Assignment
DFP1B-1v2.1 Financial Planning
Student identification (student to complete)
Please complete the fields shaded grey.
Student number INT
Student name
Telephone number
Assignment result (assessor to complete)
Result — first submission (Details for each activity are shown in the table below)
Not yet competent
Result — resubmission (if applicable)
Not yet competent
Result summary (assessor to complete)
First submission Resubmission (if required)
Case study assignment questions Section 1 Not yet demonstrated Not yet demonstrated
Section 3 Not yet demonstrated Not yet demonstrated
Section 4 Not yet demonstrated Not yet demonstrated
Section 6 Not yet demonstrated Not yet demonstrated
Section 7 Not yet demonstrated Not yet demonstrated
Statement of Advice Not yet demonstrated Not yet demonstrated
Cash flow tables Not yet demonstrated Not yet demonstrated
Five–year projections Not yet demonstrated Not yet demonstrated
Feedback (assessor to complete)
[insert assessor feedback]
Before you begin
Read everything in this document before you start your assignment for Financial Planning.
About this document
This document includes the following parts:
• Part 1: Instructions for completing and submitting this assignment
• Part 2: The case study
• Appendix 1: Fact finder and risk profile
• Appendix 2: Financial planning questions (assessment workbook):
– Case study questions
– Statement of advice (SOA) template
– Cash flow tables (financial position after implementation of strategy)
– Five-year projection table
• Appendix 3: Assumptions.
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your
work regularly.
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 Financial Planning subject room.
How to use the sample case study and SOA in KapLearn
The sample case study provides a model to help you prepare your SOA for this assignment. The case study explains the process that is undertaken to develop the SOA with reference to an example and it is a very useful resource. Download the sample SOA and refer to it as you work through the learning materials for this subject.
Before you start work on this assignment, go back to the sample SOA and:
• compare how the SOA matches with the goals and objectives identified in the case study
• consider what information has been included in the SOA
• consider why this information has been included.
This exercise will help you prepare an SOA for this assignment that addresses your client’s goals. Please bear in mind that not all SOAs are exactly alike in their construction, but all have common heading topics within them. Accordingly, there may be minor differences between the sample SOA and the SOA template in this assignment. However, all the required compliance elements will be included in both formats.
Part 1: Instructions for completing and submitting
this assignment
Completing the assignment
The assignment
For this assignment you are required to complete the following tasks:
In your assessment workbook:
• answer the assignment questions as they relate to sections 1, 3, 4, 6 and 7 of the case study
• complete the template SOA for your client, using the data in the case study, the fact finder and risk profile
• complete the two (2) cash flow tables
• calculate the five year projections.
The information and resources that can assist you in answering the questions in this assignment can be primarily sourced from the Foundations of Financial Planning text and the sample case study. Some data will have to be externally sourced, but the assignment template will clearly indicate where this is necessary.
You are expected to analyse the 11 areas covered in the data analysis stage, explained in Topic 2, as well as review the sample case study and sample SOA. Additionally, you will need to weigh up the client’s opinion against your own analysis to determine the important areas that need to be addressed for the client.
Although the case study may indicate that the client does not wish to have advice provided about a specific area, you need still to evaluate the situation, provide clear reasons as to why, or why not, review the area, and make referrals to specialists if necessary in the relevant sections of the template.
You do not have to provide retirement planning calculations and recommendations.
However, you must consider the appropriateness of all the investments held by Jessica. If you recommend any change to her current asset allocation (including those in her superannuation fund), you must explain why this action is appropriate. That is, why there is a need to change the asset allocation, or to replace or sell an investment.
With regard to insurance, you are not expected to provide a detailed analysis of Jessica’s needs. However, this area still needs to be examined. If your analysis shows that she requires additional insurance and could benefit from a review, you should advise her of this. Alternatively, clearly explain why you believe her current cover is sufficient.
More information regarding requirements for providing advice is included throughout the assignment.
Word count
The word count shown with each question is purely indicative. You may exceed the word count by a minimal amount, however, please do not include additional information which is outside the scope of the question.
The Jessica Bigge case study
The case study steps you through the financial planning process, from initial contact with Jessica Bigge, to the development and documentation of a financial strategy as an SOA to meet her needs.
Fact finder and risk profile
The fact finder for Jessica and her risk profile are provided. You will find these in Appendix 1.
The data in these documents has been used to complete some of the sections in the SOA.
You will need to refer to these documents to complete the financial position tables for your client.
Additional research
You will be required to source additional information from other organisations in the financial services industry to find the appropriate product/s to meet Jessica’s requirements, and perhaps to calculate your service fees.
Submitting the assignment
You must submit your completed assignment in a compatible Microsoft Word document. You need to save and submit this entire document — not just Appendix 2: Financial planning questions (assessment workbook).
Do not remove any sections of the document.
Do not save your completed assignment as a PDF.
The assignment must be completed before submitting it to Kaplan Professional Education. Incomplete assignments will be returned to you unmarked.
The maximum file size is 5MB. Once you submit your assignment for marking you will be unable to make any further changes to it.
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.
Your assessor will mark your assignment and return it to you in the Financial Planning subject room in KapLearn under the ‘Assessment’ tab.
