Financial Planning (Insurance) Case Study Essay

Allison has recently been promoted by her employer, Best merchandise, and now earns $135,000 p. a. exploiting effective time. She has commenced salary sacrificing 30% of this amount into highlyannuation, and her employer contributes l mavenliness pension Guarantee Contributions of 9% of her remaining interchange salary. The fund is a equilibrize refund retail old-age pension fund, MM Superannuation. Her f beginninging balance is $160,000 and earns on add up 7% p. a. afterward tiptoes and taxationes. She to a fault has $100,000 in term life and TPD insurance cover within her crackannuation fund.She drives a 4-year old Land Cruiser that is richly paid for. It has low kilometres and she expects to pass off it until she retires. She impart then drive $30,000 to purchase a new car on top of the trade in she expects to ingest from the Land Cruiser. Simon works for Newbolds Pty Ltd, a comp both which fills custom furniture. He earns almost $45,000 p. a. and intends d oing this work for the fore put onable future. He is supplied with a work vehicle and his employer honorariums his SGC ground on his $45,000 salary.Simon has $47,000 in retirement fund savings, held within the PP Superannuation Fund. The funds atomic number 18 invested in a balanced/ conservative portfolio with a low altogetherocation to step-up assets that earns around 4% p. a. after fees and taxes. They argon living on a semi-rural property which is valued at around $750,000, but they latestly need a mortgage of $150,000 as a line of credit. They be salaried approximately $1,000 per month as interest-only payments. Their opposite personal expenses are around $40,000 p. a. and they spend an spare $15,000 p. a. on holidays.Aside from private health cover, car, and house and contents insurance, the only personal insurance they bring is the coverage pop the questiond in Allisons retirement check fund. They do non have a depart or both powers of attorney but they wan t to en sure as shooting they have sufficient specie for their grandchildren (now old 6 and 4 geezerhood) to attend university. They estimate they will pack to accumulate approximately $120,000 (in todays dollars) over the undermentioned 12 years to pay for this. Allison wants to work for five or six more years and they wish to pay off the remainder of the mortgage over that time.She overly wants to increase the amount of money in both her and Simons superannuation. When she retires she believes they will need $40,000 (in todays dollars) for their living expenses in retirement, but Simon intends to continue working part time and estimates he will earn $20,000 p. a. They intend to use Simons in get hold to fund any holidays. Aside from their superannuation assets, they have $9,000 in a believe account for emergencies earning 4% p. a. , $15,000 in a term deposit earning 5% p. a. and $12,000 in a cash management account earning 5. 5% p. . They are not happy with the taxation im plications of these accounts, as any interest earned on the term deposit and cash management accounts seems to go in tax. You ascertain that they both have balanced encounter profiles. Required You are required to put up written responses to the following scenarios and questions, either in short answer form or using gage orients (or both). The following attachments are included try on Financial table attend tos Guide (Personal Advice) Sample Fact sentry and luck Profile Questionnaire Sample Ongoing Service Options Establish Relationship with knob You are preparing for an initial interview with Simon and Allison Callahan. a) Give some thought to the sort of things you would cover. Include any legal essentials and other(a) reinforcement which whitethorn be helpful in the interview. For the initial interview with the guests I would cover what Azza financial services stands for, their commitment to the customer and any legal implications, go over the financial service s guide (send protrude with letter before hand) and privacy constitution and compliance.I would also make the customers aware that the information they are providing is to be used solely for the purposes of assessing their situation to help them get to a better financial position. I would allow the customers to do most of the talking, recording their responses in a fact finder, and ask the client to off a risk profile questionnaire to get a feel for what their financial position is at the present, what charitable of expectations they have on Azza financial services, how ofttimes risk they are willing to take on and if there is anything ab reveal(predicate) their situation that world power prevent Azza financial from providing advice to the client. )How might you ask the client to arrive at for the first meeting? By sending a confirmation letter indicating how immense the interview will in all likelihood be, the purpose of the interview and what is the outcome intended, adv ising the client if there are to be any fees paid, providing the client with a list of documents to bring (eg current insurance policies, super recitements, current enthronement schemes, income and expenses, latest tax returns, military ratings of assets such as property, bank and credit card statements. ) To establish a relationship with Simon and Allison, what strategies might you use to name rapport during the interview process? offer food or drink (eg coffee, biscuits, tea, water) monitor client body language and engage in similar movements to make them feel more comfortable ask open ended questions to show clients you are interested in the personally and want to hear what they have to say. d)What are the four points you must cover when presenting a Financial Services Guide? Fees and charges = explain what fees might be applicable, including benefits and commissions that could be received by 3rd parties/referrers or product providers as a payoff of the see being impleme nted Products = outline the features of the products and services being inspireed Complaints Policies and Procedures = make sure to completely explain the procedures for handling customer complaints Relationships = explain any relationships which might influence which products are recommended or provided e)List the type of fees you could