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Assignment
Securities and Managed Investments
(DFP4_AS_v2A1)
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Before you begin
Read everything in this document before you start your assignment for Securities and Managed Investments (DFP4_AS_v2A1).
About this document
This document includes the following three (3) parts:
• Part 1: Instructions for completing and submitting this assignment
• Part 2: The assignment
• Section 1: Case Study Questions
– Case study 1: Establish relationship with client and identify client’s objectives, needs and financial situation
– Case study 2: Analyse client’s objectives, needs, financial situation and risk profile to develop appropriate strategies and solutions
– Case study 3: Present appropriate strategies and solutions to client and negotiate a financial plan, policy or transaction
– Case study 4: Agree the plan, policy or transaction and complete documentation
– Appendices
Risk profiles
Approved products list
• Section 2: Present appropriate strategies and solutions to client and negotiate a financial plan, policy or transaction
• Section 3: Agree the plan, policy or transaction and complete documentation
• Section 4: Provide ongoing service where requested by client
Note: Section 2–4 questions relate to Case Study 4.
Completing the assignment
The assignment
Complete Part 2:
Section 1
• Case study 1: Questions 1–4
• Case study 2: Questions 1–4
• Case study 3: Questions 1–4
• Case study 4: Questions 1–4
Section 2
• Parts A–C
Section 3
• Parts A–C
Section 4
• Parts A & B.
Part 1: Instructions for completing and submitting this assignment
How to use the study plan
We recommend that you use the study plan for this subject to help you manage your time to complete the assignment within your enrolment period. Your study plan is in the KapLearn Securities and Managed Investments (DFP4v2) subject room.
Word count
The word count shown with each question is indicative only. You will not be penalised for exceeding the suggested word count. Please do not include additional information which is outside the scope of the question.
Additional research
When completing this assignment, assumptions are permitted, although they must not be in conflict with the information provided in the case studies.
You may also be required to source additional information from other organisations in the finance industry to find the right products or services to meet your clients’ requirements, or to calculate any service fees that may be applicable.
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your work regularly.
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(e.g. 12345678_DFP1B_Submission1).
• Include your student ID on the first page of the assignment.
Before you submit your work, please do a spell check and proofread your work to ensure that everything is clear and unambiguous.
Submitting the assignment
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You are able to submit your assignment earlier than the deadline if you are confident you have completed all parts and have prepared a quality submission.
The assignment marking process
You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
Should your assignment be deemed ‘not yet competent’, you will be give an additional four (4) weeks to resubmit your assignment.
Your assessor will mark your assignment and return it to you in the Securities and Managed Investments (DFP4v2) subject room in KapLearn under the ‘Assessment’ tab.
Make a reasonable attempt
You must demonstrate that you have made a reasonable attempt to answer all of the questions in your assignment. Failure to do so will mean that your assignment will not be accepted for marking; therefore you will not receive the benefit of feedback on your submission.
If you do not meet these requirements, you will be notified. You will then have until your submission deadline to submit your completed assignment.
How your assignment is graded
Assignment tasks are used to determine your ‘competence’ in demonstrating the required knowledge and/or skills for each subject. As a result, you will be graded as either competent or not yet competent.
Your assessor will follow the below process when marking your assignment:
• Assess your responses to each question, and sub-parts if applicable, and then determine whether you have demonstrated competence in each question.
• Determine if, on a holistic basis, your responses to the questions have demonstrated overall competence.
‘Not yet competent’ and resubmissions
Should sections of your assignment be marked as ‘not yet competent’ you will be given an additional opportunity to amend your responses so that you can demonstrate your competency to the required level.
You must address the assessor’s feedback in your amended responses. You only need amend those sections where the assessor has determined you are ‘not yet competent’.
Make changes to your original submission. Use a different text colour for your resubmission. Your assessor will be in a better position to gauge the quality and nature of your changes. Ensure you leave your first assessor’s comments in your assignment, so your second assessor can see the instructions that were originally provided for you. Do not change any comments made by a Kaplan assessor.