‘Not yet competent’ and resubmissions
Should sections of your assignment be marked as ‘not yet competent’ you will be given additional opportunities 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:
FNSASICZ503A Provide advice in financial planning
FNSFPL501A Comply with financial planning practice ethical and operational guidelines and regulations
FNSFPL502A Conduct financial planning analysis and research
FNSFPL503A Develop and prepare financial plan
FNSFPL504A Implement financial plan
FNSFPL505A Review financial plans and provide ongoing service
FNSFPL506A Determine client requirements and expectations
FNSINC401A Apply principles of professional practice to work in the financial services industry
BSBITU402A Develop and use complex spreadsheets
We are here to help
If you have any questions about this assignment you can post your query on the ‘Ask your Tutor’ forum in your subject room under the ‘Help’ tab. You can expect an answer within 24 hours of your posting from one of our technical advisers or student support staff.
Part 2: The case study
Introduction
You are a financial planner for EANWB Financial Planning and authorised to provide financial product advice on a range of investments (excluding direct shares), superannuation and retirement planning, and insurance and risk protection.
You are also able to provide taxation information that is incidental to the advice provided. In other words, you can provide information about any potential tax savings or tax benefits that could result from your recommendations, but you must refer the client to a tax professional for specific tax advice.
You do not have the authority to provide estate planning or property advice and you must refer clients to suitable professionals should you identify they need advice in areas for which you have not been appropriately authorised and trained. (Refer to the sample SOA and the wording used regarding tax, estate planning and real estate, as well as the summary of what advice areas are covered, and what are not, at the beginning of the sample SOA.)
Section 1: Meeting your client
The first phone call
Jessica Bigge has agreed to speak with you following a suggestion made to her by her bank’s personal lending officer who knows you and is respectful of the quality advice you provide to your clients. She was in the process of successfully organising a loan to purchase her car at the time.
Jessica is unsure of what is involved in personal financial planning, but concedes that planning for her future financial objectives could be of value. She agrees to have her contact details passed on to you by the bank’s lending officer so that you can tell her about what is involved in the financial planning process, what the possible benefits might be to her, and costs involved.
When you phone Jessica, you provide her with details about the financial planning process, and why you will need to ask her for certain types of financial information. You stress that you work for a licensee (a person authorised by the Government to deal in financial products) and any information she gives you will be treated confidentially. You let her know that this information will only be used to provide the financial advice you consider will meet her needs. You tell her all this information is in the Financial Services Guide (FSG) that you will send her.
Jessica is reassured by your introduction so you proceed. You explain you need her to contribute to the compilation of a financial profile in order to help you work out how she can best meet her financial goals. This means that she will need to tell you what she owns, what she owes, what she earns and her living expenses. She can record all this information in the fact finder you will send her with the FSG. You inform Jessica that the fact finder also includes a risk profile section and the information she provides you will give you sense of her appetite for different financial planning strategies.
You make a date and time with Jessica to come to your office and take down her address and phone numbers. You ask Jessica to bring along to the meeting her completed fact finder and as much financial information as she can, such as income details, expenses, superannuation, insurance details, etc.
When you have concluded the call, you make a file note about the conversation including the date, the potential client’s name, and the name of the person who referred her to you. This is the start of your paper trail. You also complete some of the initial details in your data collection form so that it looks like Table 1.
Finally you write to Jessica, as promised during your initial conversation, and include the fact finder, the FSG and a checklist of the information she needs to bring to the meeting.
Table 1 Personal details
Client 1 Client 2
Title Miss
Surname Bigge
Given & preferred names Jessica
Home address 18/43 Benton St, Rozelle, NSW.
Business address n.a.
Contact phone (02) 7766 5544
Date of birth 15 July 1986
Sex Male ? Female Male Female
Smoker Yes ? No Yes No
Expected retirement age Haven’t really thought about it, but probably 66
The first meeting
Jessica arrives at your office for the meeting. After greeting her and offering her a glass of chilled water, she confirms that she received your package of documents and that she has filled in the fact finder and the risk profile.
You then take her through the key elements of the FSG, including your role and capacity to assist her with her planning needs and your company’s fees. You make sure that Jessica understands this information before you proceed to the next step.
Collecting the data
You learn the following information about Jessica through a process of thorough and polite questioning. From time to time she provides you with a relevant document to confirm her financial situation. You confirm the details in the fact finder as you proceed.
Jessica’s current situation
Jessica, born 15 July 1986, is single with no dependants, and lives in a rented flat for which she pays rent of $460 per week.
Jessica is a marketing manager for a mining engineering company and has been with that firm for six years.
Jessica earns $70,000 p.a. and receives superannuation guarantee (SG) contributions from her employer in addition to this.
Jessica owns a new Mazda CX5 that she recently borrowed $39,000 from the bank to purchase.
The loan is over five years at a fixed rate of 10% p.a. with the repayments being $850 per month. There is a prepayment fee of $175, though this fee is waived if the loan is refinanced to another product with the same bank. The car has full comprehensive insurance with an annual premium of $1500.
Jessica’s needs and objectives
During your conversation with Jessica it becomes apparent that her principal objective is to save for her own home. At this stage she is unsure of the location where she would like to buy but it would be a unit.
On her own calculations, based on what she feels comfortable in borrowing and with her savings, she could afford a unit up to a purchase price of $550,000. She also said that she would like to have saved at least 15% of the purchase price and if possible, be able to purchase her first home in no more than 5 years time.
She is also concerned about the debt she has incurred buying her car and would like to know the benefits and ramifications of paying it off early, particularly in terms of her primary objective of saving for, and purchasing, her first home.