charge the clients. What are the benefits of explaining these fees to the Callahans?Types of fees which could be charged to the clients if they choose to implement the active platform are plan fees (often charged regardless if plan is let ined), commissions, entry fees, management fees, account keeping fees. The benefits of explaining these fees to the clients are that there will be no nasty surprises and they will go to sleep what they are getting themselves into from the start. It also provides defense for the advisor in the event that the client deems something unreasonable. In other words, there will be no misunderstandings about the po ssible cost of advice. ) noinate the range of financial products and services you will be providing advice in. Name the benefits of explaining these to your clients. The financial services and products which I could be providing advice on range from simplistic things such as bank deposit accounts to general and life insurance, complex and simple enthronization funds schemes, general and specialized superannuation schemes, commonwealth planning issues (although a lot will be directed to a solicitor if I am not qualified to provide advice on that particular area, the same goes with taxation).The benefit of explaining these to the client is that they will be more aware of what it is Azza financial services poop help them with, and if they will need to be involving any third parties to complete their requirements (eg control or solicitor). It also takes away any misconceptions as to the outcome of the advice provided and puts everyone on the same level expectation wise. The clients a lso may not have been aware of particular products and services offered which once explained may change their needs and requirements which might have not previously been considered by the client. )Outline the three steps your clients should take if they have a complaint or dispute prior to contacting the ASIC. Clients should first contact their advisor to make sure that their disatisf run is not due to a misunderstanding or something which can be ammended to their satisfaction. I would endeavour to solve their complaint within 3 working days. If the clients are up to now unhappy, they should lodge a formal complaint with the liscensees internal complaints process and allow appropriate time for this to be acted upon. If the clients are still unsatisfied with the outcome they may then contact the Finance Industry Ombudsman Service (FOS) for complaints involving losses of less than $500,000. FOS first trys to negociate and outcome between the involved parties, if this is not possib le the topic is passed for formal assesemnt by a panel. FOS is free to clients and the decisions it makes are law to the liscensee. 2-Identify Client Objectives and Financial Situation a) What techniques or tools could you use to gather further information about your clients goals, objectives and financial situation? Fact finder Financial documentation tax returns, statements, scheme overviews etc Use of open ended questions Diagnostic questionnaires endangerment profiling b)Using your case study, complete the attached Fact Finder with as much information as you can. Remember that this document is used to collect current information as well as identify any issues, problems or constraints that may be relevant in developing your advice. See Fact Finder i)From the scenario in your case study, write down one or more limited financial goals for the generic needs provided. Wealth creation for a specific purpose Start increasing Allison and Simons Super balances ($160K and $47K) sacrifice for grandchildrens university in 12 years estimated needed $120K in todays dollars Wealth security Take out Personal insurances to avoid eroding savings if something unforeseen happens income protection, trauma, evaluation of current life and TPD Debt reduction Pay off IO mortgage of $150K in 5 years Tax minimization Save on tax on bank accounts/term deposits peradventure downsize family home and move mortgage to coronation property to save on tax Superannuation Start increasing Allison and Simons Super balances ($160K and $47K) and evaluate suitability of current funds investiture visualisening Possibly purchase Investment property to produce another income stream and save on current tax Look into other investment excerpts to diversify current wealth Estate proviso Establish will and power of attorney with solicitor c)Write down a line of questioning that you would use in the initial interview to increase your understanding and obtain furthe r clarification of the clients goals and objectives.Use open-ended questions starting with What, How, When, why and Where. Apart from what we have already discussed, tell me about any other goals, long or short term that you might have. What do you plan to do when you retire? What is your current state of health? Eg do you smoke, are you aware of any issues that could affect your ability to work? Simon, what sort of duties do you perform at work? (- for insurance purposes we need to ascertain what type of work Simon is doing in golf-club to now which category he fits, A/B/C? ) What are the contact elaborate of your accountant? (- Financials) If you have a solicitor, what are their details? power of attorney, will) What are your plans/goals in relation to the planning of your estate? Tell me what other possible financial details you could have overlooked in filling out the fact finder? (- no credit cards? No shares or any investments outside of super and level(p) bank acco unts? ) What level of cash reserve do you feel comfortable keeping liquid for emergencies, and are you expecting to receive a pomposity contribute of money in the future? What are the premium details of your current life and general insurance policies? When are you considering downsizing the family home, if at all? d) What action would you take immediately after the first meeting?Immediately after the first interview I would Clearly write down everything which needs to be investigated or researched, in relation to what types of products, tax issues, possible strategies, the sources of information and a timeline for completion. This is so that I can prove I have been compliant with the corporations