Units of competency
This assignment is your opportunity to demonstrate your competency against these units:
FNSASICW503 Provide advice in securities
FNSASICT503 Provide advice in managed investments
FNSFMK502 Analyse financial market products for client
FNSFMK503 Advise clients on financial risk
FNSCUS505 Determine client requirements and expectations
FNSCUS506 Record and implement client instructions
FNSINC501 Conduct product research to support recommendations
FNSIAD501 Provide appropriate services, advice and products to clients
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If you have any questions about this assignment you can post your query at the ‘Ask your Tutor’ forum in your subject room. You can expect an answer within 24 hours of your posting from one of our technical advisers or student support staff.
Part 2: The assignment
Section 1: Case Study Questions
Case study 1 (Arthur and Gwen)
Background information
Arthur (61) and Gwen (62) have recently sold their four-bedroom home of 35 years, downsizing into a new ‘over 55s’ townhouse. This has generated net proceeds of $250,000, and as this is the first time they have a significant amount of surplus funds, they have decided to seek some investment advice. After some discussion, you have determined the following facts.
Employment
Arthur is still working, but will look to retire from the workforce in two years time. Arthur earns $120,000 (including super) as a meteorologist. Gwen does not work and has no intention of rejoining the workforce.
Savings and spending
Arthur is not currently making any contributions into super apart from his employer’s 9.5% SGC. Since paying off their mortgage a few years ago, they have tended to save about $5000 every year from Arthur’s income, which has been going to their savings account. They have looked at their budget over the years and they figure that they spend about $1000 per week on bills, food and lifestyle expenses. This level of spending will likely continue after Arthur is retired.
Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home Joint $500,000 $0 $500,000 Recent purchase price
Home contents Joint $130,000 $0 $130,000 Replacement value
Car Arthur $18,000 $0 $18,000 Hyundai Excel bought 9 years ago new
Car Joint $10,000 $0 $10,000 Toyota Rav4 bought 3 years ago second-hand
Transaction account Joint $10,000 $0 $10,000 Usually maintain float of $10,000; surplus transferred into savings account periodically
Total personal assets $668,000 $0 $668,000
Superannuation
Employer superannuation Arthur $590,000 n.a. $590,000 Balanced option
Employer superannuation Gwen $65,000 n.a. $65,000 Conservative option
Total superannuation $655,000 $655,000
Other investments
Savings account Joint $290,000 Nil $290,000 Includes net proceeds from downsizing
Total other investments $290,000 Nil $290,000
Total investments $945,000 $945,000
Net worth $1,613,000 $0 $1,613,000
Investment objectives
• Neither Arthur nor Gwen has had any experience with investing (apart from term deposits). They were both surprised to hear that they had the ability to decide how their superannuation was invested.
• They are definitely worried about losing money through their investments, and when first asked they indicated that they want to eliminate the risk of any capital losses. However, after some discussion, you uncover that they would be comfortable with some volatility, including short-term losses, but wanted to limit losses in any one year to –10% of the starting investment value.
• Arthur feels that a return of about 10–15% p.a. would be good. He saw the value of his old home increase fivefold since they initially purchased it and understands that investments can earn a lot more than term deposits. Gwen commented that she has a friend ‘who does some sort of FX trading and she makes a lot of money through investing’.
• They would like their investments to cover their spending through retirement, and will leave their only child whatever assets they have left when they have passed away.
• Gwen does not want her money invested in companies that she believes are harming society, including tobacco companies, alcohol suppliers and coal miners.
• Arthur is interested in investing more in emerging technologies and developing countries as he feels this is a common-sense way to make money faster.
• They do not want to invest in hedge funds as they have heard negative reports over the years about the way they operate.
• They want their investments to be managed all together (i.e. combined risk profile).
