Case Study Solution

Superannuation and Life Insurance Skills (Capstone project)
FP3B-1SN3-2 Capstone project

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This document includes:
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project checklist
Case study
Project sections (including fact finder templates, cash flow templates
and managed funds calculations)
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Superannuation and Life Insurance Skills
Capstone project
This project contains five sections based on the information provided on your clients, Ted and
Eliza Hardgraves, and their family. Complete all sections.
The following checklist is provided as a guide to ensure you have completed the
project requirements.
Project checklist (student to complete)
Step Action Completed?
1. Read the Study Guide
Go to the What you need to know section and read the advice in the Study Guide on
preparing your project.

2. Familiarise yourself with the project
Think about the project tasks while reading your learning materials and completing the
activities and review questions.

3. Answer Sections 1 - 2 up to Section 2 Part F
Ensure that you complete the fact finder for Section 2 Part A.
4. Answer Section 2: Part G Statement of Advice
Follow the steps given in the Statement of Advice Preparation Checklist you must
submit the completed checklist
Use the family cash flow templates provided
Use an Excel spreadsheet to prepare SOA Appendix 3.

5. Answer Sections 3 - 5

6. Upload your completed project.
You must submit the following completed items in this template:
the project cover sheet
answers to all five project sections
the completed Statement of Advice Preparation Checklist
the completed Statement of Advice and appendices.

