You have completed your first meeting with Harper and Riley Evans. You are confident that you now have most of the information you will need to prepare a comprehensive financial plan for them. Beyond what they shared in the meeting, they had emailed most of the documents you requested in advance of the meeting. Riley and Harper, both 38 years old, shared a lot about their 8-year-old daughter Drew. It is a clear priority of the Evans' is to do whatever they can to provide Drew all the opportunities available. Drew attends a private school which is renowned for their swim program. Before classes start each day, she goes to swim practice. Drew loves swimming. She would like to participate in the provincial championships next year and her coach is confident that she could qualify. To continue to develop the skill competitively, Drew's coach told Riley that he should expect to spend about $4,000 a year in swim fees. The Evans' insist that this be budgeted for as part of their plan until Drew goes to university. Beyond swim expenses, the Evan's pay school tuition in semi annual installments of $5,500 each. Harper receives the tax deduction for the tuition. As it comes from their bank account, Riley questions why Harper claims it. They have some savings for Drew's post secondary education. A friend had told Riley he should buy some mutual funds in an "In-Trust" account and put it under Drew's Social Insurance Number (SIN). The income would be taxed in Drew's hands. Riley set up the account and contributes $500 a month to a fixed income mutual fund. As of the last investment statement, the mutual fund was valued at $13,650. Riley chose a fixed income mutual fund as it seemed easy to set up and he was told it wasn't as volatile as stocks. The return on the fund since inception has been 4.5%. The Evans expect Drew to go to a prestigious US university and wants to be able to have $25,000 US (or $31,000CDN ) in today's dollars to give to Drew for each of the expected four years she will attend university. Although inflation has been running in the 1.5% to 2.5% range, Riley has heard that education costs have been escalating at about 4% and would like you to use that rate in calculating whether they are saving enough. Beyond providing for Drew, why the Evans came to see you was a $50,000 inheritance that Harper had just received from a great aunt's estate. Harper did not know that she was included in her aunt's will so was very surprised with this inheritance. They have asked you what alternatives are available for investment including the pros and cons of each alternative. Harper mentioned that she had heard that in Ontario, it is best to keep the funds separate because they would not be included in the net family property value calculation. She would like options for this inheritance where the funds would not be co-mingled with funds from Riley. During the one and a half hour meeting, you also found out that Riley is a national sales manager at a specialty electronics company. His annual salary is $91,000 plus a benefits package. The package (completely funded by the employer except the pension) includes group health coverage, group life insurance equal to two times his salary, dental coverage with an annual maximum of $1,000,100% short- term (3-months) and 50% long-term disability insurance coverage of his salary and a pension plan. Neither of the Evans have any other life or disability insurance. They want their family to have the same lifestyle and standard of living in case of premature death of either of them. They have heard a friend talk about critical illness protection and wanted to know if Riley needs such protection. Riley and his employer contribute to a pension plan. Riley does not understand exactly how his pension plan works. The pension plan documentation does not state what his final pension will be When Drew was born, they updated their wills with a lawyer. Harper thinks now it might be time to even though he knows exactly how much he is contributing each year. Ultimately, he is not overly review their wills again and has asked you to provide a list of any special clauses that should be concerned since he doesn't think he will work with the same company until he retires at age 62 . Based included in their wills. They do not have powers of attorney (POA) and the Evans do not seem to on his industry, he expects to work with two more companies at least before retirement. He provided understand the importance of these documents. you with a copy of his most recent pension statement. He and his employer each contributed $1,000 While talking about estate planning, Harper indicated that they are very active in their church, and she to the plan annually into a balanced mutual fund selected by Riley. The fund has had an average rate donates $3,000 annually to the causes the church supports. She would also like to bequest $100,000 of return of 5.5% (before fees and inflation). The current value of the vested benefits is $15,500. that varies each year. The minimum annual bonus amount she expects is $14,000. She feels this would the cottage itself) to Drew on the assumption that she will be self-sufficient by then. be a safe projection to use in the financial plan. She is registered as a spouse on Riley's benefit The Evans have never analyzed their investments before. In the past, they have invested mainly with package at his work and she has no benefits at work other than a Group RRSP. She contributes $500a advice from friends. They have a mix of various investments. Riley bought $5,000 worth of gold month to the Group RRSP (invested in a short-term bond fund) which is matched by $250 from her mining stocks two years ago from a broker who called him at home one night. Riley is not sure of its employer. She only started contributing to the Group RRSP last month and it is currently worth $750. She had hesitated starting contributions to the plan because she does not understand the difference value today. He believes it might be worth $2,000. Harper invested $8,000 in a money market mutual fund under a non-registered account that now has a market value of $8,350. between her Group RRSP, Riley's pension plan, and the type of plan her sister has through her employer. Her sister Brittany has a Registered Pension Plan (RPP) to which only her employer In addition to the inheritance money in Harper's savings