Case study 1: Question 1
(a) Determine the clients’ ability to take on investment risk (low, average, high) and provide two key reasons for this assessment. (100 words)
(b) Determine the clients’ willingness to take on investment risk (low, average, high) and provide two key reasons for this assessment. (100 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 1: Question 2
Is the clients’ return objective appropriate? Why or why not? What further actions should be taken prior to establishing an investment strategy? (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 1: Question 3
Refer to the risk profiles in Appendix 1. Which of these would be most appropriate to meet the clients’ investment needs? (100 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 1: Question 4
List and describe four (4) different investment constraints the clients exhibit. (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 2 (Mario and Corsette)
Background information
Mario (32) is a systems engineer in the local arm of a large multinational software company. He is married to Corsette (28). They have two young children and they live in an apartment in the inner city. He has recently inherited his grandfather’s Australian share portfolio, a property located in a different city and some cash, and he is looking for investment advice. Following a lengthy fact-find meeting with only Mario, you have collated the following information.
Employment
Mario has been working for his current employer for 18 months and earns $135,000 plus 9.5% SGC. Corsette has never been gainfully employed, but is currently studying part-time. Mario has no plans to retire in the foreseeable future.
Savings and spending
Mario and Corsette spend most of their income, with any surplus funds usually used to fund new gadgets, cars or holidays.
Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home Joint $700,000 $400,000 $300,000 Purchased 5 years ago. 25 years left on mortgage
Home contents Joint $100,000 $0 $100,000 Replacement value
Car Joint $38,000 $24,000 $14,000 Toyota Kluger
Car Joint $18,000 $0 $18,000 Mini Cooper
Boat Mario $25,000 $0 $25,000 His father’s old boat
Transaction account Joint $2,000 $0 $2,000 Usually have at least $2,000
Total personal assets $883,000 $424,000 $459,000
Superannuation
Personal superannuation Mario $95,000 n.a. $95,000 High growth option
Total superannuation $95,000 $95,000
Other investments
Cash management account Mario $50,000 $0 $50,000 Inheritance cash. Receives income from property and share account (approx. $40k p.a.)
Investment property Mario $480,000 $0 $480,000 Inherited with a cost base of $480,000
Australian share account Mario $650,000 $0 $650,000 Inherited with an aggregate cost base of $240,000
Total other investments $1,180,000 $0 $1,180,000
Total investments $1,275,000 $0 $1,275,000
Net worth $2,158,000 $424,000 $1,734,000
Investment objectives
• Mario doesn’t want to sell the inherited property as he has fond memories of spending time with his grandparents in the house. He plans to rent it out indefinitely.
• Mario’s grandfather had generated a lot of wealth through investing in ASX-listed blue-chip companies and he wishes to retain at least half of this inherited portfolio.
• Mario is not averse to borrowing funds to invest.
• Mario wants their investments to be managed all together (i.e. combined risk profile).
Risk profile
Mario has determined that his investments should be managed in line with that of a ‘growth’ investor. He understands the risks that come with such a strategy, but is willing to accept these risks due to the long timeframe he has until his potential retirement.
Case study 2: Question 1
(a) Determine the client’s ability to take on investment risk (low, average, high) and provide two key reasons for this assessment. (100 words)
(b) Determine the client’s willingness to take on investment risk (low, average, high) and provide two key reasons for this assessment. (100 words)
(c) Even though the investments are all in Mario’s name, why would it be appropriate to also ascertain Corsette’s attitude towards investment risk? (100 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 2: Question 2
(a) Identify the client’s main investment constraints. Are these objectives rational from an investment point of view? (200 words)
(b) How might these constraints affect the client’s asset allocation? What are some appropriate ways of dealing with this? (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 2: Question 3
What concerns might you have in regards to recommending gearing for this client? (100 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 2: Question 4
What are some other considerations that might be important for the clients to take into account? (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 3 (Sam and Rosie)
Background information
Sam (46) and Rosie (43) are the trustees and members of the Gam G Family Super Fund and are seeking investment advice in regards to the fund’s assets. If possible, they want their investments to be invested directly (e.g. listed shares, direct holdings), and not through managed funds.