Case study Ted and Eliza Hardgraves
Background
You work for the financial planning company, B and N Pty Ltd, which is a licensed securities dealer
and a registered life insurance broker.
Your company specialises in investment, insurance and retirement planning advice but does not
provide stockbroking, real estate evaluations and advice, income tax preparation, superannuation
fund accounting, superannuation fund administration or the preparation of legal documents such as
Wills or trusts.
Ted Hardgraves is a successful senior geologist with an international mining company. He has
been working for the same company for the last seven years and due to his success has recently
received a significant promotion and pay rise. He believes there is potential for further
improvement in his salary as well as growth prospects within the company.
His wife, Eliza Hardgraves works part-time as a paralegal with the same company she worked for
prior to having their children, Harriett and Bill. She has a good relationship with the owners of the
firm and does not see any change in her current employment situation for the time being.
Both Ted and Eliza are in good health and are non-smokers. They have private health cover
for the family.
Ted and Eliza have approached you for financial advice.
They advise you that they are confused in regard to their financial situation. This has come about
due to conflicting information they have read, which states that although they will be living longer,
nearly half of all 40-year-olds will die over the next forty years. Also, their children have asked
questions about the insurance plan advertisements they have seen on television which has raised
concerns as to whether they have adequate insurance cover. Further, they want to make sure their
children will be adequately provided for if something were to happen to them.
They also believe they should have surplus income following Teds recent promotions and pay
rises. They would like to save any surplus in the most tax effective vehicle for the long term. Both
Ted and Eliza are concerned that if they have access to these funds they may spend them.
Ted and Eliza would like to reduce their mortgage faster than the current repayment schedule and
believe that this could help them to get ahead before they have to pay large school fees. Their
current loan has a redraw facility. However; they enjoy their annual holidays and have an active
social life, and want to make sure they have income available to continue these activities.
Ted also advised you that his aunt, Jenny, recently died and he has inherited around $63,700
made up of $10,000 in cash and approximately $53,700 in shares. They have never considered
owning shares before but Ted is keen to understand the share market and perhaps buy some
shares. Ted is prepared to take some risks in order to accumulate wealth quickly. However, Eliza is
more concerned about risk and does not wish to gamble any of their funds.
Detailed below are Ted and Elizas current details.
Personal information
Surname Name: Hardgraves Hardgraves
Christian Name: Ted Eliza
Salutation Mr Mrs
Age/Date of birth 28 March 1970 17 August 1971
Status Married Married
Home address 4 Pringle Ave, Kensington 4 Pringle Ave, Kensington
Health Good Good
Smoker No No
Occupation Senior Geologist Paralegal
Employer Lemon Gold Pty Ltd Ranier and Jackson
Start date 2004 2008
Sick leave currently available 14 days plus 10 days per annum 6 days plus 10 days per annum
Retirement age 65 64
Dependants/Family relationships Harriett (aged 9 years) Bill ( aged 8 years)
Professional relationships
Solicitor Carlie Mattieson
Time span of relationship 10 years
Quality of relationship Poor
Service provided Conveyancing for home purchase
Accountant John Watson
Time span of relationship 7 years
Quality of relationship Excellent
Service provided Annual tax return
Annual income details
Name: Ted Eliza
Salary $140,000 $55,000
Inheritance - interest $510
Dividends (99% franked) $3,436
Notes:
Ted and Elizas salaries exclude superannuation guarantee (SG) contributions, which are currently
paid at 9% per annum.
Annual expenditure
Mortgage $37,800
General living expenses $50,400
Accountants fees $550
Donations $1,000
Holidays (annually) $11,000
Assets and investments
Principal residence $650,000 Purchased 6 years ago for $550,000. Outstanding mortgage
$470,000 joint names, variable rate 6.25%
Contents $50,000 Joint names
Car $18,000 Fully paid off joint names
Savings Account $5,000 Everyday savings account paying no interest joint names
Cash management account - inheritance $10,000 Cash management account earning 5.1% p.a. Teds name only
ABC Superannuation - Ted $220,000 Invested in a retail fund, balanced option. No beneficiaries or binding
nominations specified. The fund accepts salary sacrifice.
SOH Industry Superannuation - Eliza $58,000 Invested in an accumulation industry fund, balanced option. The
fund only has a defensive, balanced or high growth options
available. No beneficiaries or binding nominations specified. The
fund accepts salary sacrifice.
Share portfolio $53,691 Dividend yield of 6.4% p.a. 99% franked dividends in Teds
name only
Current share portfolio
Number of shares Company ASX Code Current Value (same as
value at date of death)
Price of Shares when
acquired by aunt Jenny
500 AMP Limited AMP $2,158 $4.40
1,300 Insurance Australia Group Limited IAG $5,473 $1.75
400 Commonwealth Bank Limited CBA $22,052 $27.7
400 Telstra Corporation Limited TLS $1,552 $4.48
400 Westpac Banking Corporation WBC $9,900 $19.60
400 BHP Billiton Limited BHP $12,556 $11.41
All shares were acquired by the deceased after 1 January 1986 and prior to 1 December 2011.
Investment objectives
They have rated their investment objectives, using a scale ranging from 1 (not concerned) to
5 (very concerned).
Ted Hardgraves
Income to keep pace with inflation 2 Legal logical and appropriate tax relief 5
Easy access to your capital 1 Regular income from your investments 1
Easy to administer 3 Capital growth 5
Volatility 2
Eliza Hardgraves
Income to keep pace with inflation 2 Legal logical and appropriate tax relief 5
Easy access to your capital 1 Regular income from your investments 1
Easy to administer 4 Capital growth 5
Volatility 4
Estate planning
Ted and Eliza have Wills which they quickly wrote using packs bought from the post office when
Bill was born. They do not have powers of attorney.
Insurance and risk management
Ted has three times his salary in term life and total permanent disability (TPD) insurance within his
superannuation. He cannot take out any higher cover within this superannuation fund.
Eliza has $50,000 of life and TPD in her superannuation fund. Ted and Eliza do not have income
protection or trauma cover.
They have family private hospital cover.
Planning issues
Ted and Eliza are seeking a long-term tax effective investment plan which will provide for them
in their retirement.
Ted has recently inherited $63,700 from his aunt and would like advice on how to invest these
funds to contribute to securing their future.
Ted has told you that he understands the risks associated with investing and is willing to invest
in riskier securities in order to increase their returns.
Eliza is more risk averse. She would like to ensure they do not lose any of their inheritance.
Ted and Elizas children currently attend a public school but they would like to send both
children to a private school to complete their secondary education.
Ted and Eliza would like to do some renovations to their home, such as replacing the old
bathroom which they believe will cost approximately $17,500. They are happy to use some of
