mr Johnson has been employed for five years as an accountant with the same company earning an annual income of $130,000 before tax.

Mrs Johnson earns an annual income of $80,000 before tax and has been employed in her role as a marketing consultant working her way up in the same company since leaving school.

They live in their own home at 28 Smith Drive, Wentworthville, NSW. The home is worth approximately $600,000 and is in joint names with a mortgage of $30,000 which they expect to pay off in the next few years. The loan is a basic mortgage product without a redraw facility and currently has a variable interest rate 6.10%. Your clients make monthly payment on the mortgage of $1,200 per month. This amount exceeds the monthly payment required by the bank.

Both Carlos and Susana have superannuation funds with $110,000 and $90,000 respectively in the Colonial First State First Choice Personal Super balanced fund.

Their risk profile questionnaire confirms that they are balanced investors.

Their superannuation includes $175,000 of Life and TPD insurance each. Your clients are not sure if they have sufficient insurance cover.

Carlos and Susan have not put any estate planning measures in place.

Your clients have two children Sophie 10 and James 12. Their additional annual educational costs total $4,000 each per annum. The families total living expenses are $45,000 per annum.

They have $60,000 invested in a bank account in Mr Johnsons name earning 3.5% per annum.

A term deposit matures in one month (August) which will return principal and interest of $210,000 into Carlos cheque account.

Carlos and Susanne explain that they would like to invest outside of superannuation. They are currently focused on their childrens activities and plan to make an investment in about eight years.

Carlos and Suzanne realise that their surplus cash has not returned high rates of interest while they have been paying off their mortgage. They realise that other forms of investment are available which return higher rates of interest. They would like to know a better way to go forward with their investments and personal wealth creation. But they believe that some cash should be available to cover unforseen emergencies equivalent to one months expenses.

The clients are interested in knowing how best to invest their monies in their respective bank accounts, fixed deposit and their home loan. They have heard that monies invested in managed funds/share markets can outperform monies in a bank account or term deposit and if they should utilize their money to pay off their home loan and creating an investment portfolio.

They are going on a holiday around Australia for four weeks within the next eighteen months and is expect it to cost $15,000.

Task 2

Roll Play

Your roll play assumes the presentation of the completed statement of advice in task 1 to your clients. For the purpose of this assessment a single person will be sufficient, assume Carlos or Suzanne.

The presentation should be for approximately 20 minutes including summary, discussion and questions between the parties to the roll play.

It is suggested that you complete a simple agenda or check list for the presentation to ensure all important features of the Statement of Advice are covered with your client.

You need to seek an appropriate person to participate in the roll play. This person cannot be related to you. You must include the full name, address and contact details (mobile number and e-mail address), so that we can contact them if necessary.

Please also ensure that this person signs the below form and adds their contact details.

Once complete this form must be scanned and uploaded to SAKAI with the statement of advice for assessment.

Declaration by the person who acted as the client (this must be completed in full and signed)

Title: Mr./Mrs/Ms./Dr. Other __________

First Name _____________

Surname _____________

Mobile Number ______________

Work or other Number ______________ (please also include area code)

Please circle your answers below:

1. Was the Statement of Advice communicated to you in a clear and concise manner? Yes /No

1. Did you understand the recommendations? Yes/No

1. Were the Investment risks associated with the recommendations explained to your satisfaction? Yes/No

1. Were the fees and charges about the service and advice and any ongoing service explained clearly? Yes /No

1. Were all your questions answered in a satisfactory manner? Yes /No

1. Overall, were you satisfied with the presentation Yes /No

1. How could the presentation be improved?

If the answer for any of the above is No or you are unsure, please comment below:

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The person who played the role of the client and who is NOT related to the student is required to sign below:

Please sign here: ________________________________

Mobile Number:

Email Address:

You also agree by signing this form that a facilitator of NSW TAFE may contact you to discuss your comments regarding this students role play.

Task 3.1

List in bullet point form, five reasons why it is important for a financial plan to be reviewed after it has been implemented.

Task 3.2

In accordance with the financial planning process you wish to offer your clients Carlos and Susana a review of their financial plan. You have discussed this with them previously when you presented their statement of advice almost twelve months ago.

Prepare a letter to your clients that should cover the following points:-

• The reasons for a review
• The cost
• The process followed during a review with your clients

Your letter should comply with the content and format of a standard business document.

Task 3.3

For this task you are to prepare a template and entries for recording file notes in chronological order of the following:-

• A header with your business details
• Columns for recording the date, time and name of the person recording the file note
• Important pieces of information not recorded in the fact find about Carlos and Susana
• Important meetings between the financial planner, Carlos and Susana
• Phone conversations
• Milestones in the financial planning process
• Regulatory and compliance obligations

The file notes should cover the period of time from the initial contact with your clients when you received a phone telephone call from Susana and discussed a meeting to the completion of you review meeting. In other words, the file notes should reflect the whole financial process for your clients.

Limit your file notes to two typed pages.