Acts requirement of investigating the subject matter of the advice. I would ask the clients to sign an authority accepting the breeding and research of drawing up a financial plan and agreeing to pay any fee which may be incurred as a extend of this advice. e) Simon and Allison have a balanced risk profile. unload the sample Risk Profile Questionnaire to reflect this. See risk profile 3- Analyse Client Objectives & Financial SituationWill Simon and Allisons current financial circumstances and other concerns meet their objectives without your assistance? a) Why/why not? No, Simon and Allisons current financial set up is not adequate to allow them to meet their goals and objectives. This is because they are note contributing enough in their superannuation to achieve their desired balances, they do not have any estate plans in place, their current bank accounts are leaving them paying excess tax, they are not sure how to structure their expenses in order to reach a comfortable position upon retirement in 5 years time, and their personal insurance are grossly insufficient to keep them in their current lifestyle and meet expenses should something happen to one of them. ) List the assumptions you made. Allison and Simon do not have current solicitor whom they have talked about creating a will or power of attorney with Allison and Simon are of middling intelligence and have not had much to do with Financial planning services in the past. Allison and Simon do not know much about investment schemes, Superannuation regulations, Life insurance or Taxation Allison and Simon have used an Accountant in the past to prepare their yearly tax returns The average evaluate rate of return is 6% Expected CPI is 3% and current tax rates have been used. c) Reference information sources that you have relied on in forming your view. RG146 training Australia DFS course material and scenario Australian Taxation Office website (www. ato. gov. au) Financial Planning association website (www. fpa. asn. au) Westpac and BT Financial group case studies (internal) 4 Develop becharm Strategies & Solutions a) Describe two research processes you can use to gather information about products and services you recommend to your clients. Independent research houses (eg Standard and Poors and Morning Star) cyberspace searches eg ASX, AFPA, ATO etc Product disclosures, rankings, past performance of companies, Financial fall over newspaper etc Refer to your case study, Fact Finder and Risk ProfileDevelop a scheme for each of the following points for Simon and Allison. Describe each of your strategies in terms of key characteristics, advantages and disadvantages. b) Please address Allisons insurance requirements. Your response should include a draft description of each type of cover and actual amounts recommended. Include calculations and explanations of amounts. limit Life term life insurance provides a bulk payment to the beneificiaries of a person upon their closing, or in some cases when disgnosed with a terminal affection the person insured can also received the payment. offered to people from 16-75 and can renew until age 99. Can be paid via stepped premiums (where premium increases with age, you pay more in the long run) or le vel premiums (same amount througout policy, 30% cheaper than stepped in long run, and indexed to CPI) Advantages of having life insurance are that it gives the insured ease of mind knowing that they are not leaving their loved ones in poor financial positions upon their death and ensures they are looked after Disadvatanges are that there are a few exclusions to the policy such as suicide within first 13 months, War, exist conditions, aids, and terminal illness/disease where it is a direct extend from an action which was self-inflicited. Currenlty Allison has $100,000 expenditure of life and TPD insurance within her superannuation. In regards to life insurance this is unluckily inadequate as the estimated living costs for Allison and Simon are $67,000 per anum. In order for Simon to continue meeting these expenses (whilst still working) if allison were to becomed de drop by the waysided, the insured amount would need to be scraggy to $475,000.This is because if invested at a n average fixed deposit rate of 6% it would provide an income stream of $28,500 per anum to Simon. (475000/100) x 6 = 28,500 this along with his current net salary of $38490 come to a per anum income strem of $66,990 to meet expenses. An additional $270K should also be added to cover their alert mortgage debt and to have money left over in order to pay for the grandchildrens university education, bringing the total life benefit to $745,000. Income protection A fortnightly or monthly payment paid to the insured in the event that they brave out and injury or illness which leaves them unable to work Maximum of 75% of income can be insured and person must be employed at least 25 hours per week. Waiting periods of 14-720 dys apply and benefits periods can be 1-65 years (longer the beenfit period the higher(prenominal) the premium) 2 types of policies are agreed value (specified value to be paid regardless of difference between insureds current and former incomes) indemnity (benefi t based on insured income at time of claim. Advantages are that the insurance provides peace of mind knowing that if the insured was to suffer from an injury or illness and are unable to generate an income that the benfit will be paid as if it were their regular income, giving them peace of mind that they could stay on top of all their financial commitments and goals whilst healing. Disadvantges are that as income protection is linked to employment, those who are unemployed or even those with occupations which are considered too risky are not able to obtain income proteciton insurance. Also, as the benefit is only 75% of income, the insured will be 25% worse off and will need to make sure this will not affect any financial commitments or goals they may have. Allison presently does not have income protection insurance in place which could end diasterously as she earns 75% of the matess gross income. (180,000/100) x 75 = 135,000). Allison should take out an income protection poli cy with a $101,250 benefit (135,000-25%) which would then provide