their inheritance to do this and anticipate the work to be done this year.
Both Ted and Eliza are not sure if the current asset allocation used in their superannuation is
appropriate and are seeking your advice on determining an asset allocation that they are
comfortable with, and will improve the potential to meet their lifestyle and financial objectives.
They would also like to know if they are on track to reach their retirement income goal of
$125,000 per annum when Ted reaches age 65.
Eliza is unhappy with the service she receives from her industry fund and the limited number of
choices she has for her account. In addition Ted has been earning better returns every year
even after fees are deducted.
They wish to have their full insurance needs reviewed.
Ted and Eliza would like to reduce their mortgage and believe that this could help them to get
ahead before they have to pay large school fees.
They express concern about the fees that you charge and seek clarification on your fees.
As their financial planner, your task is to prepare a Statement of Advice (SOA) that will include
strategies to meet Ted and Elizas goals.
Project questions (student to complete)
Section 1 Establish the relationship with the client and identify their objectives,
needs and financial situation
Part A
List particular strategies you will use to ensure that the Hardgraves are comfortable with the
interview process. (200 words)
A comfortable interview process definitely helps to establish good connection between the client
and the partner. Comfortable interview process could be established by doing following:
1. There should not be any disturbance while doing interview process.
2. Mobile phones should be switched off, computers should be on standby mode, there should
be no noise near to interview room, and tea-snacks should be used for breaking the ice.
3. Client should be greeted in very courteous manner to make them feel valued and
respected.
4. Agenda for the meeting/ interview should be conveyed 1-2 days before so as to make
Hardgraves can do initial research and they can be comfortable within the discussion.
5. Conversation should be started with some casual talks so that client can adjust to the new
environment and can think rationally.
6. Showing interest is the most important aspect, it can be achieved by cross questioning,
making eye contact, never interrupt.
7. Notes should be made while listening to the Hardgraves concerns, expectations and
demands.
8. Simple language and timely breaks should be used so that Hardgraves can keep their full
attention to the meeting.
9. Body language should be positive which indicates helpful nature and open for the
suggestion.
Part B
Give details of any legal requirements you need to comply with at the initial stage of your
relationship with the clients. (250 words)
A financial planner should meet the minimum training requirements as defined in the Australian
Securities and Investments Commission (ASIC) Regulatory guide 146 licensing.
Financial planner should be up-to-date with the training knowledge as per Australian Securities and
Investments Commission (ASIC) Regulatory guide 146
A financial planner is recognised through law and he has a duty of care for their clients and he is
legally obliged to exercise as much as the circumstance require. He has to ensure that client is in
no way mislead.
It is mandatory to provide a Financial Service Guide (FSG) to the clients before providing them any
service, as defined by Australian Securities and Investments Commission (ASIC) Regulatory guide
175.
It is very important to comply with privacy legislation. It says that, All the personal information
collected by financial planner and/or the licensee is governed by the Privacy Act 1988 which
contains a national scheme for the collection, use, correction, disclosure and transfer of personal
information by organizations in the private sector.
It is also important for the financial planners to comply with the Anti-Money Laundering and
Counter-Terrorism Financing Act 2006 (AML/CFT. It says that, A planner is obliged to establish
and verify the identity of the client regardless of the nature of the client.
Part C
If, at a later stage, Ted and Eliza wish to make a complaint about your advice, what are their
options? How much information are you required to give them, initially, about complaints
procedures? (150 words)
If Ted and Eliza have a complaint, they could take the following steps:
1. They can tell to their financial planner about their complaint. Financial planner can resolve
the complaint at his end.
2. If Ted and Eliza are still not satisfied with the solution, they can complain in the company of
financial planner (B n Y Pty Ltd.).
3. If Ted and Eliza are still not satisfied with the solution they can move to complain in
Financial Ombudsman Service (FOS). FOS is an external dispute resolution body that
provides free consultation and assistance to consumers so as to resolve the complaint
related to financial services industry.
4. In the end Ted and Eliza can also contact Australian Securities and Investments
Commission (ASIC) to complaint and know their rights.
This information is also available in the Financial Service Guide (FSG).
Part D
Neither of your clients have trauma insurance and they are unsure about the adequacy of their
current level of life and TPD insurance. Prepare a list of questions that you could use during the
initial interview to help you determine appropriate levels of cover. You should cover asset
preservation, income preservation and future expenditure needs and the answers to the questions
should enable you to complete the risk needs section of the fact finder (250 words)
Below is the list of questions that will be used by financial planner to interview about the level of
insurance cover:
Hi, Ted and Eliza please answer my questions so that I can give my best to judge your insurance
needs.
1. Do you have insurance for your home, car, medical, income, life?
2. What are your income sources and what are your assets? (This will gauge the present
value of Ted, what he will leave to his family in case something bad happens to him)
3. Can you please explain your lifestyle? It will be your monthly and annually expenses and
liabilities.
4. How much do you have in your superannuation account?
5. What are your short term and long term liabilities? What is the remaining amount of debt if
you have any?
6. What are the expenses of your dependents?
7. How much is your basic necessity amount? How do you pay this amount, cash or credit?
8. Do you have any other big liability in mind which can occur and can change your way of
living?
9. Do you have anything else to ass to your Trauma insurance estimate?
Part E
Discuss the benefits and drawbacks of using tools to gather the information required to develop a
financial plan for clients as compared to a more casual, conversational style approach. (200 words)
A financial planner should never only rely on their intuition when determine clients risk profile and
needs. There are many tools that can be used to gather the necessary information for developing a
financial plan. These tools can be factor-finders, questionnaires, psychometric testings, etc. The
data gathered from these tools will help the financial planner to have a clear picture of the clients
financial position and expectation.
However, most of these tools are normally in standardised form and may not be able to cover the
full image of the clients real situation. For instance, the client may think none of the pre-listed
model in the risk profile questionnaire matches their particular circumstance. Alternatively, a
