Professional Documents
Culture Documents
Prepared for
Prepared by
Tracy Burton
12 February 2010
You are entitled to receive a Statement of Advice (‘SOA’) whenever we provide you with
any personal financial advice. Personal advice is advice that takes into account your goals,
objectives, financial situation and needs.
This SOA is a report of the personalised financial advice provided to you and includes
information on the basis on which this advice is given, information about fees and
commissions and any connective information which might influence the advice.
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 no longer be current and will need
to be reviewed for accuracy.
Personal information………………………………………………………………………………………...6
Financial Information……………………………………………………………………………………..….7
Strategy recommendations…………………………………………………………………………………9
Ongoing services…………………………………………………………………………………………....15
Authority to Proceed…………………………………………………………………………………….….16
SOA Appendix 1 Cash flow projections after one year – No implementation of strategy……..18
SOA Appendix 2 Cash flow projections after one year – After implementation strategy………21
I recommend that:
• You pay off your personal debt including the car loan and mortgage of $242000.
• You open a high yielding savings account and place $15000 within as an emergency
fund.
• You set up Family Tax Benefit B.
• You see a solicitor to update your Will.
• Invest $40000 in a balanced managed fund, and then be accessed in 4 years when
Chloe begins her high school studies.
• Invest $50000 in a growth managed fund for the build up of retirement wealth.
Your personal debts being paid off and setting up your high savings account will generate
further savings. This will allow you to enjoy the lifestyle you require with minimum worry.
The growth managed funds and your existing share portfolio will grow over time while still
being accessible. This will help you achieve your retirement goals.
You will have effective insurance and health cover in the unlikely events of death, sickness
or injury.
Your updated Will can protect your family in the case of unlikely events.
As has been discussed, all investment options do carry some risk. You are to be aware
that your managed investments may not increase as quickly as you expect, or the value
may not change or go down.
Under RG 175.109, we are required to give you warnings on the accuracy of advice, due to
not being able to obtain all information required, regarding your personal circumstance, e.g.
(Superannuation, Insurance cover).
Our advise may be limited if we do not have all relevant information required. It is up to you
to assess how appropriate our recommendations are in your circumstances.
The fee required for our advice and the preparation of making this Statement of Advice is
$2600 including GST. Burton Financial Planning Pty Ltd is entitled to receive $1600 and I
will receive the balance.
Further details on the fees, commissions and benefits relevant to our advice can be found
in the Disclosure of commissions, fees and benefits section.
To proceed with your advice, please complete the ‘Authority to Proceed’ at the end of the
statement and return it to us.
Walter - you mentioned you did not want any advice on:
• Insurance
• Superannuation
After our discussion, we understood your main objectives and needs as follows:
• You would like Patricia’s Super invested in best possible way, producing as much
income as possible with minimum worry;
• You want Patricia’s Super to pay for your daughters’ future high school & university
studies of $115000;
• You wish to maintain family lifestyle whilst working part-time till Larissa is 13.
• You expect to retire at 65 with $40000pa.
Personal Information
Personal Details
Walter - you have $300000 Life and TPD cover under your superannuation fund and your
family has private health insurance.
You have advised us that your Will requires updating, and need to see a solicitor.
Walter Total
Assessable income $44014 $44014
Income after tax $37604 $37604
Yearly expenses $52636 $52636
Estimated surplus/deficit -$15032
Walter- based upon the income and expenses schedule above, you have a deficit -
$15032 income available if after 1 year this implementation is not followed.
Be advised, that for any reason, information on which our advice is based upon, is either
inaccurate or not complete, then it may be necessary to consider its appropriateness in
respect to your particular circumstances, needs and objectives.
From our discussions, and from the answers of your risk profile questionnaire, we believe
that you are a Balanced investor.
You are a cautious investor who wants a balanced portfolio that can work towards medium
and 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. An appropriate asset mix for you would be:
The target asset allocation for your risk profile is seen below:
• Repay all personal debt including the car loan and mortgage of $242000, this will
reduce your interest expense, resulting in future savings over time and a greater income
level.
• With $15000, set up a high yielding savings account for use as an emergency fund,
where further income earned can be saved here.
• Set up a balanced managed fund of $40000 for secondary school expenses. This
will provide greater returns then a bank account.
• Organise a growth managed fund of $50000 to help fund retirement and necessary
expense.
• Set up a growth investment bond of $80000 that can be used in 10 years for
University expenses. This will provide returns as well as tax advantages.
• Set up your entitlement Family Tax Benefit B with Centerlink.
• Update you Will.
Product recommendations
Note that we can only recommend products that have received approval by Burton
Financial Planning Pty Ltd.
Personal investment
As can be seen in the Cash Flow Statement in Appendix 1, you currently have a deficit of
funds which is largely due to the mortgage and car loan. The faster these are paid off, the
sooner you will have access to greater funds at your disposal. This is due to the fact you
will not be paying interest on your debts. Setting up the high yield savings account will help
you have added security as an emergency fund in reserve.
Managed funds
Managed funds will give you diverse investment over different types of assets which will
help create wealth. Your fund managers have the advantage of much expertise and
resources as well as good administration procedures for regular reports. This has
contributed to reason why Colonial First State is one of the largest in Australia.
The recommendation to place $40000 in a balanced managed fund is for your daughters’
high school expenses. This fund will provide a balanced level of risk and will likely provide
greater growth of funds then keeping it in a bank account.