both her and Simon peace of mind knowing that if anything was to happen they could continue paying their expenses add up and Permanent balk TPD insurance provides a lump sum payment to the insured after a qualifying period ( unremarkably six months) when certain criteria is met. Criteria can be inability to perform own occupation, any occupation, home duties or all duties these are based on the type of work the insured is in (rated AAA-E) Immediate dexterity for TPD payout if insured looses sight or a limb Advantages of having TPD is that if the insured suffers a debiltating injury that sees them unable to return to work that they can still meet their expenses Disadvantages are that it is not available to everyone a new policy cannot be taken out after 60 and policies already in place automatically cease when insured reaches 65.Also unless rated category E, the standard level of cover criteria is any occupati on, meaning that the insured may be able to perform in a role significantly less stimulating, challenging and financilally rewarding which would make them ineglibly to receive a payout even if they suffer a total and permanent diability. As Allison and Simons expenses are $67,00 p/a and Allisons income protection benefit is $101,250, whilst Allisons still working a stand alone TPD policy would be beneficial for having a lump sum to pay off the exisiting mortgage debt of $150K, have enough money to pay for the grandchildrens university ($120K) and possible medical expenses (another $150K) totalling a $420K TPD. Another amount for Living expenses should also be considered for the 6 years until retirement ($67,000 x 6 years = $402,000).This brings the total recommended TPD benefit to $822K which could also be bundled as a rider on Allisons life insurance to avoid overinsurrance. Trauma Trauma insurance provides the insured with a bulk payment when they suffer from an illness specif ied in the policy Can be bundled with life insurance and a payout will decrease the life policy by the same amount Available to people aged 16-55, or trauma for children aged 1-12 years ( waiting periods and age limit criteria apply) Advantages are that as trauma insurance is not related to employment, people with uninsured occuppations can still generally take out trauma insurance.Also the insurance provides peace of mind knowing that if the isured was to suffer from a specified illness and are unable to generate an income that the sum paid will cover their expenses and ease the financial pressure Disadvanages are that there are exclusions such as death within 3 to 30 days of trauma event, trauma caused by an ntentional self inflicted injury or attempted suicide and acts of war. In order to avoid overinsurance Allison should take out around $250K trauma insurance to cover $150K exisiting mortage debt and any medical expenses associated with the event. Allisons Income protecti on will also most likely be able to contribute towards the benefit amount should a defined event occur. c)Does Simon require personal insurance? If so, what types and how much? Please include reasons and calculations Simon could take out the following polices to provide stability and peace of mind for Allison in the event something should happen to him. border Life, Trauma, TPD As Allisons income (or insurance benefit if something were to happen to her simultaneously) alone can support the couples expenses of $67,000, I would recommend a combined life insurance, TPD and Trauma policy, of $690K for Simon (salary of $45,000 x 6 years = $27,000) + $150K mortgage debt + $150K possible medical espenses + $120K grandchildrens education = $690,000), so that the mortgage can be paid out, the grandchildrens education can be paid for, any medical expenses which might be incurred can be paid, and a replacement income stream for simon is created leaving allison debt free if something were to happen to Simon. Income protection It is my view that Income protection is not necessary for simon as allisons income is more than adequate to support the couple with money left over, however if they did not want to draw on this, an income protection policy could be put in place for 75% of his income. $45,000 x 75% = $33750 ($33750 / 12 = $2812. 5. this would mean Simons monthly benefit woul be $2812. 5 (75% of his monthly income). D) What is the most efficient way for Simon to contribute to superannuation and why? How much should Simon contribute? As Simon is on the lower end of the income tax scale, it is beneficial for him to make non-concessional contributions into his superannuation as he is qualified for government co-contributions for every $1 he puts in up to $1000.As Allison is on a higher MRT than Simon, if she were to salary sacrifice a larger portion of her income into both their superannuation accounts (shes currently Sacrificing $40,000 into her own, however this cou ld be brought up to $70,000 and then she could sacrifice another $20,000 per anum into Simons in line with their goals of increasing their super balances) they would be paying less tax (as Allison in on the highest MRT and super contributions are at 15%) and they can use Simons income (on lower MRT) to put towards their expenses, thus Simon should not contribute too from his salary preceding(prenominal) the SG of 9% and non-concessional contributions past $1000 (as his super will be paid in by Allison to achieve the above stated tax advantages).Simon should also merchandise his investment system to a balanced blend as it is too conservative to his risk profile at the present. e)Is Allison contributing sufficient funds to superannuation at this time to meet their retirement objectives? Please explain. To meet their objectives of having $40,000 per anum to live off in retirement, Allison is not contributing enough to her superannuation at this point in time. Allowing for the effec ts of compounding interest, after 5 years Allisons superannuation balance would have accumulated to $224,400 (at 7%). In order to provide an income stream of $40,000 Allison will need to bring her balance up to $580,000 by the time she retires in 5 years.This means Allison will need to make up the difference ($580,000 $224,400 = $355,600) in the next five years. Allison will need to