financial planner could adopt a more casual and conversational approach to find out their personal
needs and therefore discover the client risk tolerance.
Psychometric testing could be another method to reveal clients psychological profile. This tool
offers a relatively cheap and easy way to assess clients risk acceptance. Nevertheless the results
can be misinterpreted by not taking account of clients personal circumstance. On the other hand, a
more casual and conversational style might help the financial planner to determine a clients
psychological acceptance of risk, but it could be time consuming. The effectiveness of using
conversational style approach relies on the communication skills of the financial planner.
Section 2 Analyse client objectives, needs, financial situation and risk profile to
develop appropriate strategies and solutions
Part A
Record the information you have gathered from your clients in the fact finder below. Include the
information you obtained from your questions in Section 1 Part D.
[insert student response]
Part B
Identify any gaps in your data collection form as well as any other issues that would need to be
followed up with Ted and Eliza. (100 words)
Below are the gaps in the data as provided by Ted and Eliza,
In the home address section, state and post code are not mentioned
There is no contact phone number given
Dates of birth of their children are not given, neither the school details are mentioned
Home and content insurance coverage are not given
Superannuation details, date of joining fund is missing
Amount of insurance premiums is not mentioned
Fact finder
Personal and employment details
Personal details
Client 1 Client 2
Title
Mr Mrs
Surname
Hardgraves Hardgraves
Given & preferred names
Ted Eliza
Home address
4 Pringle Ave, Kensington 4 Pringle Ave, Kensington
Business address
NA NA
Contact phone
NA NA
Date of birth
2!Mar"h!#$ %#!A&g&st!#%
Age
44 4'
Sex
Male
Male Female Male
(e)al
e
Female
Smoker Yes
No
No Yes
No
No
Expected retirement age
*+ *4
Dependants (children or other) :
Name Date of birth Sex School Occupation
Harriett NA NA NA NA
Bill NA NA NA NA
Employment details
Client 1 Client 2
Occupation
,enior -eologist Paralegal
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, bank, solicitor, etc.
,oli"itor. /arlie Mattieson with %$ years poor relationship with Ted and Eliza and providing servi"e o0
/onveyan"ing 0or ho)e p&r"hase
A""o&ntant. 1ohn 2atson with # years e3"ellent relationship with Ted and Eliza and providing servi"e o0
Ann&al ta3 ret&rn
Income, expenditure and net worth
Cash flow statement
Income and expenses
Client 1 Client 2 Notes
Income from employment
Salary %4$,$$$ ++,$$$
Salary sacrifice %2,*$$ 4,4+$
(9 % SG)
Salary after salary sacrifice %2#,4$$ +$,$+$
Rental income
Unfranked dividends
Franked dividends ',4'*
(state % return if applicable)
Franking (imputation) credits
(state franking % if applicable)
Interest +%$
(state % return if applicable)
Other income, e.g. taxable benefits
Capital gains <1yr
Capital gains >1yr
Tax-free component of capital gains
Assessable income %'%,'4* +$,$+$
Deductible expenses
Rental expenses, repairs etc.
Taxable income %'%,'4* +$,$+$
Tax on taxable income NA NA
Non-refundable tax offsets (e.g. LITO/SAPTO)
Medicare levy
Medicare levy surcharge
Franking rebate
Refundable rebates and offsets
Net tax payable NA NA
Family cash flow
Client 1 Client 2 Combined Comment
Salary less any salary sacrifice amount
%2#,4$$ +$,$+$ %##,4+$
Non-taxable income (e.g. income from superannuation
income streams for a person aged over 60, Family
Tax Benefits)
Interest income
+%$ +%$
Dividends received (excluding franking credits)
',4'* ',4'*
Rental income
Other income
Total income received before tax
%'%,'4* +$,$+$ %%,'4*
Living expenses
Mortgage
'#,$$
General Living expense
+$,4$$
Accountants Fees
++$
Donations
%,$$$
Holidays (Annually)
%%,$$$
Other expenses
Total expenses
%$$,#+$
Total income received before tax less expenses
$,*4*
Net tax payable from the Income and Expense
table above
NA
Net cash flow
$,*4*
Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family Home
1oint tenant 5*+$,$$$ 54#$,$$$ 5%$,$$$
Home contents
1oint tenant 5+$,$$$ 5+$,$$$
Car
1oint tenant 5%,$$$ 5%,$$$
Total
#%,$$$ 4#$,$$$ 24,$$$
Investment assets
Savings account
1oint tenant +,$$$ +,$$$
Cash management
account - inheritance
Ted %$,$$$ %$,$$$
,hares Ted +',*4% +',*4%
Total
*,*4%
Superannuation assets
AB/ ,&perann&ation Ted 22$,$$$ 22$,$$$
,6H 7nd&stry
,&perann&ation
Eliza +,$$$ +,$$$
Total
2#,$$$
Net worth
+44,*4%
Liabilities
Loan Current debt Percentage deductible Comments Repayment
Ho)e 8oan 4#$,$$$
Total
4#$,$$$
Goals and objectives
Details Comments
Save any surplus in the most tax effective vehicle for the long
term, long-term tax effective investment plan for retirement
Long term
Ted received $63,700 inheritance and would like advise how to
invest these fund, Eliza would like to ensure they do not lose
any of their inheritance
Discuss possible options for using the inheritance money
Ted is willing to invest in riskier securities Discuss possible options
Send both children to private school to complete their
secondary education
Estimate cost and discuss possible options
Home renovation cost approximately $17,500 Short term
Review superannuation asset allocation, Eliza is also not
happy with her current industry fund
Discuss possible options
Protect income against sickness or accident To be reviewed
Protect family and/or assets in the event of death To be reviewed
Protect against serious illness or trauma To be reviewed
Reduce/pay off mortgage To be discussed
Estate planning
Do you have a Will? Yes No
When was it last updated?
2hen Bill was born9
Executor/rixs name and contact details:
Do you have powers of attorney? Yes No
Attorneys name and contact details:
Do you have a funeral plan? Yes No
Funeral provider and contact details:
Amount paid
Do you have superannuation
beneficiaries in place?
Yes No
Type Binding Non-binding
Beneficiary names and contact details:
Current superannuation, rollovers, insurances & investments
Superannuation details
Member
Ted Eliza
Superannuation fund
name
ABC Superannuation SOH Industry Superannuation
Date of joining fund
Type of fund Accumulation
Defined benefit
Pension
Accumulation
Defined benefit
Pension
Contributions By employer
By yourself
Other
By employer
By yourself
Other
Current value of your
superannuation fund
22$,$$$ +,$$$
Amount of death &
disability cover
Is there provision for
additional contributions or
salary sacrifice?
Yes No Yes No
Non-concessional
contributions
Amount Year
Amount Year
Amount Year
Amount Year
Spouse contributions
received
Amount Year
Amount Year
Amount Year
Amount Year
Concessional
contributions
Amount Year
Amount Year
Amount Year
Amount Year
Any other contributions Amount Year
Amount Year
Amount Year
Amount Year
Life insurance details
Life insured Policy Owner Company Policy number Benefit type Benefit or
insured amount
Annual
premium
NA
General insurance details
Item covered Owner Policy type Company Policy
number
Cover
Amount
Other benefit Annual
premium
NA
NA
Investment details
Investment type Company Purchase date Units held/
fixed rate
Current value Owner
Risk needs
Insurance needs life and TPD
Client 1 Client 2
Gross annual income (before tax)
%'%,'4* +$,$+$
Less business expenses
Number of years income required
2$ 2$
Property repayment
4#$,$$$ 4#$,$$$
Other debts
Sub-total = (income years) + debts
',$4*,42$ %,4#%,$$$
Less existing realisable assets
(Insurance/savings/superannuation)
Insured benefit shortfall (before tax)
Gross income is the total of earned income (i.e. before tax earnings derived from personal exertion, including salary, fees,