Super fund portfolio — current
Asset $ % Notes
AUSTRALIAN EQUITIES
BHP Billiton (BHP) 55,000 4.2
Commonwealth Bank (CBA) 70,000 5.3
National Australia Bank (NAB) 60,000 4.6
Rio Tinto (RIO) 60,000 4.6
Westpac Bank (WBC) 70,000 5.3
Wesfarmers (WES) 60,000 4.6
INTERNATIONAL EQUITIES
ExxonMobil (XOM) 80,000 6.1 US-listed shares
PROPERTY and INFRASTRUCTURE
46 Factory Lane 350,000 26.6 Commercial warehouse
Transurban (TCL) 25,000 1.9
Westfield Group (WDC) 30,000 2.3
ALTERNATIVE ASSETS
Gold bullion 40,000 3.0
FIXED INTEREST
ANZ Capital Notes 3 (ANZPF) 90,000 6.8
CASH
CBA cash management account 45,000 3.4
Bankwest term deposits 280,000 21.3 1 year maturity
Total investments $1,315,000 100.0%
Investment objectives
• Sam and Rosie want to diversify their super further into international assets.
• They are skeptical about debt securities as they cannot see how they can provide adequate returns in the current environment of ultra-low interest rates.
Super fund investment strategy — asset allocation
Asset Target % Range % Notes
AUSTRALIAN EQUITIES 25 20–30
INTERNATIONAL EQUITIES 20 10–30
PROPERTY and INFRASTRUCTURE 25 20–30
ALTERNATIVE ASSETS 0 0–20
FIXED INTEREST 15 10–25
CASH 15 10–50 Includes short-term deposits
Case study 3: Question 1
(a) Discuss the main costs and benefits of investing directly as opposed to investing through managed funds. (200 words)
(b) Describe the main types of equity and debt securities available to an Australian retail investor. (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 3: Question 2
(a) Refer to the current portfolio and investment strategy. What investor risk profile best describes these clients and why? (100 words)
(b) In what ways does the current portfolio breach the super fund’s stated investment strategy?
(100 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 3: Question 3
(a) Explain the concept of systematic risk and how it relates to diversification. (200 words)
(b) Determine whether there is adequate diversification in the equities portion of the clients’ portfolio, and provide two (2) recommendations that might help to improve the portfolio’s diversification. (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 3: Question 4
(a) Discuss the role of fixed interest assets in a portfolio. (200 words)
(b) Describe the benefits of including an exposure to government bonds in the clients’ portfolio and how this might be accomplished (given the clients’ preference for investing in direct securities). (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 4 (John and Lily)
Background information
John (21) and Lily (21) have put together a trust to help pay for their newborn son Harry’s board and tuition at a prestigious college (to begin in 11 years time). As a result of the liquidation of various assets, they have contributed $500,000 into the trust.
Harry’s education trust
Asset $ % Notes
AUSTRALIAN EQUITIES
–
INTERNATIONAL EQUITIES
–
PROPERTY
–
ALTERNATIVE ASSETS
–
FIXED INTEREST
–
CASH
–
Bank account $500,000 100.0
Total investments $500,000 100.0%
Risk profile questionnaire
Investment attitude details
Please answer the following questions regarding your attitude to financial issues.
Are you concerned about the amount of tax that you are paying? Why? Yes/No
We do not wish to borrow for investment purposes.
How important is liquidity (i.e. funds available) to you? Why? Very/Moderately/Not
We do not need the funds now but would not want them locked up until Harry turns 11.
If you had funds available for investing, how would you choose to invest them? Why?
We want to invest across different areas of investments.
Are there certain sorts of investment that you wish to avoid? Which ones? Yes/No
We do not want to invest in companies that are likely to cause harm to society.
Determining your investor risk profile Points
This investor risk profile questionnaire has been designed to help you understand the type of investor you are, so that with the help of your adviser, you can choose the investments that best match your financial objectives.
Q1. Which of the following best describes your current stage of life? Client 1
Single with few financial commitments. You are keen to accumulate wealth for the future. Some funds must be kept available for enjoyment such as cars, clothes, travel and entertainment 50
A couple without children. You may be preparing for the future by establishing and furnishing a home. There are a lot of things you need to buy. You are probably better off financially now than you may be in the future 40
Young family. This is the peak home purchasing stage. You have a mortgage and a very small amount of savings. Probably dissatisfied with your financial position and the amount of money saved 35?