contribute another $30,000 p/a ($355,600/5 = $71,120) her current Salary Sacrifice of $40,500 = $30,000 to her superannuation to achieve this balance and their retirement objectives. Allisons current total superannuation contributions per anum are $40,500 in salary sacrifice (30% of salary of $135,000) along with a Superannuation assure of 9% of her remaining salary ($135,000 $40,500 = $94,500, $94,500 x 9% = $8505) bringing her total contribution to $49,005. f) Are their additional benefits available to Simon or Allison as a result of your strategies above?By Allison salary sacrificing more of her i ncome she is saving astronomical amounts on tax as the contributions tax is only 15% as opposed to her MRT. As stated previously, Simon will also be eligible for the government co-contributions with his non-concessional contributions. Allisons income protection policy (and Simons if taken out) are also tax deductible. Simon is also eligible for the low income tax offset of $804 from a maximum of $1350 for income earners of under $30,000. For Simon his amount is worked out with the following calculations 1. $1350 ($45,000 taxable income -$30,000 threshold) x 4% = 546 and then 2. $1350 546 = $804) g)What is your recommendation regarding an investment for the grandchildrens university education? What are the benefits of this investment?For the grandchildrens education I would recommend investing in a balanced education savings plan (they would need to contribute $7000 p/a (at approx 7%, and with the effects of compounding interest) to reach their goal of $120,000 in 12 years) as the amount invested in taxed at a flat internal company rate of 30% however after 10 years the amounts can be withdrawn for non education purposes tax free, and as the investment is to be over 12 years Allison and Simon could take advantage of this. If it was to be withdrawn earlier, they are still in a effectual position as the money would be invested with a bit more risk than that of an everyday savings account and the taxation benefits still outweigh other methods, especially with the low income offset which is still said to be increasing. h) Are their bank/cash investments (total $36,000) meeting their requirements? Why/why not? What do you recommend? No, currently these investments are not meeting Allison and Simons requirements as they are held in both names and are accordingly subject to Allisons higher MRT.If Allison and Simon fixed to use the advantages provided by income splitting (that is, transferring term deposits and interest bearing accounts into Simons name) then they would save on tax as Simon has a lower MRT. Allison and Simon could also see of putting this money in their Superannuation to capitalize on the 15% contributions tax or putting it into the mortgage as then they are paying less interest, however this would depend on whether or not they would be needing to keep this money liquid for everyday use and emergencies. i) How would you address their goals of paying out their home loan and purchasing the new car upon retirement? In order to pay out their home loan in 5 years time, Allison and Simon would eed to put around $40,000 P/A towards due to interest payable. After Allisons extra salary sacrificing for both their Super accounts, the couple have around $45,000 surplus disposable income per anum. $40,000 can be used to make these extra payments on the home loan and the other $5000 can be put into a high interest savings account for the 5 years (which if invested at the average deposit rate of 6% will leave them with $29576. 10 after 5 years with the effects of compounding interest) which will leave them with enough money to purchase the new car. j) Are their estate planning preparations adequate? Why/why not? Currently Allison and Simon have no estate plan, therefore it being inadequate.I would recommend to Allison and Simon to contact their solicitor to discuss a will/power of attorney using their information we have uncovered done analyzing their financial situation here today. k)What alternative strategies did you consider? Why did you reject them? restitution providing insurances for Simon as well This would be over insuring and wasting money for Allison and Simon as Simons income in relatively small in comparison to Allisons, and she is able to cover all costs if something we to happen to Simon. Superannuation Simon contributing more to his superannuation the tax benefits of Allisons salary sacrifice through decreasing her MRT far outweigh that of Simons and it was therefore better to prioritise with All isons SS and utilize Simons income for expenses.Investments For the grandchildrens university education, possibly investing in something more risky (eg shares) or less risky (eg Term deposits) however the tax advantages and return on the educations savings plan in comparison would leave them in a better position. 5 Present Strategies and carry on Solutions Prior to Presentation a)Describe what preparations you would undertake to present your strategies in step 4 to Simon and Allison. After thorough research enabling me to form my recommendations, I would prepare a Statement of Advice with my findings, make sure to gather all product disclosure statements which are relevant, and information to back up my advice. I would also make sure there was a financial services guide within the information I would be taking to the interview.I would then call the clients to arrange a time which suits. b) What back-up information or documentation might you need? I might need to back up the perfo rmance of particular products/services I recommend (this could be provided in the form of company reports, asx reports, PDS, articles, academic studies etc) also easy to follow breakdowns of any calculations made so the client can see exactly how the strategy will benfit them. FSG and Privacy policy to assure the client of the companies principles and policies in the event of a dispute. During the Presentation c) Describe the disclosure principles and presentation requirements you must adhere to for the following documents ? Statement of AdviceThe statement of advice must have statement of advice written across the front of it, it must be in non complex evince (clear, concise and effective manner), must