commission, bonuses, fringe benefits or similar payments that would cease on disablement).
Business expenses are expenses incurred by you in the process of earning income from your profession,
business or partnership.
Insurance needs Income protection/trauma
Income protection Client 1 Client 2
Gross annual income
%'%,'4* +$,$+$
Employer superannuation contributions
Other employer fringe benefits
NA NA
Maximum allowable benefit
(75% of annual income)
4,+$4 '#,+'#
Monthly income
,2$4 ',%2
Less existing insurance
Monthly benefit required (pre-tax)
,2$4 ',%2
Waiting period to be served
*$ :ays *$ :ays
Trauma
Medical costs (to cover out-of-pocket
health costs)
$100,000 $100,000
Additional expenses of a permanent
nature, wheelchairs, home
alterations etc.
$100,000 $100,000
Additional income: income protection
only covers 75%, would you need extra?
Total funds required $200,000 $200,000
Less cash available or assets
that can be readily cashed
$122,000 $122,000
Shortfall/surplus $78,000 $78,000
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)
Ted Hardgrave
Eliza Hardgrave
Adviser's name
Adviser's signature
Date
Part C
Now that you have determined the Hardgraves needs and objectives you need to identify their
likely risk profile based on the information they have provided. Ted and Eliza completed the risk
profile below prior to your meeting with them.
Identify any concerns that you may have with their responses compared with the information in the
case study and suggest questions you could use to clarify the responses. Justify why you do or do
not think that the score and the resulting risk profile category is an accurate reflection of their
tolerance to risk. (250 words).
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? Yes/No
Why?
2o&ld li;e to pay less9
How important is liquidity (i.e. funds available) to you? Very/Moderately/Not
Why?
Eno&gh "ash is present
If you had funds available for investing, how would you choose to invest them?
Why?
,ee;ing g&idan"e 0or this9
Are there certain sorts of investment that you wish to avoid? Yes/No
Which ones?
<is;y invest)ents sho&ld be avoided
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 adviser, you can choose the investments that best match your financial objectives.
Which of the following best describes your current stage of life? Ted Eliza
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 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 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 35
Mature family. You are in your peak earning years and have 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 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 20
Retired. No longer working and 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 10
What return do you reasonably expect to achieve from your investments? Client 1 Client 2
A return without losing any capital. 10 10
37% p.a. 20 20
812% p.a. 30 30
1315% p.a. 40 40
Over 15% p.a. 50 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 10
Less than 1 year 20 20
Up to 3 years 30 30
Up to 5 years 40 40
Up to 7 years 45 45
Up to 10 years 50 50
How familiar are you with investment markets?
Very little understanding or interest 10 10
Not very familiar 20 20
Have had enough experience to understand the importance of diversification 30 30
Understand that markets may fluctuate and that different market sectors offer different income, growth
and taxation characteristics
40 40
Experienced with all investment sectors and understand the various factors that may
influence performance
50 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 10
Stable, reliable returns, minimal tax savings 20 20
Some variability in returns, some tax savings 30 30
Moderate variability in returns, reasonable tax savings 40 40
Unstable, but potentially higher returns, maximising tax savings 50 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 10
You would cut your losses and transfer your money into more secure investment sectors 20 20
You would be concerned, but would wait to see if the investments improve 30 30
This was a calculated risk and you would leave the investments in place, expecting
performance to improve
40 40
You would invest more funds to lower your average investment price, expecting future growth 50 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 5560. You are mainly investing
for growth to accumulate long-term wealth
50 50
You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-
term wealth from a balanced fund
40 40
You have a lump sum, e.g. an inheritance or an eligible termination payment from your employer, and 30 30
you are uncertain about what secure investment alternatives are available
You are nearing retirement and you are investing to ensure that you have sufficient funds available to
enjoy retirement
20 20
You have some specific objectives within the next five years for which you want to save
enough money
20 20
You want a regular income and/or totally protect the value of your savings 10 10
Investor profile total points 220 140
INVESTOR RISK PROFILE SUMMARY
050 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.
51130 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.
131210 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.
211300 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.
301350 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.
(Section 3 Part D commences on the next page)
Part D
Given the information you now have on the Hardgraves current situation and their tolerance of
risk, what are the critical issues you need to consider to appropriately advise them?
What sorts of investments would they each be comfortable with? (400 words)
Debt: The mortgage interest rate of 6.5% is higher than the return from rest of their investment
assets. So, It would be beneficial if they could reduce the mortgage.
Risk protection: The couple seems to be under insurance. Ted and Eliza need to increase their Life
and TPD insurance cover. They do not have income protection or trauma insurance either.
Investment: Majority of their investments are cash. They need some fund to support their childrens
secondary education. Tuitions for private school can be costly in the near future; they should be
well prepared before it happens. Also school fees for the private school will be very high compared
to the government schools.
Retirement funding: Teds superannuation risk option does not quite match his risk profiles. Elizas
superannuation seems not performing well enough. Certain analysis and adjustments can be made
to help them reach their retirement goals.
Social security & Taxation: The Hardgrave family is entitled to receive family tax benefit.
Estate planning: The couple wrote their Will when Bill was born, the Will has not been reviewed
since then. They have no Powers of Attorney or guardianship for their children.
Part E
Prepare appropriate insurance and superannuation strategies for Ted and Eliza, and provide a
detailed explanation as to why you consider them to be appropriate. Include the lump sum amount
that they will need in retirement and strategies to help them reach that goal. Include
recommendations on the amounts and types of insurance cover you will recommend. Provide a
summary of other recommendations that you will include in your SOA for Ted and Eliza.
(500 words)
Ted contributes about 66% of the total income to the family. So it will be very unfortunate to Eliza
and their kids if something bad happens to Ted or he dies prematurely. Hence Hardgraves need to
increase Teds Life and TPD insurance cover to an appropriate level (current shortfall $1.6 million).