Jessica admits that she knows very little about the sharemarket, how it works, or what it actually means to own shares. However, she is keen to learn more about it following her success with the purchase of Westpac Banking Corporation shares.
Jessica is in good health and believes the insurances within her superannuation fund provide adequate cover.
Jessica does not place superannuation and retirement planning as a priority at the moment, saying that retirement is a long way off and her employer looks after her superannuation anyway.
Jessica does not have a will or powers of attorney in place, and is not overly concerned about the adequacy of her estate planning.
Superannuation
Jessica has $32,000 in her employer’s default superannuation fund, the ABXY Super Fund, and is invested in a ‘balanced’ portfolio. Jessica joined the fund on 19 January 2007.
Jessica does not make any additional contributions to her superannuation fund.
The fund has returned the following, after fees and tax:
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
–4.5% -9.5% 8.9% 10.2% 2.1% 8.3%
The investment objective of the fund is to achieve returns after tax and fees that exceed the inflation rate, as measured by the CPI, by at least 3% p.a. over rolling five-year periods.
The asset allocation for Jessica’s balanced growth in her superannuation fund is:
Cash 7%
Australian fixed interest 12%
International fixed interest 10%
Australian equities 30%
Property 18%
International equities 23%
Insurance
Jessica’s superannuation fund provides a death and total and permanent disability (TPD) benefit of $50,000 in addition to her accumulated superannuation value. The premium is $1.50 per week for this level of cover and is deducted from her fund.
Jessica has no other personal insurance cover.
Jessica’s car has full comprehensive insurance with an annual premium of $1500.
Jessica also has home contents insurance cover of $20,000 with an excess of $100 including legal liability cover of up to $20 million. Jessica pays $30 per month from her credit card for this policy.
Jessica has adequate private health insurance cover that she pays $110 per month for on her credit card. This premium includes the private health insurance rebate.
Jessica has advised you that she is comfortable with the insurances she has in place and does not believe that she requires any further advice at this time.
Investments
Jessica has $57,000 in a term deposit earning 4.15% p.a. that is due to mature shortly. She plans to use these funds and future savings towards the purchase of her own home in about 5 years time, or earlier if possible.
Following advice from her uncle at a family barbecue, Jessica purchased 59 Westpac Banking Corporation shares on 25 November 2008 at $16.93. The full dividend received for the year is $1.66 per share fully franked and dividends received are not reinvested.
Jessica also has a small transaction account where her pay is deposited. This account is used to pay various expenses and her credit card. The account, on average, would have $1000 and it does not receive any interest.
Other information
Jessica has a credit card with a limit of $5000 that she uses for all her general expenses and entertainment. However, she does not spend up to her limit and her average expenses are $900 per month, (including home contents and health insurance), which she repays within the interest free period.
Each year Jessica goes on a two-week cruise with a friend, which costs $2500.
In addition, she usually spends two weeks with her family during her employer’s Christmas leave period.
Jessica is very healthy and has taken very little sick leave and has accumulated 54 days sick leave.
Other expenses include a donation to the National Breast Cancer Foundation of $10 per week, tax deductible ‘bucket’ donations of $10 p.a. to disaster relief funds, and accountant’s expenses of $150 p.a.
Jessica does not have any dependants and both her parents are well, fit and active. She has an older brother who is married with two young children and a younger sister who still lives with her parents.
Risk profiling
Jessica completed the risk profile section in the fact finder prior to attending the meeting. The completed fact finder and risk profile are in Appendix 1 of the assignment.
Closing the interview
Prior to concluding your meeting with Jessica, you review the information provided to her to check that it is complete and accurate.
Jessica is naturally curious about the next step in the process. You answer some additional questions she has about what happens next. You explain that with her agreement you will prepare a written report, an SOA, based on the information she has just shared with you. The SOA will be a financial plan detailing a number of actions she could take to meet her financial goals
Jessica agrees to proceed to the next stage of the financial planning process, and you make an appointment with her to present the plan in a fortnight.
There is a series of questions relating to Section 1 in the assessment workbook that you need to answer. Your answers to these questions are your opportunity to demonstrate your ability to establish a relationship with a client.
Section 2: The fact finder and risk profile
After this meeting and when you are in professional practice you would normally take the time now to complete a fact finder.
However, this template has already been prepared for you based on the information given by Jessica. You will find that fact finder and risk profile in Appendix 1.
Take some time now to familiarise yourself with Jessica’s fact finder and risk profile to confirm that all the information recorded is correct. You will need to refer to this data when you are completing the SOA, the cash flow tables and the five–year projections.
Section 3: Analysing the data
The next step in the financial planning process is to analyse the data provided by Jessica. You do this to ensure that you can fully understand her financial situation and needs and are therefore in a position to design a plan that addresses her goals and objectives.
By analysing the data provided under the following headings you can now start thinking of the strategic options that may be appropriate for Jessica, leading you to then preparing a financial planning strategy that is designed to meet her needs:
• current position
• debt management
• risk/protection
• savings
• investment
• retirement funding
• future income stream
• social security issues (if any) and implications
• present and future taxation issues
• estate planning.
There is a series of questions relating to Section 3 in the assessment workbook that you need to answer. You will use your answers for Section 3 to help you decide on your recommendations for Jessica. Your answers to these questions are your opportunity to demonstrate your ability to analyse a client’s needs in preparation for developing a strategy that aligns with their requirements.