Having $50000 in growth managed fund is for your personal investment. These funds have
the potential for greater growth then the balanced managed funds. This should help you
achieve your retirement goals and any other necessary expense.
By using managed fund shares and keeping your existing shares, you allow yourself long
term capital growth as well as interest income Also, shares by their nature, can easily be
sold on the stock exchange and provide you with funds on short notice.
The growth investment bond of $80000 is for the purpose of funding your daughters’
university expenses whilst generating growth from its interest payments. The growth
investment bond will keep its yearly earnings and pay its 30% tax on its own, so you won’t
have to be taxed on anything unless you withdraw within the 10 year period, for which it
will be listed as an earning in your assessable income. Otherwise you do not have to
declare anything on your income statement even when it is matured in10 years time. This
method is a popular instrument used to save for children’s education whilst minimising risk
and benefiting from tax advantages.
Gearing
Please check the Cash Flow and Assets and Liabilities Statements in SOA Appendix 2, for
your financial position after recommendations.
Please be aware there may be discharge or legal fees associated with paying the mortgage
off early. You will have to discuss this with your mortgage provider. This may also be the
case with the car loan.
You need to be aware that you should discuss this with a Centerlink representative, as I
have limited knowledge in this advice.
Taxation issues
Taxation is fairly complex and beyond my limited taxation advice. I recommend that you
see a taxation advisor/accountant on any taxation advice you may require.
You have 14 days from the time your investment is confirmed to change your mind on any
products. If you wish to return a product and get a refund you must notify us within 14 days
after confirmation. Please note that if you return a product within the cooling off period you
may get back less than you originally paid for. This can be due to market fluctuations, taxes
and administrative costs.
As we discussed, your likely risk profile is a balanced investor. Your investment for your
children’s high school education is a balanced managed fund, however your personal
investment is a growth managed fund. This bears more risk then a balanced managed
fund; however, it is set to a higher growth to help you generate extra income for future
expense and retirement more quickly.
This chart indicates how your assets have been allocated for your managed funds.
Notice the balanced fund bears 40% defensive assets and 60% for growth assets, whilst
your growth fund is set to 20% defensive and 80% growth. Defensive assets are asset
classes such as fixed interest and cash, whilst growth asset classes are equities and
property.
Defensive assets are less risky but generate less return compared to growth assets, which
bear greater risk but potential for much greater returns.
The total fee for our advice is $2600 (including GST). $1600 will be received by Burton
Financial Planning Pty Ltd and I will receive the balance. Please make this payment within
14 days of receiving this Statement of Advice.
Neither Burton Financial Planning Pty Ltd nor I will receive any commissions earned, and
where necessary will be rebated. You may be charged for buying and investing in products
that have been recommended in this statement.
The product providers usually charge fees, such as the management fee at 1.2%. As an
example if you invest $40000, you will pay $480.
Other Benefits
Burton Financial Planning Pty Ltd and I may sometimes receive other benefits in addition to
our fees. With benefits exceeding $300, they are recorded on alternative forms of
remuneration. A copy of this Register can be publicly made available if requested.
Changes such as these must be assessed in an ongoing manner, and related to your
particular situation. This will ensure you have the best resources to meet your goals and
objectives.
Given the Burton Financial Planning Pty Ltd’s Financial Services Guide;
Confirmed that the personal information I have collected is correct;
Discussed your goals and objectives;
Confirmed that you are happy with your risk profile;
Discussed any risks in the recommendations;
Discussed fees that need to be paid.
You have kept a copy of the SOA and have had the opportunity to read, consider and
understand the document, supporting material and have asked questions.
The SOA dated 17 February 2010 accurately summarises your current situation,
investments, insurances and financial goals. You understand that any inaccurate or
incomplete information provided to us, may bring risk to meeting your needs appropriately.
You have understood the Disclosure of commissions, fees and benefits’ section of SOA.
You understand that recommended investments may rise and fall with the market, and
cannot guarantee future performance.
You understand that this statement is solely for yourself; Burton Financial Planning Pty Ltd
does not accept liability to others who rely on any of the information in this SOA.
You hereby request Tracy Burton to provide services in the ‘Ongoing Services’.
We consent to being contacted by our Advisor on an ongoing basis, in line with the ongoing
service review within this recommendation.
Walter Notes
Taxable income
Salary $42000
Rental income $0
Deductible expenses $0
Notes
These figures are based on our assumption that you have received your dividend of 3%.
These figures are based on our assumption that you have received your fixed interest deposit of 6%.
Walter
Investment expenses
Living expenses
Holiday $1500
Personal assets
Investment assets
Liabilities
Total $218264
Walter Notes
Taxable income
Salary $42000
Rental income $0
Unfranked dividends $0
Deductible expenses $0
Walter
Investment expenses
Interest payments $0
February 2010 Page 22
Rental expenses $0
SOA Appendix 3 Cash flow projections
Projected returns for Walter’s growth managed investment fund
Assumptions:
Growth fund net return after fees= 8.5%
Management Fee 1.2%
Contribution Fee 0.5%
Assumptions:
Balanced fund net return after fees=8.0%
Management fees 1.2%
Contribution fee 0.5%
Assumptions
Growth investment bond net return after fees=4.5%
Management fees 1.2%
Contribution fee 0.5%
The table below shows a year by year estimate of your recommended investment portfolio. In
addition, the table shows your growth managed fund being reinvested for illustrative purposes.
Please refer to the assumptions as all illustrations are based on these assumptions. These
illustrations are indicative only and are not guarantee of a future performance.