Further assume that it is also found out that Eliza actually performs lot more home duties than Ted.
So, Ted may need to pay extra house keepings if something bad happens to Eliza to cover Elizas
death. Eliza should also increase her Life and TPD insurance cover (current shortfall $1 million).
Having appropriate life and TPD insurance will help to pay off debts and maintain their familys
standard of living if either Ted or Eliza could no longer provide for them.
Income protection insurance Suggest Ted or Eliza undertakes income protection insurance that
can cover 75% of their salary.
Hardgraves should also have reasonable trauma insurance just in case they cannot afford medical
costs if too many bad things happen. The main purpose of having trauma insurance is to have a
amount to cover the medical cost for medical conditions. The estimated trauma insurance cover is
$100,000 each.
Superannuation:
It is estimated that the couple will have a combined superannuation fund of $1.1 million when Ted
turns 60.
Oct - 2012 Oct - 2013 Oct - 2014 Oct - 2028 Oct - 2029 Mar - 2030
Ted Age 42 43 44 58 59 60
A/C Balance $190,000 $211,224 $233,758 $742,471 $797,771 $821,807
Eliza Age 41 42 43 57 58 58
A/C Balance $85,000 $94,079 $103,624 $301,843 $322,017 $330,725
Ted Net return 6% p.a. Monthly contribution $770.60
Total $1,152,532
Eliza Net return 5% p.a. Monthly contribution $385.30
Assume the couple switch to more conservative option when Ted turns 60. The combined fund will
provide a net return of 3% per annum. It could provide an annual income of $60,000 ($5000 per
month) for them and would be run out before Ted turn 88. The estimation is shown below
Mar 2030 Mar 2031 Mar 2032 Mar 2057 Mar 2058 Apr 2059
Ted 60 61 62 87 88 89
A/C Balance $1,152,532 $1,126,756 $1,100,196 $96,896 $39,012 -$20,634
It appears out that they have thought well enough about their retirement goal. However, Teds
current superannuation option does not match his risk preference. Since salary sacrifice
contributions are taxed at a rate of 15%, it is another option that both Ted and Eliza can undertake
to effectively build their wealth. The salary sacrifice can reduce the taxable income and this way
Hardgraves will be able to pay less tax.
Part F
Provide a summary of the research that you have conducted to support one insurance product
recommendation you will make for Eliza or Ted. (250 words)
Life and TPD insurance can help to mitigate the financial impact that arose as a result of the death
or terminal illness of the life insured. It can supply a lump sum to pay off debts and maintain the
familys standard of living if you can no longer provide them.
If something bad happen to Eliza (e.g. worst case: death), the family will lose about $45,000 net
income and may even increase further expenses (e.g. Ted need to pay for extra house keepings).
The financial burden on Teds shoulders will be dramatically increased. Considering the mortgage
and future financial needs for their childrens education, their family will certainly have difficult times
if without proper insurance.
I would recommend Eliza to have life and total and permanent disability insurance within her
superannuation to $1,000,000. This amount should be able to cover the shortfall.
Assume Eliza will continue work for another 17 years (until Ted reach 60). Her overall life & TPD
insurance need is calculated by adding 17 years of her total income with current debt, which is
$1,241,800. Then subtract this figure by her current realisable assets of $257,000 (See table
below) to determine Elizas insurance shortfall.
Realisable Assets Owner Amount
Death Benefit Eliza $50,000
Superannuation Eliza $85,000
Cash management account Joint $15,000
Saving Account Joint $5.000
Cash management account Ted $75,000
Shares Ted $27,000
Total Realisable Assets $257,000
Assume I did my research and find out Elizas superannuation fund has the option of $1 million
coverage for life and TPD insurance. Having life & TPD insurance through superannuation can
also be cost effective option as the premium are deducted from super contribution, which means
paying for the cover before tax.
Part G
You must now prepare a Statement of Advice (SOA) based on the recommendations made, which
will be used to record this advice (including amendments, if any) for Ted and Eliza. Remember that
the SOA must be of a standard that is compliant and would be suitable to present to a client.
Important instructions
What to submit: you have been provided with a Statement of Advice Preparation Checklist and
cash flow templates to use for the project SOA. Please include these with your submission.
Template SOAs and SOA preparation software: it is preferable that you do not use the
sample SOA published by ASIC as a basis for your submission. The use of financial planning
software and dealer templates to prepare your SOA is also not permitted. Submissions that
exhibit excessive reliance on SOA templates may be considered a case of plagiarism or
collaboration, and may not be considered to be a reasonable attempt at the project.
Assumptions: you must list the assumptions used in your SOA in your project submission.
These will generally include:
any assumptions you have made regarding missing background information on the clients
any assumptions you have used to calculate future income from your
recommended investments
any assumptions used for fees relating to the products you have recommended.
Strategy advice: you must provide strategy recommendations in the following areas based on
the information given:
personal investment or debt reduction
personal insurance
superannuation
estate planning.
Use the information on each of these areas given in the subject notes to provide reasons for each
of the strategies recommended.
Product advice: product recommendations for any personal investment or estate planning
recommendations are not required. However, you should recommend an appropriate
superannuation and/or life insurance product to implement the advice you have provided. You
are required to source, or develop, your own fund details. It is not necessary to include Product
Disclosure Statements in your project for any products you may recommend in your SOA.
Including insurance quotes in the SOA is not required. For insurance recommendations you
may estimate the premiums based on the clients ages, health and occupations but they do not
have to be prepared from actual quotes.
Cash flow projections: you must include detailed cash flow tables using Appendix 1 and
Appendix 2 as a template showing Eliza and Teds situation before and after your
recommendations. These should be included as Appendices 1 and 2 to your SOA. Remember
to include any insurance premiums in the analysis.
Recommendations: You should include superannuation projections up to the retirement age of
your clients before and after your recommendations as Appendix C to your Statement of Advice.
In addition please show that your strategy will enable your clients to meet their retirement
income goal until Ted is at least 84 (Eliza is 83, her life expectancy).
Statement of Advice preparation checklist (student to complete)
SOA section Action Completed?
i. Cover sheet The following elements should appear on the cover sheet:
the words Statement of Advice
the clients name
the authorised representatives name, AR number and contact details
(if different to the licensee)
a statement that the authorised representative is an authorised
representative of the licensee
the licensees name, ABN number, AFSL number, address and
contact details
the date of issue of the SOA
a warning about the importance of the document