Section 4: The strategy
Now that you have analysed the data and selected strategies that could be appropriate, you are in a position to start drafting the preferred strategy you believe is appropriate for Jessica. You will then be able to research and select possible products that can support the implementation of that strategy. All of this information you will use in your SOA for Jessica.
There is a series of questions relating to Section 4 in the assessment workbook that you need to answer. You will use your answers for Section 4 to help you decide on your recommendations for Jessica. Your answers to these questions are your opportunity to demonstrate your ability to develop a strategy that aligns with her requirements.
Section 5: Completing the SOA
When you have determined the financial planning recommendations you believe are appropriate for Jessica’s needs, you then need to prepare her SOA. Use the SOA template provided in the assessment workbook.
Section 6: Presenting the SOA
You meet with Jessica as arranged to present her SOA. You take the time to outline the proposed strategies and recommendations, confirming throughout that Jessica understands the plan and how it has been designed to meet her needs.
Satisfied with your explanation of the plan and responses to each of her questions, Jessica agrees to go ahead with your recommendations.
There is a series of questions relating to Section 6 in the assessment workbook that you need to answer. Your answers to these questions are your opportunity to demonstrate your ability to continue to engage your client.
Section 7: Providing ongoing service
Jessica is not sure she will have time for regular reviews of her financial plan. She expresses the opinion that the advice seems comprehensive with no need at this stage to commit to scheduled reviews.
There is a series of questions relating to Section 7 in the assessment workbook that you need to answer. The questions are your opportunity to demonstrate your ability to work with a client to implement a plan over the longer term.
Appendix 1: Fact finder and risk profile — Jessica Bigge
Important notice to customers
Your planner must act in your best interest and provide appropriate advice when making an investment or insurance recommendation.
Before making a recommendation, the planner needs to ask you about your investment objectives, financial situation and your particular needs.
The information requested in this form will be used strictly for that purpose.
Warning
The planner could make inappropriate recommendations or give inappropriate advice if you fail to fully and accurately complete this form.
Personal and employment details
Personal details
Client 1 Client 2
Title Miss
Surname Bigge
Given & preferred names Jessica
Home address 18/43 Benton St, Rozelle, NSW
Business address n.a.
Contact phone (02) 7766 5544
Date of birth 15 July 1986
Sex Male ? Female Male Female
Smoker Yes ? No Yes No
Expected retirement age Haven’t really thought about it, but probably 66
Dependants (children or other)
Name Date of birth Sex School Occupation
n.a.
Employment details
Jessica Bigge
Occupation Marketing manager
Employment status Self-employed ? Employee Self-employed Employee
Not employed Pensioner Not employed Pensioner
? Permanent Part-time Permanent Part-time
Casual Contractor Casual Contractor
Other Government Other Government
Business status Sole proprietor Partnership Sole proprietor Partnership
Private company Trust Private company Trust
Notes
Any other person to be contacted? e.g. accountant, banker, solicitor, etc.
Income, tax and cash flow
Tax calculation Client 1 Client 2 Combined Comments
Income from employment
Salary $70,000
Salary sacrifice nil
Salary after salary sacrifice $70,000
Rental income n.a.
Unfranked dividends n.a.
Franked dividends $98 Westpac Banking Corporation dividends
Franking (imputation) credits $42
Interest $2,366 $57,000 at 4.15%
Other income (e.g. taxable benefits, trust income, investment income) n.a.
Capital gains 1 yr n.a.
Capital gains 1 yr n.a.
Tax-free component of capital gains n.a.
Assessable income $72,506
Deductible expenses $150 Accountant’s fees
Donations $530 $520 National Breast Cancer Foundation
$10 bucket donation
Other nil
Taxable income $71,826
Tax on taxable income $14,890 FY 2013/14
Non-refundable tax offsets (e.g. LITO/SAPTO) n.a.
Medicare levy $1,077
Medicare levy surcharge n.a.
Franking rebate $42
Refundable rebates and offsets n.a.
Total tax $15,925
Cash flow
Client 1 Client 2 Combined Comment
Cash flow
Salary less any salary sacrificed amount $70,000
Non-taxable income nil
Rental income n.a.
Unfranked dividends received n.a.
Franked dividends received $98
Interest $2,366
Other income (e.g. taxable benefits, trust income, investment income, social security benefits, etc.) nil
Total income received before tax $72,464
Investment expenses nil
Expenses
Mortgage n.a.
School fees n.a.
Utilities n.a.
Personal insurance nil
Car insurance $1,500 Paid from credit card
Home contents Insurance $360 Paid from credit card Includes legal liability
Health insurance $1,320 Paid from credit card
Living expenses $9,120 Expenses through credit card
Holidays $2,500
House maintenance n.a.
Motor vehicle Unknown Paid as part of the expenses through credit card
Other $23,920 Rent
$10,200 Car repayments
$530 Donations
$150 Accountant’s fees
Total expenses $49,600
Total income received before tax less total expenses $22,864
Total tax payable from tax table above $15,925
Total net cash flow $6,939
Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home n.a. n.a.
Home contents Jessica $20,000 $0 $20,000 Insured value and includes legal liability cover
Car Jessica $39,000 $39,000 $0
Total $59,000 $39,000 $20,000
Superannuation
Employer superannuation Jessica $32,000 n.a. $32,000
Total $32,000 $32,000
Other assets
Investment property n.a. n.a. n.a.