account, there is $22,000 in their joint bank contributes. Brittany will receive 2% for each year she works with her employer times the average of account. Their joint investment account at the bank's discount brokerage has $87,000 in it comprised her final three year's salary. You make a mental note to include a discussion on the various options in of $23,000 in money market mutual funds, $5,500 cash from non-invested distributions, $10,000 of a the retirement planning section of the financial plan. Latin American Mutual Fund (original cost $17,500 ), $40,000CDN in a US Index Mutual Fund (original cost $28,000CDN ) and $8,500 of a (LSVCC) Labour Sponsored Venture Capital Corporation (original From the Evans' tax returns, you note that they each paid the required Canada Pension Plan (CPP) cost $8,500 ). Harper is wondering if they should sell these investments to pay down some of the premiums and Employment Insurance premiums. Riley paid approximately $27,000 in income taxes mortgage. She is concerned about the tax consequences involved in this type of strategy. and Harper paid $37,000 in taxes. When Riley and Harper last visited their bank branch, they were encouraged to open a $20,000 unsecured personal line of credit (PLC) with an interest rate of prime +4%. With prime rate at 4.5%, the current interest rate on the PLC is 8.5%. They were told that it was important for all homeowners to have a line of credit in case of emergencies. Riley has found it convenient to use the line of credit to purchase items when the credit card limit is reached. Riley stated that his credit card limit of $7,000 was fully utilized and he had used $2,500 of the line of credit. Harper simply shook her head and commented that they usually payoff only 10% of the outstanding balance on the credit cards and all the interest accrues on the line of credit each month. The Evans own a cottage that Riley inherited from his aunt. Riley estimates that the cottage is currently worth about $335,000 which is about what it was worth when he inherited it. He believes that due to the demand that aging baby boomers will put on recreation properties, the cottage will escalate in value at a rate of at least 12% per year. Both parents want Drew to inherit the cottage. You have gathered all the necessary information and now you are now moving to the analysis step of the financial planning process. 1. Prepare Net Worth statement using the appropriate template. ( 3 marks) 2. Cash Flow statement using the appropriate template. (3 marks) 3. Any three of the four ratios with brief explanation on them without any recommendations. (3 marks) - Basic Liquidity Ratio - Liquid Assets to Total Assets Ratio - Investment to Net Worth Ratio - Debt to Assets Ratio 4. A summary that you would share with the Evans with your assessment of their net worth statement (including ratios) and cash flow statement. Your summary can be bullet points and aim for a maximum of 500 words. (3 marks) Note: When completing this assignment, remember that this is the analysis step of the financial planning process, and the objective of this exercise is to analyze what you have gathered. You are not providing recommendations. You have completed your first meeting with Harper and Riley Evans. You are confident that you now have most of the information you will need to prepare a comprehensive financial plan for them. Beyond what they shared in the meeting, they had emailed most of the documents you requested in advance of the meeting. Riley and Harper, both 38 years old, shared a lot about their 8-year-old daughter Drew. It is a clear priority of the Evans' is to do whatever they can to provide Drew all the opportunities available. Drew attends a private school which is renowned for their swim program. Before classes start each day, she goes to swim practice. Drew loves swimming. She would like to participate in the provincial championships next year and her coach is confident that she could qualify. To continue to develop the skill competitively, Drew's coach told Riley that he should expect to spend about $4,000 a year in swim fees. The Evans' insist that this be budgeted for as part of their plan until Drew goes to university. Beyond swim expenses, the Evan's pay school tuition in semi annual installments of $5,500 each. Harper receives the tax deduction for the tuition. As it comes from their bank account, Riley questions why Harper claims it. They have some savings for Drew's post secondary education. A friend had told Riley he should buy some mutual funds in an "In-Trust" account and put it under Drew's Social Insurance Number (SIN). The income would be taxed in Drew's hands. Riley set up the account and contributes $500 a month to a fixed income mutual fund. As of the last investment statement, the mutual fund was valued at $13,650. Riley chose a fixed income mutual fund as it seemed easy to set up and he was told it wasn't as volatile as stocks. The return on the fund since inception has been 4.5%. The Evans expect Drew to go to a prestigious US university and wants to be able to have $25,000 US (or $31,000CDN ) in today's dollars to give to Drew for each of the expected four years she will attend university. Although inflation has been running in the 1.5% to 2.5% range, Riley has heard that education costs have been escalating at about 4% and would like you to use that rate in calculating whether they are saving enough. Beyond providing for Drew, why the Evans came to see you was a $50,000 inheritance that Harper had just received from a great aunt's estate. Harper did not know that she was included in her aunt's will so was very surprised with this inheritance. They have asked you what alternatives are available for investment including the pros and cons of each alternative. Harper mentioned that she had heard that in Ontario, it is best to keep the funds separate because they would not be included in the net family property value calculation. She would like options for this inheritance where the funds would not be co-mingled with funds from Riley. During the one and a half hour meeting, you also found out that Riley is a national sales manager at a specialty electronics company. His annual salary is $91,000 plus a benefits package. The package (completely funded by the employer except the pension) includes group health coverage, group life insurance equal to