ii. Table of contents Check that the pages in the table of contents agree with the page numbers in
the completed SOA.

iii. Executive summary Headings should include:
Summary of our recommendations
Summary of expected outcomes if you implement our advice
Risks in our advice
Summary of our fees and commissions
Your next steps

iv. Present position
information about
the client
Headings should include:
Important information about you
Your reasons for seeking advice
What you would like to achieve
Your personal and financial information
Personal information
Your existing insurance
Your existing estate planning
Financial information
Current income and expense details

v. Risk profile Heading:
Your risk profile
vi. Strategy
recommendations
(analysis of the
investment
strategies)
Recommended action:
personal insurance
superannuation
estate planning
Reasons for recommendations:
personal insurance
superannuation
estate planning
Things you should consider (risks)

vii. Product selection You are only required to provide a superannuation and or insurance product
recommendation. Do not provide product recommendations for personal
investments or estate planning.
Product recommendations
Cooling off period advice

viii. Recommended
asset allocation
Recommended asset allocation
Comments on proposed asset allocation versus your risk profile

SOA section Action Completed?
ix. Disclosure of fees,
commission and/or
benefits
How are we paid
Commission and fees upfront, ongoing commissions and financial
planning advice fees
Product management and/or operational fees
Other benefits

x. Ongoing service
and review
Ongoing services
Implementation

xi. Authority to proceed Headings should include:
Authority to proceed
Consent to ongoing contact

xi. SOA Appendix 1 Use the family cash flow template below.
Heading:
Financial position before implementation of strategy

xii. SOA Appendix 2 Use the family cash flow template below.
Heading:
Financial position after implementation of strategy

xii. SOA Appendix 3 Include detailed projections of the clients super account balances before
and after your recommendations up to their retirement age. Also show how
the resultant balance can be drawn down until Eliza reaches age 84, her
current life expectancy.
You should include all assumptions for calculations and rates of return should
be in todays dollars (i.e. net of inflation).