Savings account Jessica $1,000 nil $1,000 Transaction account
Term deposit Jessica $57,000 nil $57,000
Shares Jessica $2,070 nil $2,070 Westpac Banking Corporation current price $35.08
Total $60,070 nil $60,070
Net worth $151,070 $39,000 $112,070
Liabilities
Loan Current debt Percentage tax deductible Interest only Repayment
Home loan n.a. n.a.
Investment property n.a. n.a.
Investment loan n.a. n.a.
Personal loan $39,000 nil No $850 per month
Other n.a. n.a.
Total $39,000 $0
Needs and objectives
Details Comments
Save for her own home Has been saving towards it using term deposits. Has estimated that she could afford purchase price of up to $550,000 using mortgage and savings. Would like to have saved at least 15% of the purchase price and be in a position to buy in no later than 5 years time
Decrease debt Concerned about debt — interested in paying off early but requires guidance on the effect (if any) to her primary desire to purchase her first home
Cruise with friend $2500 annually
Increase sharemarket knowledge Current knowledge is low
Maintain lifestyle in the event of prolonged illness To be reviewed
Other
Estate planning
Do you have a will? Yes ? No
When was it last updated: / /
Do you have powers of attorney? Yes ? No
Current superannuation, rollovers, insurances and investments
Superannuation
Member Jessica
Fund name ABXY Super Fund
Date of joining fund 19 January 2007
Type of fund ? Accumulation Defined benefit Accumulation Defined benefit
Pension Pensioner Pension Pensioner
Contribution
(e.g. 5% of salary) SG By employer By yourself By employer By yourself
Current value of your superannuation fund $32,000
Amount of death and
disability cover $50,000
Is there provision for you to top up or salary sacrifice? ? Yes No Yes No
Superannuation taxation details
Jessica
Current value $32,000
Tax-free component $0
Taxable component:
Taxed element $32,000
Untaxed element $0
Preservation:
Preserved $32,000
Unrestricted non-preserved $0
Restricted non-preserved $0
Contributions:
Non-concessional contributions:
Year 1 $0
Year 2 $0
Year 3 $0
Year 4 $0
Concessional contributions:
Year 1 SG only
Year 2 SG only
Year 3 SG only
Year 4 SG only
Nominated beneficiaries:
Name Binding Non-binding
(Yes/No) Trustee discretion
(Yes/No)
Yes/No Amount
None noted Yes

Is there any current flags or splits on a superannuation benefit of yours following a marriage breakdown? Yes/No N Details
Are you a beneficiary of any current flags or splits of a superannuation benefit following a marriage breakdown? Yes/No N Details
Life insurance details
Life insured Owner Policy type Company Policy number Death benefit Comments Annual premium
Jessica Superannuation fund Life ABXY Super Fund XTP1234 $50,000 Within superannuation From superannuation
Disability insurance details
Life insured Owner Policy type Company Policy number Death benefit Comments Annual premium
Jessica Superannuation fund TPD ABXY Super Fund XTP1234 $50,000 Within superannuation From superannuation
Income protection insurance details
Life insured Owner Policy type Company Policy number Benefit amount Waiting period Benefit payment period Annual premium
Jessica n.a. nil n.a.
General insurance details
Item covered Owner Policy type Company Combined policy number Cover amount Other benefit Total annual premium
Car Jessica Comprehensive Ourcover 234907MV Market Value nil $1,500
Contents Jessica Contents Ourcover 438129HC $20,000 nil $360 p.a. deducted monthly from credit card
Health Jessica Full health Ourcover 6978/967PH $1,320 p.a. deducted monthly from credit card
Investment details
Investment type Company Purchase date Units held/fixed rate Current value Owner
Term deposit East Antipodean National Wealth Bank n.a. $57,000 Jessica
Shares Westpac Banking Corporation 25 November 2008 59 shares $2,070 Jessica
Savings account East Antipodean National Wealth Bank n.a. $1,000 Jessica
Note: An insurance needs analysis is not required for this assignment. These risk needs tables have been included to provide a realistic example of the fact-finder process.
Risk needs
Insurance needs — life
Jessica
C Clean-up fund Settle all outstanding accounts, including credit cards, bills and funeral costs

I Income fund The lump sum required to produce a level of regular income that maintains the family’s living standard for a defined period

M Mortgage fund The amount necessary to discharge any existing mortgages

E Education fund Lump sum determined by calculating each child’s education costs and multiplying by the number of years of school and/or university remaining

R Retirement fund The lump sum necessary to provide adequate funding for retirement

less value of realisable assets
less existing life insurance cover
Recommended sum insured
Recommended sum insured (rounded up to the nearest $10,000)
Insurance needs — TPD
Jessica
C Clean-up fund Settle all outstanding accounts, including credit cards, bills and funeral costs

I Income fund The lump sum required to produce a level of regular income that maintains the family’s living standard for a defined period

M Mortgage fund The amount necessary to discharge any existing mortgages

E Education fund Lump sum determined by calculating each child’s education costs and multiplying by the number of years of school and/or university remaining

R Retirement fund The lump sum necessary to provide adequate funding for retirement

less value of realisable assets
less existing life insurance cover
Recommended sum insured
Recommended sum insured (rounded up to the nearest $10,000)
Insurance needs — Trauma
Jessica
Funds required to pay out home mortgage
Estimated medical and rehabilitation costs (including cover out-of-pocket health costs)
Other debts
Other expenses
less existing realisable assets
Recommended sum insured
Recommended sum insured (rounded up to the nearest $10,000)
Insurance needs — Income protection
Jessica
Gross annual income
SG
Total insurable income
Monthly income (i.e. total insurable income / 12)
Recommended monthly benefit (i.e. 75% of total monthly insurable amount)
Benefit payment period
Waiting period to be served
Acknowledgment
The information provided in this financial fact finder is complete and accurate to the best of my knowledge.
