To make it easy for you to understand the task, I have shared as much details as possible of the entire work. Although I mainly require help in;

• Advice and recommendations section
  • Calculations for the pre-advice and post-advice cashflow and balance sheet/ net worth
  • Retirement planning
• Superannuation and SMSF advice section

Any help with how to go on with the calculations is appreciated!

- - - - - - - - - - - - - - - -

The task consists of the preparation of a scaled advice related to limited scope of matters related to insurance, risk management and superannuation. The advice document needs to be in a form of a professional & compliant Statement of Advice (SOA) in relation to the case study. The SOA must adhere ASIC RG175 requirements in particular the "Clear, Concise and effective" requirement. The SOA must meet the compliance requirement including meeting the Best Interest Duty, Switching advice rules (refer to the ASIC info sheet 182) and the disclosure requirements.

Important Note: Answer the question in a Statement of Advice (SOA) format in accordance with ASIC guidelines (refer to RG 90 for examples only). The SOA must have a "Executive Summary" section where you summarise the client's current situation, needs, concerns, goals, objectives and your recommended strategy.

- Attempt ALL questions and issues raised in the case study assignment.

- Ensure your SOA contains all the relevant sections, to ensure your SOA is compliant with the relevant financial services laws, technically accurate and professionally presented in line with the industry best practice.

- Where appropriate, the use of tables, graphs, flowcharts, etc. is encouraged to help illustrate your point clearly.

- Show workings and calculations where applicable.

- Be clear in answering the questions and or clients' enquiry.

- Assumptions must be clearly stated, assumptions need to be reasonable and logical and cannot conflict with the facts in the question/s

Assumptions:

Inflation 2.1% AWOTE 2.4% (use for wages inflation) Assume the investment rate of return is 5.5% applied to investable assets (i.e. Superannuation) where a growth risk profile asset allocation is used

Case Study - The Jones Family

Joe (aged 32) is married to Mary (aged 30). They have two children, Simon (4) and Ashley (2).

Joe is works as senior manager in financial services in Sydney. Mary is a marketing manager for an IT company.

Joe and Jane have been discussing for a while the need for them to see a financial adviser, they have left you with the information below after the first interview.

Joe and Mary like to ensure they have adequate insurance to protect them and their family and their properties. They also like to consolidate their superannuation accounts since they both have accumulated 2 separate accounts from their past employment. They also want to make sure their superannuation is invested appropriately, to help them grow their superannuation and save for retirement, particularly considering the latest superannuation changes.

Joe and Mary have a very strong view to do whatever possible for their children including making the investment to put them through private school education from primary school if they can afford it otherwise at least for their high school years and would like to continue to assist them in every way possible. They think they would need to set aside $25,000 p.a. in today's dollars for each child to find their children private school education.

Joe and Mary would like to pay off their home loan as soon as possible.

Both Joe and Mary have reasonable experience when it comes to investment and management of their financial affairs. Although in recent times Joe and Mary have been too busy to pay attention to their financial affairs. They, however, hope this will change in the near future as they are keen to take control of their investments to ensure they meet their lifestyle and retirement goals and objectives.

Joe and Mary have decided to come and see you. They made an appointment for an initial consultation with you.

The Jones family personal and financial information:

	Joe Jones	Mary Jones
Income salary & wages (Before Tax)	$180,000	$160,000
Home (principal residence)	$1,100,000 (Joint tenancy)
Home loan @5.5% variable (current repayments $6,500 per month)	$750,000
Home contents	$130,000
Car	$45,000
Bank Account (at call)	$15,000 (Joint)
Superannuation Accounts from previous employments	Hostplus Account Balance: $48,000 (Insurance $220K life and TPD included) Investment: Default Life stages (5% Tax free Component and 95% Taxable, Taxed component)	Rest Super Account Balance: $36,000 (Insurance $150K life and TPD included) Investment: Default Life stages (2.% Tax free component and 98% Taxable, Taxed component)
Current superannuation where the employer contribution is made (retail funds)	Colonial first state Super Account Balance: $125,000 (Insurance $450K life and TPD included) Investment: Growth (80% Growth, 20% Defensive (100 % Taxable, Taxed component)	MLC Personal Super Account Balance: $85,000 (Insurance $450K life and TPD) Investment: Growth (80% Growth, 20% Defensive (100 % Taxable, Taxed component)
Total Joint Living expenses (Exclude loan repayments)	$75,000 p.a