Mature family. You are in your peak earning years and have got the mortgage under control. Many partners also work and any children are growing up and have either left home or require less supervision. You are starting to think about retirement, although it may be many years away 30
Preparing for retirement. You probably own your own home and have few financial commitments; however, you want to ensure that you can afford a comfortable retirement. Interested in travel, recreation and self-education 20
Retired. You are no longer working, so you must rely on existing funds and investments to maintain your lifestyle. You may be receiving the pension and are keen to enjoy life and maintain your health 10
Q2. What return do you reasonably expect to achieve from your investments? Client 1
A return without losing any capital 10
1–3% p.a. 20
3–6% p.a. 30
6–9% p.a. 40?
Over 9% p.a. 50
Q3. If you did not need your capital for more than 10 years, for how long would you be prepared to see your investment performing below your expectations before you cashed it in?
You would cash it in if there was any loss in value 10
Less than 1 year 20
Up to 3 years 30?
Up to 5 years 40
Up to 7 years 45
Up to 10 years 50
Q4. How familiar are you with investment markets?
Very little understanding or interest 10
Not very familiar 20
Have had enough experience to understand the importance of diversification 30?
Understand that markets may fluctuate and that different market sectors offer different income, growth and taxation characteristics 40
Experienced with all investment sectors and understand the various factors that may influence performance 50
Q5. If you can only get greater tax efficiency from more volatile investments, which balance would you be most comfortable with?
Preferably guaranteed returns, before tax savings 10
Stable, reliable returns, minimal tax savings 20?
Some variability in returns, some tax savings 30
Moderate variability in returns, reasonable tax savings 40
Unstable, but potentially higher returns, maximising tax savings 50
Q6. Six months after placing your investment you discover that your portfolio has decreased in value by 20%. What would be your reaction?
Horror. Security of capital is critical and you did not intend to take risks 10
You would cut your losses and transfer your money into more secure investment sectors 20?
You would be concerned, but would wait to see if the investments improve 30
This was a calculated risk and you would leave the investments in place, expecting performance to improve 40
You would invest more funds to lower your average investment price, expecting future growth 50
Q7. Which of the following best describes your purpose for investing?
You want to invest for longer than five years, probably to the age of 55–60. You are mainly investing for growth to accumulate long-term wealth 50
You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-term wealth 40
You have a lump sum, e.g. an inheritance or an eligible termination payment from your employer, and you are uncertain about what secure investment alternatives are available 30?
You are nearing retirement and you are investing to ensure that you have sufficient funds available to enjoy retirement 20
You have some specific objectives within the next five years for which you want to save enough money 20
You want a regular income and/or totally protect the value of your savings 10
Investor profile total points ?
INVESTOR RISK PROFILE SUMMARY
0–50 Defensive
You are a conservative investor. Risk must be very low and you are prepared to accept lower returns to protect capital. The negative effects of tax and inflation will not concern you, provided that your initial investment is protected.
51–130 Moderate
You are a cautious investor seeking better than basic returns, but risk must be low. Typically an older investor seeking to protect the wealth that you have accumulated, you may be prepared to consider less aggressive growth investments.
131–210 Balanced
You are a prudent investor who wants a balanced portfolio to work towards medium to long-term financial goals. You require an investment strategy that will cope with the effects of tax and inflation. Calculated risks will be acceptable to you to achieve good returns.
211–300 Growth
You are an assertive investor, probably earning sufficient income to invest most funds for capital growth. Prepared to accept higher volatility and moderate risks, your main concern is to accumulate assets over the medium to long term. You require a balanced portfolio, but more aggressive investment strategies may be included.
301–350 High growth
You are an aggressive investor prepared to compromise portfolio balance to pursue potentially greater long-term returns. Your investment choices are diverse, but carry with them a higher level of risk. Security of capital is secondary to the potential for wealth accumulation.
Other investment objectives
• John and Lily want a well-diversified portfolio in line with their risk profile.
• They have heard that using index managers is most appropriate for retail investors and would like some advice in this regards.
• They are skeptical about debt securities as they cannot see how they can provide adequate returns in the current environment of ultra-low interest rates.
• John would like to see a reasonable exposure to China and other emerging markets.