have a generic description of the range of financial products or strategies considered and investigated. The customer must receive a copy, along with PDS and FSG and must have sign and had the SOA presented to them BEFORE any implementation of strategies can be put in place. A disc laimer is also usually placed at the bottom of the SOA to protect the financial planner and affiliated companies against the working of case law althogh this is not required by the corporations act. ? Product divine revelation Statement The PDS needs to accompany the SOA so the clients have all the information in relation to possible products they are signing up to. Other things which need to be in the PDS include Fees and charges = explain what fees might be applicable, including benefits and commissions that could be received by 3rd parties/referrers or product providers as a result of the plan being implemented ? Products = outline the features of the products and services being recommended ? Complaints Policies and Procedures = make sure to completely explain the procedures for handling customer complaints ? Relationships = explain any relationships which might influence which products are recommended or provided d)List 2 objections or concerns your client might raise. How wou ld you address these in order to gain agreement? 1. How do I know that what you recommend will work out for me in the long run? We have based these recommendations on previous performance of these products and services, all of which you have perceive with your eyes.We cannot 100% guarantee that these potential outcomes listed will occur, however financial planning is what we specialise in and we make it our duty to look after your financial health. If we unwrap that the course which we have mapped out for you is not heading in the direction we have anticipated, you will be the first to know, and we will review your situation in order to alter your plan to best fit your needs, provided you would like us to provide you with this ongoing service. 2. This plan fee seems overly expensive why do I have to pay it? It takes a considerable amount of time, research, investigation and preparation for us to put together a plan that is tailored tout ensemble according to your personal need s.There are no generics or assumptions made with what we are presenting you and the savings and earnings you will make as a result of our guidance will far outweigh the cost of this information. 6 Implement Agreed Plan Simon and Allison have agreed to your plan. a) What transactional documents/authorities need to be signed by Simon and Allison? Authority to proceed / SOA and disclaimer Application forms along with PDS attached A cheque to be written to accompany industriousness form b) Complete an Implementation Plan, in order, that details your planned actions now that Callahans have decided to proceed with your recommendations in step 4, providing an indication of when each must be completed. A Adviser C Client No. Action Who When Sign Authority to Proceed C Now Provide 3rd parties with adequate relation of actions needed to be taken eg solicitor, accountant A ASAP Complete practise forms ready for client to sign A ASAP Present application forms to client with PD S attached to be signed. A + C When ready Photocopy, keep one and give other with PDS to client. Obtain Cheque from Client and attach to application form to be sent to dealer group A With step 4 Welcome letter from dealer is issued A /Dealer - see client file established (maintained for 7 years) A - Confirm with clients that they have received welcome letter and they have heard from any 3rd parties. A - peach to clients about Review Service A When everything is settled 7 Provide ongoing service You now have to address the issue of providing ongoing advice to Allison and Simon. )What environmental (economic, market, regulatory) changes, or changes to their personal or financial situation would cause a review of their plan? Interest rate changed may affect tax advantages, investment earnings New regulatory changes may grandfather or completely remove current strategies in place Market booms and busts may cause portfolio mix to be outdated / underperforming Clie nts may have suffered a loss, or injury causing them to claim and or need to reassess the financial commitments they can keep up with Clients may have come into a considerable amount of money unexpectedly allowing for more room to move in current strategy (e. g. inheritance, lotto) Change of advisor may bring upon new light on their situation, may have a better strategy in mind. b)Describe 2 activities you regularly undertake to keep up-to-date with current legal, ethical and regulatory requirements of the finance sector. lead financial review/finance news, current company legal updates Read the AFPA reports issued and newsletter from BT financial and liaise with current financial planners c)What level of ongoing service would you propose for these clients? ( No service ( Portfolio valuation ( Portfolio review ( Financial Plan review ( Other Describe d)Describe the option recommended for your client, and why you have recommended this option.Describe the level of service you wi ll provide and the associated fees. I would recommend an annual portfolio review for Allison and Simon to ensure that they are on track to achieving their goals. This would involve checking balances and fund mixes to ensure adequate returns have been made and that products are performing as anticipated. I would prepare a letter to send out based on my finding advising whether or not a change could benefit them. As the strategies recommended for Allison and Simone are middling basic a separate fee would not be necessary as this service would be considered to be paid for under the trail commissions. Sample Fact Finder & Risk Questionnaire 1. ain DETAILS node 1 thickening 2 Title Mrs Mr Given Name Allison Simon Preferred Name Allison Simon soubriquet Callahan Callahan escort of Birth 1956 1958 Marital Status M M Home Address Address Lot 3 Wattle Road Suburb/ township Hurstbridge State VIC Postcode Home Telephone No. Preferred connectedness No. CHILD / DEPENDENT DETAILS Name Megan Relationship Daughter Date of Birth 1981 Current Age 29 Financially Dependent