I understand that a policy purchased without the completion of a fact finder, or following a partial or inaccurate completion, may not be appropriate to my needs. I also understand that a policy purchased that differs from that recommended by the planner may not be appropriate to my needs. I acknowledge that the planner has provided me with the completed financial fact finder, signed by me.
Customer(s) signature(s)
Planner’s name
Planner’s signature
Date
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
I think that I should be able to structure things better to pay less tax like other people seem to do.
How important is liquidity (i.e. funds available) to you? Why? Very/Moderately/Not
I would like the money available so I can buy a property in the future.
If you had funds available for investing, how would you choose to invest them? Why?
Term deposits, but don’t know what else is available or how it works.
Are there certain sorts of investment that you wish to avoid? Which ones? Yes/No
I don’t really know.
Risk profile
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 planner, you can choose the investments that best match your financial objectives.
Which of the following best describes your current stage of life?
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: No longer working 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
What return do you reasonably expect to achieve from your investments?
A return without losing any capital. 10
3–7% p.a. 20
8–12% p.a. 30?
13–15% p.a. 40
Over 15% p.a. 50
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 were 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
How familiar are you with investment markets?
Very little understanding or interest 10
Not very familiar Would like to know more 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
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
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
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 220
INVESTOR RISK PROFILE SUMMARY
0–70 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
71–150 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
151–230 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
231–300 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
Appendix 2: Financial planning questions
Case study questions
Section 1: Questions — Establishing relationships with clients
Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to establish a relationship with a client.
Section 1 Part A
Preparation by both the client and the planning team is essential to a successful client meeting. Describe the preparation that should be made to ensure the success of the initial interview held in your office. (250 words)
Answer here
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Section 1 Part B
List the documents that you would provide a client during, or prior to, the initial meeting. Explain the contents of each document and why they are necessary. (200 words)
Answer here
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Section 1 Part C
Outline how you would develop rapport with a client during your first meeting. (200 words)
Answer here
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Section 1 Part D
Explain to a client the role of the adviser and the relationship with the licensee. Ensure you use language that your client would understand. (250 words)
Answer here
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Section 1 Part E
How do you/are you going to maintain your knowledge of the industry and your obligations under the relevant legislation? (150 words)
Answer here
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Section 1 Part E
It is important that your clients understand your company’s dispute resolution procedure. Explain, step-by-step, a typical internal and external complaints resolution processes available to a client. (150 words)
Answer here
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Section 2: The fact finder and risk profile
There are no questions for this section.
Section 3: Questions — Analysing the data
Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to analyse a client’s needs in preparation for developing a strategy that aligns with their requirements.
Section 3 Part A
List what you understand to be Jessica’s goals, needs and objectives. Categorise them into short, medium and long-term time frames. They should be specific, measurable and have a nominated dollar value where possible. (250 words)
Goals/need/objectives Time frame Dollar value
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Section 3 Part B
Analyse the data provided by Jessica by answering the following questions. The questions are designed to help you think about the possible issues that any client may have and enable you to show your skill in analysing a case study across the 11 general headings in the data analysis section of the text, and strategy development steps of the financial planning process (refer to Topic 2 and the sample case study and sample SOA).
Think carefully about your responses and do not assume that you are in a position to provide detailed answers to every question. You may not have enough information, it may be outside of your licensee’s designated authority for this case study (i.e. the matter needs to be referred to a specialist adviser), or it is not one of Jessica’s goals or objectives. In addition, the question may not apply to Jessica’s current situation. Where any of the above apply, you still need to make a comment and explain why the question is not relevant at this time.
Make sure you constantly refer to the data you have on Jessica so your responses accurately reflect the information she has provided you.
The questions Your response The assessors feedback
a. Does Jessica need a debt management solution? Answer here
If yes, why?
If no, why not? Answer here.
b. Jessica has stated that she is comfortable with her current insurance arrangements; however, does Jessica have adequate risk protection?
Provide reasons for your answer. Answer here
c. Does Jessica have sufficient savings to meet her goals? Answer here
If yes, why/how?
If not, how much does she need? And by when? Answer here
d. Does Jessica have any investments currently, and what is her appetite for different types of investment? Answer here
What will this mean for any strategy you might recommend? Answer here
e. Are there any present and/or anticipated future taxation issues? Answer here
If yes, why and what are they?
If no, why not? Answer here
f. Has any provision been made for estate planning? Answer here
What could be put in place now for any anticipated requirements? Answer here
Section 4: Questions — Developing a strategy
Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to analyse a client’s needs and develop a strategy that aligns with their requirements.