• Lily has a preference for socially responsible companies and investments.
Case study 4: Question 1
(a) The ongoing review of portfolios is an important component of the investment advice process. Comparing this case study (John and Lily) to the previous case study (Sam and Rosie), determine and explain an appropriate frequency of review for the respective portfolios. (200 words)
(b) Explain the different fee arrangements that are commonly used by fund managers. (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 4: Question 2
(a) Give three (3) reasons why an investor might consider using active fund managers. (100 words)
(b) Which asset classes or strategies might be suitable for the passive approach to investing, and why? (100 words)
(c) Describe two (2) different investment styles an equity fund manager might use. (100 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 4: Question 3
(a) What are some of the key things an investor might focus on when evaluating fund managers?
(200 words)
(b) Research one of the Australian share funds listed on the approved products list (refer to Appendix 2):
(i) Describe the fund’s objectives and strategy. (100 words)
(ii) Determine the fund’s benchmark and analyse its relative performance over the past five years. (100 words)
(iii) Determine whether the fund should be included in the client’s portfolio. (100 words)
Answer here
Assessor feedback: Resubmission required?
No
Case study 4: Question 4
Assume you put the entire trust funds into the Netwealth Investment Wrap platform (refer to Appendix 2). Provide the following to John and Lily (400 words):
(a) recommended client portfolio (a reasonable basis for advice for each investment chosen is not required)
(b) recommended asset allocation
(c) fees.
Answer here
Assessor feedback: Resubmission required?
No
Appendix 1
Investor risk profiles
Defensive
Risk profile characteristics
Investment objective You are a conservative investor. Risk must be very low and you are prepared to accept lower returns to protect capital. The negative effects of tax and inflation will not concern you, provided that your initial investment is protected.
Suitability With your investment style it is important you understand the likelihood of and are prepared to accept negative returns approximately one year in every 30 years.
Benchmark 100% defensive
Minimum investment term Not applicable
Long-term objective CPI + 1–2% p.a.
Asset allocation
Defensive Strategic asset allocation
Australian equities 0% 0% Growth
International equities 0%
Property* 0%
Alternatives 0%
Fixed Interest 20% 100% Defensive
Cash** 80%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Moderate
Risk profile characteristics
Investment objective You are a cautious investor seeking better than basic returns, but risk must be low. Typically an older investor seeking to protect the wealth that you have accumulated, you may be prepared to consider less aggressive growth investments.
Suitability With your investment style it is important you understand the likelihood of and are prepared to accept negative returns during the minimum investment term.
Benchmark 23% Growth, 72% Defensive, 5% Alternatives (mainly defensive)
Minimum investment term 3 years
Long-term objective CPI + 2.5%
Asset allocation
Defensive Strategic asset allocation
Australian equities 8% 25% Growth
International equities 8%
Property* 7%
Alternatives 4%
Fixed Interest 45% 75% Defensive
Cash** 28%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Balanced
Risk profile characteristics
Investment objective You are a prudent investor who wants a balanced portfolio to work towards medium to long-term financial goals. You require an investment strategy that will cope with the effects of tax and inflation. Calculated risks will be acceptable to you to achieve good returns.
Suitability With your investment style it is important you understand the likelihood of and are prepared to accept negative returns during the minimum investment term.
Benchmark 47.0% Growth, 40.0% Defensive, 13% Alternatives (mainly defensive)
Minimum investment term 5 years
Long-term objective CPI + 3.5%
Asset allocation
Defensive Strategic asset allocation
Australian equities 20% 50% Growth
International equities 20%
Property* 7%
Alternatives 13%
Fixed Interest 35% 50% Defensive
Cash** 5%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Growth
Risk profile characteristics
Investment objective You are an assertive investor, probably earning sufficient income to invest most funds for capital growth. Prepared to accept higher volatility and moderate risks, your main concern is to accumulate assets over the medium to long term. You require a balanced portfolio, but more aggressive investment strategies may be included.
Suitability With your investment style it is important you understand the likelihood of and are prepared to accept negative returns during the minimum investment term.