NO HEALTH DETAILS Do you Smoke Yes / No Yes / No State of wellness Poor / Good / Excellent Poor / Good / Excellent Are you aware of any health issues that may impact your ability to earn an income? (please provide details) Notes 2. EMPLOYMENT DETAILS CLIENT 1 CLIENT 2 Employment Status ( Unemployed ( Unemployed ( Full while Employed ( Full Time Employed ( Self Employed ( Self Employed ( Part-time ( Part-time ( Retired ( Retired ( Other ( Other Employer Name Best Marketing Newbolds Pty Ltd Position Title Marketing Employee Primary Duties Marketing Custom Furniture Work Address Current Work Phone No. Employment Security Secure just promoted Secure intention to stay long term Are you Contemplating leaving your employer? In 5-6 years Not in the foreseeable future Do you foresee any substantial change in Planned retirement in 5-6 years, possible In 5-6 years will reduce hours to part time your income in the next 2-5 years? reduction in take home pay in the lead up to income will be approx $20K p/a this Notes OTHER consultant DETAILS Accountant Name Company Contact Detail Do we have authority to contact? ( Yes ( No Solicitor Name Company Contact Detail Do we have authority to contact? ( Yes( No ESTATE PLANNING DETAILS CLIENT 1 CLIENT 2 Do you have a current Will? No No Date of Will / Last Reviewed Power of attorney No No Type / Name of lawyer? Do you have Funeral Plans? No No Do you have any specific intentions Intention to pay for grandchildrens Intention to pay for grandchildrens regarding your estate distribution? university in the approx 12 years (approx university in the approx 12 years (approx $120K in todays dollars) $120K in todays dollars) 3. FUTURE unavoidably OBJECTIVE AND GOALS E. g.Current income needs, retirement income needs, diversification, tax minim isation, capital growth, investment security, wealth creation, eliminate mortgage etc Reasons for seeking financial advice Gain assistance with making the changeover to retirement and planning the next five years Short Term (1 to 3 years) Save on tax on bank accounts/term deposits through possibly restructure Start increasing Allison and Simons Super balances ($160K and $47K) Look into other investment options to diversify current wealth Medium Term (4 to 7 years) Pay off IO mortgage of $150K in 5 years Buy new car (through trade in 9 year old land cruiser) worth $30K In 5 years shake off a $40K (todays dollars) p/a retirement income stream in 5 years Long Term (7 year plus) Pay for grandchildrens university in 12 years estimated needed $120K in todays dollars RETIREMENT PLANNING Retirement Details CLIENT 1 CLIENT 2 Planned Retirement Age 59/60 loose Retirement Income required $40K (todays dollar) $40K (todays dollar) After retirement, do you intend to work NO Expected Income= again either on a full-time or part-time $20K basis? Till age undetermined What capital expenses will you have in $ $ retirement? (Please state expense and value) Would you like some assets left to your $ $ estate? Please detail) Notes 4. FINANCIAL DETAILS PERSONAL BALANCE SHEET Lifestyle Assets Owner Date Acquired Value Associated Debt Principal Residence Allison and Simon $750,000 $150,000 Contents Motor Vehicle/s Allison 2006 Land Cruiser No debt Caravan / Boat / Trailer Investment Property Other Total Investment Assets Investment INCOME DETAILS CLIENT 1 CLIENT 2 Income $135,000 $45,000 Investment Income $1770 p/a interest (bank accounts) $1770 p/a interest (bank accounts) Centrelink Income Pension/Annuity Income Other Income Less Income Tax $38554 $7580 Less Medicare Levy $2050 $700 Total terminal Income $94426 $38490 Combined Net Income $132,916 EXPENSE DE TAILS COMBINED Food Entertainment $15,000 Transport/Vehicle Council Rates Amenities Rent Mortgage Repayments $12,000 Other $40,000 Total $67,000 SURPLUS DISPOSABLE INCOME COMBINED Annual $65,916 Monthly $5,493 PLANNED MAJOR EXPENSES Nature of Expense Approx.Expense Amount Expected Date Grandchildrens university $120,000 in todays dollars 12 years Purchase new car $30,000 5/6 years What cash reserve do you require for emergencies or unforeseen expenses? Are you expecting a future lump sum or inheritance? If so, how much? Notes 5. SUPERANNUATION & INSURANCE SUPERANNUATION Company Policy No. Employer/ Personal Are any of the above policies preserved? No Has a tax deduction been claimed for part/all? Yes No Are there any exit fees applicable? Yes No LEAVE PAYMENTS Type Expected Receipt Date Anticipated Amount Annual Long Service Other Have you recently received a redundancy package? Yes No If you have recently r eceived a redundancy package, please provide notice of payments. ordinary INSURANCE Insurance Description Policy Number Owner Date Commenced Sum Insured Premium Payable Term Life and TPD Allison $100,000 Notes 6. INVESTOR RISK penYour attitude to risk is probably the most important factor to consider before investing. To achieve higher returns, you will have to be prepared to accept a higher risk of capital loss. This is because the funds and assets that offer high returns are generally more volatile than those producing lower returns. It is what we call risk/return trade off. We will recommend investment strategies to match your investments to your risk profile. Investing across the various investment sectors according to your risk profile is called diversification. For example, kind of of investing only in property, or only in shares, you might invest a proportion in both, or even include cash or fixed interest to create a balanced portfolio.You ar e a balanced investor who wants a diversified 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 accepted to help you achieve good returns. 17 23 Moderately Conservative A Low Risk Taker You are a moderately conservative investor seeking better than basic returns, but risk must be low. Typically an older investor seeking to protect wealth that you have accumulated, you may be prepared to consider less aggressive growth investments. 9 16 Conservative A Very Low Risk Taker 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 your initial investment is protected. 