Section 4 Part A
Based on your analysis of the data, describe in general terms, the strategies you think will best meet Jessica’s needs and why. Include what other specialist advice Jessica should source so that her financial plan is comprehensive. (400 words)
Answer here
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Section 4 Part B
You are now in a position to research some products that might meet Jessica’s needs. Information on different products are readily available on the internet. For example, for managed funds, http://www.morningstar.com.au provides a fund screener tool that you can use to select funds based on a number of different criteria, (located under ‘Tools’ on the homepage). For term deposits and other investments, go to www.canstar.com.au . To ensure the appropriate product(s) for your client, you are expected to research a number of products from different product issuers (more than two). The URL link should be supplied.
List the investment products you have researched here, and indicate why you think each investment you have researched may or may not be suitable for Jessica. At the conclusion of this process you will need to have found at least two (2) products to meet your client’s needs.
The product
(name and URL link) Why you think it may or may not be the ‘best fit’ for Jessica. Indicate which product/s you will use in your plan
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Section 5: Completing the SOA
When you have determined the financial planning recommendations you believe will meet Jessica’s needs then you need to prepare her SOA. Use the SOA template provided in this assignment to produce your SOA for Jessica.
Tip: The assessor is looking for an SOA that is of a professional standard and is suitable for presentation to a client. This means your spelling and grammar needs to be correct and that you have written your recommendations so the client can understand them. Remember: the SOA is an important communication tool you can use to engage your client. A hastily written and poorly presented SOA does not engender client trust or confidence in your expertise or professionalism.
Important instructions for completing the SOA
a. Use the SOA template provided.
SOA preparation software: The use of financial planning software and dealer templates to prepare your SOA is not permitted. Submissions that exhibit excessive reliance on SOA templates may be considered a case of plagiarism or collusion and may not be considered to be a reasonable attempt at the assessment.
b. Your SOA must include strategy recommendations for:
• debt management
• personal investment and savings
• asset allocation (including superannuation).
c. You must prepare an implementation schedule detailing all of the recommendations in the SOA and provide the details in the implementation schedule within the SOA.
d. You must also prepare, using an Excel spreadsheet, a table showing the projected balance of Jessica’s investment portfolio, over a five-year period, before and after your recommendations. This task will be important in showing how your strategies may satisfy Jessica’s primary financial objective.
d. List any assumptions you have made to complete your SOA on the assumptions page at the end of the SOA. Assumptions will generally be made:
• regarding missing background information on the clients
• in regards to calculations of future returns from your recommended investments
• for clarity in relation to any of your recommendations
• for fees relating to the products you have recommended.
e. While you are not required to provide specific recommendations in the following areas for this assignment, you will need to provide, in the ‘Things you need to consider’ section of your SOA, appropriate comments about any issues you have identified. Those areas are:
• personal insurance
• superannuation
• estate planning.
f. Your investment product recommendations will need to be based on the research you conducted in section 4 Part B. Please do not include any product disclosure statements (PDSs) with your assignment submission.
Section 6: Questions — Presenting the SOA
Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to work with a client to present a financial plan, and then take the necessary steps to gain their consent to implement your recommendations.
Section 6 Part A
Identify two (2) concerns that Jessica may have with the advice that you have provided. Prepare responses to these concerns. Ensure that you use language Jessica would understand. (100 words)
Answer here
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Section 6 Part B
Outline the techniques that could be used to ensure that your client understands the advice being provided and to gain their agreement to implement the plan. (150 words)
Answer here
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Section 6 Part C
According to legislative requirements, explain how you would present your fee and cost structure to Jessica. (100 words)
Answer here
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Section 6 Part D
List the documentation, if any, that you need to present to your client at this stage of the financial planning process. (50 words)
Answer here
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Section 6 Part E
Provide a summary of all the documentation that you need to keep in the client’s file. (150 words)
Answer here
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Section 7: Questions — Providing ongoing service
Answer the following questions in the spaces provided. The questions are your opportunity to demonstrate your ability to work with a client to implement a plan over the longer term.
Section 7 Part A
Jessica is not sure she will have time for regular reviews of her financial plan. She expresses the opinion that the advice seems comprehensive and she believes she could take a ‘set and forget’ approach once it is implemented. Describe how you would respond to Jessica, highlighting why reviews are important. In addition, provide details of the type, form and frequency of the ongoing service that would ideally be provided and the fees/costs associated with this service. (400 words)
Answer here
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The SOA template
An SOA has been commenced for Jessica Bigge, using the data collected in the interviews, her fact finder and risk profile. You will need to complete the remaining sections in the SOA as directed. The SOA starts on the following page. Please review the sample case study and the text as a guide to completing your SOA.
Statement of advice
Prepared for
Jessica Bigge
Prepared by
Your name
Authorised Representative Number: 66666
AR Address
AR contact details
Authorised Representative of
EANWB Financial Planning
ABN: 1010101010
Australian Financial Services Licensee
Licence No. 101010
Head office: 88 Money Lane, Accumulation.
You are entitled to receive a statement of advice (SOA) whenever we provide you with any personal financial advice. Personal financial advice is advice that takes into account any one or more of your objectives, financial situation and needs.
This SOA is a record of the personal financial advice provided to you and includes information on the basis on which this advice is given, information about fees and commissions and any interests or associations which might influence the advice.
If this advice includes a recommendation to you to acquire a particular financial product, other than securities, or an offer to issue or arrange the issue of a financial product to you, we will also provide you with a product disclosure statement containing information about the particular product to help you make an informed decision about that product.
Be aware that the advice contained in the following SOA is valid for a period of 30 days only. If the plan is not implemented within this time, it will need to be reviewed for accuracy.