two times his salary, dental coverage with an annual maximum of $1,000,100% short- term (3-months) and 50% long-term disability insurance coverage of his salary and a pension plan. Neither of the Evans have any other life or disability insurance. They want their family to have the same lifestyle and standard of living in case of premature death of either of them. They have heard a friend talk about critical illness protection and wanted to know if Riley needs such protection. Riley and his employer contribute to a pension plan. Riley does not understand exactly how his pension plan works. The pension plan documentation does not state what his final pension will be When Drew was born, they updated their wills with a lawyer. Harper thinks now it might be time to even though he knows exactly how much he is contributing each year. Ultimately, he is not overly review their wills again and has asked you to provide a list of any special clauses that should be concerned since he doesn't think he will work with the same company until he retires at age 62 . Based included in their wills. They do not have powers of attorney (POA) and the Evans do not seem to on his industry, he expects to work with two more companies at least before retirement. He provided understand the importance of these documents. you with a copy of his most recent pension statement. He and his employer each contributed $1,000 While talking about estate planning, Harper indicated that they are very active in their church, and she to the plan annually into a balanced mutual fund selected by Riley. The fund has had an average rate donates $3,000 annually to the causes the church supports. She would also like to bequest $100,000 of return of 5.5% (before fees and inflation). The current value of the vested benefits is $15,500. that varies each year. The minimum annual bonus amount she expects is $14,000. She feels this would the cottage itself) to Drew on the assumption that she will be self-sufficient by then. be a safe projection to use in the financial plan. She is registered as a spouse on Riley's benefit The Evans have never analyzed their investments before. In the past, they have invested mainly with package at his work and she has no benefits at work other than a Group RRSP. She contributes $500a advice from friends. They have a mix of various investments. Riley bought $5,000 worth of gold month to the Group RRSP (invested in a short-term bond fund) which is matched by $250 from her mining stocks two years ago from a broker who called him at home one night. Riley is not sure of its employer. She only started contributing to the Group RRSP last month and it is currently worth $750. She had hesitated starting contributions to the plan because she does not understand the difference value today. He believes it might be worth $2,000. Harper invested $8,000 in a money market mutual fund under a non-registered account that now has a market value of $8,350. between her Group RRSP, Riley's pension plan, and the type of plan her sister has through her employer. Her sister Brittany has a Registered Pension Plan (RPP) to which only her employer In addition to the inheritance money in Harper's savings account, there is $22,000 in their joint bank contributes. Brittany will receive 2% for each year she works with her employer times the average of account. Their joint investment account at the bank's discount brokerage has $87,000 in it comprised her final three year's salary. You make a mental note to include a discussion on the various options in of $23,000 in money market mutual funds, $5,500 cash from non-invested distributions, $10,000 of a the retirement planning section of the financial plan. Latin American Mutual Fund (original cost $17,500 ), $40,000CDN in a US Index Mutual Fund (original cost $28,000CDN ) and $8,500 of a (LSVCC) Labour Sponsored Venture Capital Corporation (original From the Evans' tax returns, you note that they each paid the required Canada Pension Plan (CPP) cost $8,500 ). Harper is wondering if they should sell these investments to pay down some of the premiums and Employment Insurance premiums. Riley paid approximately $27,000 in income taxes mortgage. She is concerned about the tax consequences involved in this type of strategy. and Harper paid $37,000 in taxes. When Riley and Harper last visited their bank branch, they were encouraged to open a $20,000 unsecured personal line of credit (PLC) with an interest rate of prime +4%. With prime rate at 4.5%, the current interest rate on the PLC is 8.5%. They were told that it was important for all homeowners to have a line of credit in case of emergencies. Riley has found it convenient to use the line of credit to purchase items when the credit card limit is reached. Riley stated that his credit card limit of $7,000 was fully utilized and he had used $2,500 of the line of credit. Harper simply shook her head and commented that they usually payoff only 10% of the outstanding balance on the credit cards and all the interest accrues on the line of credit each month. The Evans own a cottage that Riley inherited from his aunt. Riley estimates that the cottage is currently worth about $335,000 which is about what it was worth when he inherited it. He believes that due to the demand that aging baby boomers will put on recreation properties, the cottage will escalate in value at a rate of at least 12% per year. Both parents want Drew to inherit the cottage. You have gathered all the necessary information and now you are now moving to the analysis step of the financial planning process. 1. Prepare Net Worth statement using the appropriate template. ( 3 marks) 2. Cash Flow statement using the appropriate template. (3 marks) 3. Any three of the four ratios with brief explanation on them without any recommendations. (3 marks) - Basic Liquidity Ratio - Liquid Assets to Total Assets Ratio - Investment to Net Worth Ratio - Debt to Assets Ratio 4. A summary that you would share with the Evans with your assessment of their net worth statement (including ratios) and cash flow statement. Your summary can be bullet points and aim for a maximum of 500 words. (3 marks) Note: When completing this assignment, remember that this is the analysis step of the financial planning process, and the objective of this exercise is to analyze what you have gathered. You are not providing recommendations