Notes to the supplied information:

Joe and Mary's total joint living expenses will continue until retirement. Joe and Mary current have a family private health insurance.

At present Joe and Mary's superannuation contribution goes to their relevant employer nominated retail fund as stated above.

Risk Profiling- after a risk profile assessment and a through discussion with Joe and Mary on their risk tolerance, attitude to risk and risk capacity, it was determined that their risk profile is "Growth risk Profile" consisting of 80% growth and 20% defensive assets.

As per the assumption provided a growth rate of 5.5 % is applied to investment assets invested in line with the growth risk profile.

Joe and Mary's goals, objectives, needs, and concerns and whether they can achieve their objectives including their retirement objectives and how (attempt to present them with more than one option where applicable). They also ask you to address and consider the following specific issues:

1. Joe and Mary would like to retire once Joe reaches age 67. However, they are happy to postpone retirement for a few more years if this would help them achieve a more comfortable retirement as Joe is happy to scale down his workload and stay working on a consultancy basis for a few more years. They think that they need a total after-tax income of $70,000 in today's dollars during their retirement (assume that this income can be produced tax free at retirement). They would like to know whether they will have sufficient superannuation savings accumulated to help them fund their retirement objectives. (Use the longest life expectancy between Joe and Mary and the add 8 years when performing their retirement projection).

2. Joe and Mary would like to consolidate their superannuation, they want to understand the meaning of the different superannuation component (Tax free and Taxable components). They have also been considering establishing an SMSF. They wanted to know the key relevant issues they need to be aware of including their roles and responsibilities as trustees as well as the key risks and benefits related to their specific circumstances. At present Joe and Mary's superannuation contribution goes to an employer nominated retail fund, they are wondering whether they can consolidate all their superannuation into an SMSF and have their future employer contribution directed to the SMSF.

3. Joe and Mary would like to know more about the possible investments available in an SMSF including investment in real property, they also would know the rules surrounding the purchase and leasing of a real property through the SMSF. They also want to know more about borrowing to purchase a property by using a Limited Recourse Borrowing Arrangement.

4. Joe and Mary would like to know more about their option in utilising their superannuation savings to commence a pension or an income stream in retirement. They would like to know the different types of pensions can be available to them to utilise with their superannuation savings to fund their retirement.

5. Joe and Mary would like to continue their commitment towards their children's private schooling both for their primary and secondary school education. They believe this need $25,000 p.a. for each child.

6. Joe and Mary would like to ensure they have adequate general and personal insurance. They want to know the type of insurance and the amount of cover they should be considering to ensure they are adequately covered be specific in your advice and perform an appropriate needs analysis as part of your justification, discussing why it's important to have a risk management plan and the different risk management strategies they can consider including insurance highlighting the need for insurance and the risks of under insurance.

7. Provide appropriate projection model to justify your recommendations.

8. Use diagrams and charts to assist with your illustrations.

The advice will be limited in scope covering at minimum the key areas below:

Risk management plan including providing detailed Insurance needs analysis and insurance advice including product recommendations and insurance quotes to highlight costing and demonstrate affordability by factoring the insurance cost to the post advice Personal P&L/ cash flow of the clients.

Superannuation consolidation, contribution, investment asset allocations strategies and recommendations providing reasoning and justifications.

Retirement planning.