Executive summary
In this section, you need to provide your client with a concise summary of:
• their situation
• their objectives
• your recommended strategy to achieve the objectives
• the outcomes your client can expect from adopting the strategy.
The client should be able to read this executive summary and understand the advice you are giving, the reason/s for underpinning the advice, and be able to determine whether or not their goals have been achieved. There should be sufficient detail to allow the client to make a decision, taking into account any risk/s involved and your fees. It should be written in clear, unambiguous language, without jargon and be appropriate to their level of financial understanding.
Your situation
This is where you need to summarise your client’s current situation.
Answer here
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Your objectives
This is where you need to list your client’s objectives (i.e. their financial and non-financial goals, objectives and needs).
Answer here
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Summary of our strategy and recommendations
For the short term — up to one year
This is where you need to summarise your short-term recommendations for your client.
Answer here
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For the medium term — one to five years
This is where you need to summarise your medium-term recommendations for your client.
Answer here
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Summary of expected outcomes if you implement our advice
For example:
Should you proceed with the recommendations contained within this report, we estimate that:
• You will reduce your debt by $XYZ and/or save $ABC.
• You will build wealth in non-superannuation assets through regular contribution of $X.
Answer here
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Risks in our advice
Answer here Refer to the sample SOA for examples of relevant descriptions that should be included here and under each subheading below.
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Summary of our fees and commissions
Answer here
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Your next steps
Answer here. Refer to the sample SOA for examples of relevant descriptions that should be included here.
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Body
While this section contains similar headings as the executive summary, the information provided is at a greater level of detail and supports the recommendations made. As with the executive summary, it should be written in clear, unambiguous language, without jargon and be appropriate to your client’s level of financial understanding.
Section 1: Important information about you
This section contains information about you that we used in preparing our advice, such as:
• your reasons for seeking advice
• what you would like to achieve
• your personal and financial information.
Present position
Your reasons for seeking advice
Outline why the client sought advice.
Answer here
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What you would like to achieve
Summarise here what you understand to be your client’s main objectives.
Following our discussions, here is what I/we understand to be your main objectives and needs:
Answer here
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Your personal and financial information
Listed below is a summary of your relevant personal and financial details that you have provided.
Personal information
Personal details
Client 1 Client 2
First name(s) Jessica
Surname Bigge
Date of birth 15 July 1986
Marital status Single
Health status
Smoker status Non-smoker
Employment status Permanent
Employer name
Occupation Marketing manager
Annual salary $70,000
Summarise the discussion points that could/need to be raised here.
Answer here
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Children and dependant details
You currently have no dependants.
Your existing insurance
Personal insurance $50,000 life/TPD inside superannuation
Car insurance $1,500
Home contents Insurance $360
Health insurance $1,320
Your existing estate planning
Summarise the client’s existing estate planning provisions here.
Answer here
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Financial information
Current income and expense details
Income and expenses
Client 1 Client 2 Total
Assessable income $72,506
Income after tax $55,901
Yearly expenses $49,600
Estimated surplus $6,939
Discussion points:
Summarise the discussion points that could/need to be raised here.
Answer here
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Assets and liabilities
Value Liability Net value
Home
Home contents 20,000
Motor vehicles 39,000 39,000
Personal assets
Employer superannuation 32,000
Savings account 1,000
Term deposit 57,000
Investment assets
Shares 2,070
Net worth 151,070
Discussion points:
Summarise the discussion points that could/need to be raised here.
Answer here
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Incomplete and/or inaccurate information warning
Note that if, for any reason, the information on which our advice is based is incomplete or inaccurate, then it may not be appropriate and you should, before acting on the advice consider its appropriateness, in light of your particular circumstances, needs and objectives.
Your risk profile
In this section, you need to provide:
• an overview of the different risk profiles
• asset classes and risk and return
• the client’s risk profile including the appropriate mix of assets (the asset allocation) for the client’s risk profile, the appropriate investment return time horizon for that profile and any specific concerns.
Answer here
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Strategy recommendations
This section tells you:
• what our advice is and why it is appropriate for you
• reasons for our recommendations
• what you need to consider and any risks associated with our advice.
Read this section carefully and ask me if you have any questions.
Recommended action — first year
You will use your findings from the analysis you did in Section 4 of the assignment above as the basis for the information you will need to provide in this section.
For each recommendation below; discuss the reasons, risks, advantages and disadvantages.
All recommendations should be listed here. They are to include investment and debt management recommendations. You are not required to provide specific advice to your client about her insurance, superannuation and estate planning needs. However, if after analysis of her situation you believe that advice is required, you need to explain what advice she should seek and why.
Note: Not all of the recommendation boxes below need to be completed. Alternatively, you can add more boxes if required.
Recommendation 1
Answer here
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Recommendation 2
Answer here
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Recommendation 3
Answer here
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Recommendation 4
Answer here
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Recommendation 5
Answer here
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Things you should consider
Answer here. Refer to the sample SOA for examples of relevant descriptions that should be included here and under each subheading below.
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Insurance
Answer here
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Estate planning
Answer here
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Taxation issues
Answer here
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Recommended asset allocation
Proposed asset allocation
Your investment assets are invested across various asset classes. The table below summarises:
• Weight: The proposed asset allocation resulting from our recommendations.
• Risk profile weight: The recommended asset allocation for your investment risk profile.
• Variance (weight): The variance between the recommended and proposed asset allocation.
Comments on proposed ass