Benchmark 72% Growth, 13% Defensive, 15% Alternatives (mainly non-defensive)
Minimum investment term 7 years
Long-term objective CPI + 4.5%
Asset allocation
Defensive Strategic asset allocation
Australian equities 32% 75% Growth
International equities 32%
Property* 8%
Alternatives 15%
Fixed Interest 11% 25% Defensive
Cash** 2%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
High growth
Risk profile characteristics
Investment objective You are an aggressive investor prepared to compromise portfolio balance to pursue potentially greater long-term returns. Your investment choices are diverse, but carry with them a higher level of risk. Security of capital is secondary to the potential for wealth accumulation.
Suitability With your investment style it is important you understand the likelihood of and are prepared to accept negative returns during the minimum investment term.
Benchmark 84% Growth, 1% Defensive, 15% Alternatives (all non-defensive)
Minimum investment term 9 years
Long-term objective CPI + 5.5%
Asset allocation
Defensive Strategic asset allocation
Australian equities 37% 99% Growth
International equities 37%
Property* 10%
Alternatives 15%
Fixed Interest 0% 1% Defensive
Cash** 1%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Appendix 2
Approved products list (investments and platforms)
Platforms
• netwealth® (‘Netwealth’) investment and superannuation platforms
Investments
• Australian bank deposit accounts and term deposits
• all ASX-listed securities
• managed funds offered through Netwealth.
Refer to the below link to access the list of approved managed funds on the Netwealth platform
(viewed 16 July 2016): https://www.netwealth.com.au/nw/Fund/CompareFundsAndModels .
Section 2 Present appropriate strategies and solutions to client and negotiate a financial plan, policy or transaction
Section 2: Part A
The SOA has been completed and a meeting has been organised with John and Lily (Case Study 4) to present the recommendations and, if they agree, to implement them.
During the meeting, you must ensure that John and Lily understand the advice you provide.
Answer the following as if you were talking to John and Lily, in language they would understand:
(a) Identify (1) piece of supplementary information to help explain your recommendation.
(b) Explain one (1) risk associated with the recommendations you have prepared.
(c) Provide an answer to one (1) question John or Lily might ask you in relation to your advice regarding their share portfolio.
(d) Provide an answer to one (1) question John or Lily might ask you in relation to your advice regarding managed investments.
Answer here
Assessor feedback: Resubmission required?
No
Section 2: Part B
Provide an analysis of two (2) managed funds, comparing key elements regarding each fund’s fund manager, philosophy, process, people and investments. Explain why you have chosen one over the other for John and Lily in Case Study 4. The funds should invest in the same asset class, or if they are multi-asset class funds, they should have the same risk profile. (250 words)
Answer here
Assessor feedback: Resubmission required?
No
Section 2: Part C
Discuss how you will ensure John and Lily fully understand your proposal. In your answer, discuss the strategies involved, alternative strategies you considered and why the ones you recommend are ultimately the best choice for John and Lily. (400 words)
Answer here
Assessor feedback: Resubmission required?
No
Section 3 Agree the plan, policy or transaction and complete documentation
Section 3: Part A
After explaining your recommendations to John and Lily (Case Study 4), you realise they have concerns that they want resolved before agreeing to the plan. Provide one (1) issue or concern that they may have with your proposal and explain how you would address it. (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Section 3: Part B
At Frontiers Pty Ltd, where you work, you charge a fee for providing advice. Explain how you calculated your fee, what it covers and why it is appropriate for John and Lily. (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Section 3: Part C
John and Lily are now happy to go ahead with your recommendations and want to implement them immediately. What documents should be completed and by whom? (150 words)
Answer here
Assessor feedback: Resubmission required?
No
Section 4 Provide ongoing service where requested by client
Section 4: Part A
As a financial adviser, explain how you would provide an adequate ongoing service to John and Lily (Case Study 4). Include an outline of the services you will provide and actions you need to take to ensure the service is delivered to the client. (200 words)
Answer here
Assessor feedback: Resubmission required?
No
Section 4: Part B
Explain why ongoing service is important for clients with direct share portfolios. (150 words)
Answer here
Assessor feedback: Resubmission required?
No