Provide a personal P&L identifying income less expenses and determine surplus (if applicable) and personal balance sheet or net worth identifying assets and liabilities. This should done for pre advice based on the clients current circumstances as well as post advice.

Cash flow and asset projections.

Provide assumptions used and justifications (cost, risk, suitability, etc.) where required.

What is expected:

Building and structuring the client current situation (including pre advice cash flow and net worth) Clearly analysing the fact in the case study. Appropriately addressing all the client goals, objectives, needs, concerns and special circumstances.

Providing a client with strategy that addresses all the client goals, objectives and concerns and aims to meet the client goals Providing client with options and solutions - providing alternative strategies Highlighting how the strategy is in the best interest of the client - i.e. meeting the best interest duty

Highlighting the risk of the strategy (if any) Addressing how the risks can be mitigated.

Providing specific product recommendations to execute the strategy Obtaining Authority from the client to proceed with the recommendation.

Insurance Advice:

Perform needs analysis based on the clients' facts and special circumstances listed in the case study to determine what personal insurance is needed and the amount of cover required.

Identify needs and gaps and provide clear recommendations of what insurance covers should be sought, increased, or upgraded, cover type, sum insured, etc.

Provide clear costing for the insurance you are recommending by obtaining and submitting Insurance quotes to determine affordability. You can obtain insurance quotes online based on the clients facts in the case study, you can also make appropriate and reasonable assumptions (i.e. client is in good health and is a non smoker, providing there no information to the contrary in the case study).

SMSF & Superannuation Advice:

Avoid including Generic information and general pros and cons.

Advice must be related to SMSF (to set or not to set up, to keep and not to keep, etc.) need to be specific to the client's circumstances and facts listed in the case study.

Other superannuation advice needs to be provided with clear justification maintaining or switching. All super switching advice need to refer to ASIC information sheet INFO182.

Switching Advice:

All switching advice (superannuation, investment, and insurance) need to be clearly justified.

Retirement Advice:

Perform appropriate calculation to identify the amount required to fund retirement income and other expenditures (if any) the clients intending to undertake.

Clearly demonstrate through both cash flow and net worth projections how the clients is able (or unable if they don't have sufficient resources) to fund their retirement.

Disclosure & Compliance:

Appropriate disclosure of fees and benefits and meeting the regulatory requirement of advice documentation. Technically accurate advice - It is critically important to provide accurate advice for the client to rely on.

Key sections to include in the SOA:

1. Executive summary

2. Scope of Advice

3. Assumptions

4. Current situation - Information of the client

Goals and objectives analysis including needs, concerns and special circumstances

Personal financial statements

- Balance Sheet/ Net worth (Assets - Liabilities)

- Cash flow (income - expenses) determine deficit/ surplus, expenses from after tax income, living expenses + debt repayments + other expenses (where applicable)

Risk profile analysis

5. Advice and recommendations

Investment advice

Retirement planning advice

- Determine retirement needs, affordability (priority and trade off), funding source (i.e. superannuation, other investments/ savings)

Insurance advice

- Need analysis to determine sum insured and type of insurance, quotes for what is needed, determine affordability, recommendation, factor into the post advice cash flow

Superannuation and SMSF advice

- Consolidation if and where applicable

- Minimum generic information, relate to the clients specific needs, facts and circumstances

- Ensure superannuation invested inline with the client's risk profile

- Insurance inside superannuation

- Super switching where application (meet the obligations as required in ASIC information sheet 182)

Estate planning advice (where applicable)

- Minimum generic information, relate to the clients specific needs, facts and circumstances

Other advice related to specific goals and objectives (education funding, specific questions, etc.)

Meeting best interest duty

Risks of the advice and how they are mitigated

6. Disclosure sections - meeting all the legal and best practice disclosure requirements:

The cost of the advice and how you are paid

All fees, commissions and other benefits including soft dollar commissions

How to proceed, authority to proceed and actions to proceed

Implementation schedule