7. CLIENT STATEMENT / AUTHORISATION I/We herby declare that the information set out in this form is true and correct to the best of my/our knowledge. I/We are n ot aware of any other information and have not disclosed to the person to whom this form is given any other information which would be relevant to the making of a recommendation by a teach Financial Planning Representative. I/We give permission for this information to be used for the preparation of my/our financial plan and I/we understand that the investment recommendations will be based solely on the information supplied in this form. I/We also note that ( I/we have received, read and understood the Financial Services Guide before any advisory services were provided ( I/we permit this document to be passed in confidence to any member of Mentor Financial Planning Pty Ltd ( Limited Information Provided I/We have provided limited financial information.I/We have limited the product(s) or objective(s) that can be advised on to If you are seeking limited advice of a particular nature you must make this cognize at the time of the interview and you should recognise that the recommendations will only relate to that limited advice being sought and may not be appropriate considering your boilers suit situation and objectives. ( Tax File Number Permission I/We give permission for my/our tax file number(s) as provided, to be held only by Mentor Financial Planning and be forwarded to financial institutions as put across or as necessary. ( Engagement Application I/We request that Mentor Financial Planning investigate research and provide suitable options to the financial objectives outlined in this questionnaire. I/We understand that the preparation fee of $500 is payable for the work to be undertaken. This fee may be credited against my establishment fee should I/We proceed to implement any of the recommendations provided by Mentor Financial Planning. Client 1 Client 2 Signature Date 8. Advisers Declaration I declare that a) the information contained in the Fact Finder is an accurate and complete record of the information obtained from the client(s) b) The client(s) was provided with a copy of the Financial Services Guides before any advisory services were provided. Advisers Signature Date supererogatory Important Information for the Client(s) If incomplete or limited financial information has been provided I, as your Adviser, will not be able to undertake a full needs analysis of your individual investment objectives, financial situation and particular needs There is a possibility that any recommendation given to you may not be fully appropriate to your individual objectives and needs, especially those which I, as the Adviser, do not know and You as the client must carefully ssess the correctness of the recommendations to your own individual investment objectives, financial situation and particular needs before acting on them. To Whom It May Concern Please accept this letter as my/our authority to provide any information requested and documentation if required to Azza Fin ancial Planning (or their representative). Please accept a photocopy or facsimile of this letter, as the original will remain on file at the offices of Mentor Financial Planning. Correspondence should be sent to Level 2, 349 collins Street Melbourne VIC 3000 This authority should remain in force until withdrawn in writing by me/us. Thankyou. Allison Callahan Client 1 Name Signature Simon Callahan Signature Client 2 Name Client 1 D. O. B. Client 2 D. O. B. ___/___/___ ___/___/___ Lot 3, wattle road, Hurstbridge, VIC Address On Going Service Options 1. The No service optionThis generally relates to a one off investment placement based on the agreed investment strategy in the financial plan. In choosing this option, no ongoing service or review of the financial plan and the investment portfolio is provided to the client unless specifically requested by the client or upon the recommendation of the planner. 2. The Portfolio valuation option This ser vice provides reports on the value of your investment portfolio only. The fee charged will depend on the frequency of the reports. In choosing this option, no ongoing service or review of the financial plan is provided to the client unless specifically requested by the client or upon the recommendation of the planner. 3. The Portfolio review optionThis service provides reports on the value of your investment portfolio. The fee to be charged will depend on the frequency of the reviews and will be agreed at the time. The minimum fee is $N/A but this may be higher depending on the complexity of the review. This service includes An annual/half yearly/quarterly review of your existing investment portfolio and its performance smell at further investment opportunities, if appropriate establishing if there have been any changes in legislation, the economic environment and state of the financial markets that may impact on your recommended investment portfolio In choosing this option, o ongo ing service or review of the financial plan is provided to the client unless specifically requested by the client or upon the recommendation of the planner. 4. The Financial Plan review option This service provides for an annual/half yearly/quarterly review of the boilersuit financial plan strategy and the investment portfolio recommended. Each review will be presented in the manner of a written report and recommendations. The fee to be charged will depend on the frequency of the reviews and will be agreed at the time. The minimum fee is $__500________, but this may be higher depending on the complexity of the review. This service includes roviding reports on the value of your investment portfolio an annual/half yearly/quarterly review (including comments) of your existing investment portfolio and its performance looking at further investment opportunities, if appropriate establishing if there have been any changes in legislation, the economic environment and state of the financial markets that may impact on your recommended investment portfolio and the boilers suit financial plan strategy establish if there have been any changes to your personal circumstances or financial goals and objectives ascertain if the overall financial plan and the investment portfolio is continuing to meet your financial goals and objectives (including an insurance review) and making any new recommendations (if necessary).