Statement of advice
[Complete your SOA in this section of the template]
Assumption List for SOA
Assume I have got the missing information from Ted and Eliza such as their superannuation
details, insurance detail, etc.;
Assume I met Ted and Eliza in Oct 2012;
All the s&perann&ation, ins&ran"e and invest)ent prod&"ts in the ,6A are 0i"tional,
in"l&ding 0ees, pre)i&), ret&rn, "ooling o00 period, et"9=
Ass&)e all Prod&"t :is"los&re ,tate)ent 0or invest)ent and ins&ran"e prod&"ts are
given to Ted and Eliza=
All the "o))ission, 0ees and bene0its in0or)ation are 0i"tional=
Ass&)e their ho)e is ins&red 0or 5+$,$$$ and the "ontents 0or 5+$,$$$=
Mr Ted and Mrs Eliza Hardgrave
4 Pringle Ave, Kensington
:ear Ted and Eliza,
Than; yo& 0or the opport&nity to )eet and dis"&ss how we "an help yo&r a"hieve yo&r
0inan"ial goals and ob>e"tives9
Based on the in0or)ation "ontained in yo&r "o)pleted 0a"t 0inder and o&r "onversation at
o&r )eeting, 7 believe that 7 have a reasonably "lear &nderstanding o0 yo&r "&rrent
sit&ation, yo&r goals and ob>e"tives, and yo&r attit&de to invest)ent ris;, se"&rity, and
volatility9 2e are pleased to provide o&r re"o))endations in the detailed ,tate)ent o0
Advi"e that 0ollows9
This ,tate)ent o0 Advi"e has been prepared e3"l&sively 0or yo& and is based on the
in0or)ation yo& have provided9 Please ta;e the ti)e to "are0&lly read and &nderstand it, to
ens&re that it is "onsistent with yo&r views and re0le"ts the in0or)ation we dis"&ssed9 70
there are any o)issions or any details are in"orre"t, please bring the) to o&r attention9 7n
addition, i0 yo&r "ir"&)stan"es have "hanged, or i0 this plan is not i)ple)ented in the ne3t
'$ days, we )ay need to revise the re"o))endation to ens&re that they are still
appropriate9
6n"e i)ple)ented, the re"o))endations in this ,tate)ent o0 Advi"e sho&ld be reviewed
on a reg&lar basis to ens&re that they "ontin&e to )eet yo&r ongoing needs9 /hanges in
legislation, 0inan"ial )ar;ets and yo&r personal sit&ation will o""&r over ti)e, and as yo&r
0inan"ial adviser we "an wor; with yo& to &pdate yo&r 0inan"ial plan so that yo& stay on
tra"; to a"hieve yo&r goals and ob>e"tives9
70 yo& a""ept o&r re"o))endation and are "o)0ortable to pro"eed with i)ple)entation,
please sign the atta"hed A&thority to Pro"eed and ret&rn it to &s9
2e loo; 0orward to helping yo& i)ple)ent the en"losed re"o))endations, and in the
)eanti)e we re)ain available to assist yo& with any ?&eries yo& )ay have in relation to
this ,tate)ent o0 Advi"e9
@o&rs sin"erely,
Statement of Advice
Prepared 0or
Mr. Ted & Mrs. Eliza Hardgraves
Prepared by
B n Y Pvt. Ltd.
@o& are entitled to re"eive a ,tate)ent o0 Advi"e AB,6ACD whenever we provide yo& with any personal 0inan"ial advi"e9 Personal
0inan"ial advi"e is advi"e that ta;es into a""o&nt that any one or )ore o0 yo&r ob>e"tives, 0inan"ial sit&ation and needs9
This ,6A is a re"ord o0 the personal 0inan"ial advi"e provided to yo& and in"l&des in0or)ation on the basis whi"h this advi"e is given,
in0or)ation abo&t 0ees and "o))issions and any interests or asso"iations whi"h )ight in0l&en"e the advi"e9
70 this advi"e in"l&des a re"o))endation to yo& to a"?&ire a parti"&lar 0inan"ial prod&"t Aother than se"&rities or an o00er to iss&e or
arrange the iss&e o0 a 0inan"ial prod&"t to yo&, we will also provide yo& with a Prod&"t :is"los&re ,tate)ent "ontaining highly detailed
s&pportive in0or)ation abo&t the parti"&lar prod&"t to help yo& )a;e well in0or)ed de"isions abo&t the prod&"t9
Be aware that the advi"e "ontained in the 0ollowing ,6A is valid 0or a period o0 '$ days only9 70 the plan is not i)ple)ented within this
ti)e, it will no longer be "&rrent and will need to be reviewed 0or a""&ra"y
Statement of Advice
Content
FP3B-1SN3-2 Capstone project 1
Project Cover Sheet 1
Capstone project 4
Project checklist (student to complete 4
Back!round "
Personal in#ormation $
Pro#essional relationships $
%nnual income details $
%nnual e&penditure '
%ssets and investments '
Current share port#olio '
(nvestment o)jectives *
+ed ,ard!raves *
-li.a ,ard!raves *
-state plannin! *
(nsurance and risk mana!ement *
Plannin! issues /
Section 1 -sta)lish the relationship 0ith the client and
identi#1 their o)jectives2 needs and #inancial
situation 13
Part % 13
Part B 13
Part C 11
Part 4 11
Part - 12
Section 2 %nal1se client o)jectives2 needs2 #inancial
situation and risk pro#ile to
develop appropriate strate!ies and solutions13
Part % 13
Part B 13
Fact #inder 13
3
Personal and emplo1ment details 13
(ncome2 e&penditure and net 0orth 1"
5oals and o)jectives 1*
Current superannuation2 rollovers2 insurances 6 investments
1/
Part C 22
Part 4 2"
Part - 2"
Part F 2$
Part 5 2'
(mportant instructions 2*
Statement o# %dvice preparation checklist (student to
complete 2/
Executive Summary...............................6
..................................................................................................................................................... 6
..................................................................................................................................................... 7
..................................................................................................................................................... 7
..................................................................................................................................................... 7
..................................................................................................................................................... 7
Important information ..........................8
..................................................................................................................................................... 8
..................................................................................................................................................... 8
Your personal and financial information.........9
..................................................................................................................................................... 9
..................................................................................................................................................... 9
..................................................................................................................................................... 9
Financial information..........................10
................................................................................................................................................... 10
Your risk profile..............................11
................................................................................................................................................... 13
................................................................................................................................................... 14
................................................................................................................................................... 15
ecommended asset allocation...................16
Implementation.................................19
................................................................................................................................................... 20
................................................................................................................................................... 21
4
S7% %ppendi& 1 8 Financial position )e#ore implementation
o# strate!1 22
S7% %ppendi& 2 8 Financial position a#ter implementation o#
strate!1 (231292313 #inancial 1ear 24
S7% %ppendi& 3 8 Superannuation Projections 2$
S7% %ppendi& 4 8 :ana!ed (nvestment Projections 2/
S7% %ppendi& " 8 :ort!a!e Projections 31
S7% %ppendi& $ 8 (mplementation schedule 32
5
Executive Summary
For the short term up to one year
<e"o))endations 0or Ted
Total and permanent disability insurance outside of his superannuation should be equal
to $1,500,000 (Approx.)
Use income protection insurance within the superannuation (maximum allowable limit
is 75% of salary)
Take out trauma insurance outside of superannuation
Move superannuation to a growth portfolio within superannuation fund
Make salary sacrifice contribution of $1,200 ( about 10% of salary) per month to
superannuation account
Reinvest the dividends
<e"o))endations 0or Eliza.
Increase total and permanent disability insurance within superannuation to $1,000,000
Use income protection insurance within superannuation (maximum allowable limit 75%
of salary)
Take out trauma insurance outside of superannuation
Make salary sacrifice contribution of $600 (about 10% of salary) per month to
superannuation account
(inan"ial Planner <e"o))endations.
Double mortgage repayments on home
Use $17,500 from the inheritance to renovate house.
keep $15,000 in bank account as emergency fund
Review existing home and contents insurance to be sure that it is sufficient
For the long term more than five years
Invest $62,500 in a conservative managed fund with a monthly contribution of $600, this
fund should be accessed when children go to their secondary studies
6
70 these re"o))endations are 0ollowed then, Hardgraves will have.
Appropriate insurance cover and health cover in the unforeseen event in which either of them
die or become injured
Established appropriate levels of general insurance
Enough fund for emergency purpose
No inefficient debt
Growing childrens education over time so as to meet the financial needs to pay for their
studies
The managed investment fund so that their share portfolio can grow over time
Updated Wills so that it can protect family in case of unlikely events
As has been dis"&ssed, all invest)ent options are s&b>e"ted to )ar;et ris; and )ay or
)ay not in"rease to in"rease the port0olio val&e9
The 0ees 0or preparation o0 )a;ing this ,tate)ent o0 Advi"e is total 54,$$$
7n order to de"ide whether to ta;e o&r advi"e yo& sho&ld.
Read the Statement of Advice fully to understand our advice.
Feel free to ask us any questions you have as a result of reading the Statement of Advice.
To 0ollow o&r advi"e, please si)ply "o)plete the BA&thority to Pro"eedC at the end o0 this
,tate)ent o0 Advi"e and ret&rn it to &s9
7
Important information
This se"tion "ontains in0or)ation that are &sed in preparing this state)ent o0 advi"e, s&"h
as.
Reasons for seeking advice
Goals to achieve
Personal and financial information
7n "ase any in0or)ation )entioned in this do"&)ent is in"orre"t, please 0eel 0ree to "onta"t
Bn @ pvt9 8td9
Ted and Eliza E we agreed that we wo&ld provide advi"e on.
Risk management and Insurance
Investments
Superannuation
Estate Planning
(ollowing the dis"&ssion, a""ording to &s yo&r )ain ob>e"tives and needs are as 0ollows.
You like to ensure that you have protection in the unlikely event
You like to have a long-term tax effective investment that could give sufficient funds for your
future needs and for your children to complete secondary education
You like to do some renovation to your home
You like to have your annual family holiday
You like to retire at 60 (Ted) with $60,000 per annum
You want to ensure that your estate planning is adequate
8
Your personal and financial information
8ist below is a s&))ary o0 yo&r relevant personal and 0inan"ial details that yo& have
provided9
Personal details
Client 1 Client 2
Title
Mr Mrs
Surname
Hardgraves Hardgraves
Given & preferred names
Ted Eliza
Home address
4 Pringle Ave, Kensington 4 Pringle Ave, Kensington
Business address
NA NA
Contact phone
NA NA
Date of birth
2!Mar"h!#$ %#!A&g&st!#%
Age
44 4'
Sex
Male
Male Female Male
(e)ale
Female
Smoker Yes
No
No Yes
No
No
Expected retirement age
*+ *4
Dependants (children or other) :
Name Date of birth Sex School Occupation
Harriett NA NA NA NA
Bill NA NA NA NA
Ted. yo& "&rrently have 5'*$,$$$Athree ti)es salaryD, li0e and TP: "over &nder yo&r
s&perann&ation 0&nd9 Eliza. yo& have 5+$,$$$ li0e and TP: "over also &nder yo&r
s&perann&ation9 @o&r ho)e is ins&red 0or 5+$,$$$ and the "ontents 0or 5+$,$$$9 @o&
both have private health ins&ran"e9
@o& have advised that both o0 yo& have not reviewed yo&r 2ills sin"e 2$$49 Neither o0 yo&
has a Power o0 Attorney AP6AD in pla"e9
9
Financial information
ncome and e!"enses
Ted Eliza Total
Assessa#le income 5%%*,* 5++,4*2 5%#2,%+$
ncome after ta! 54,+4% 54+,$+4 5%24,*$$
Ann$al e!"enses 542,*$$ 542,*$$ 5+,2$$
Estimated s$r"l$s%deficit &''('))
Ted and Eliza E based on the above in"o)e and e3pendit&re s"hed&le yo& have a s&rpl&s
o0 544,4$$ in"o)e available9 Please see B/ash (low ,tate)entC in ,6A Appendi3 % 0or
details9
Assets and lia#ilit*
+al$e Lia#ilit* ,et val$e
Total "ersonal assets 54%,$$$ 5'$$,$$$ 5*%,$$$
Total investment assets 5'4#,$$$ 5'4#,$$$ 5'4#,$$$
,et -ort. &/()/0()))
Please re0er to BAssets and 8iabilitiesC table in ,6A appendi3 % 0or details9
ncom"lete and%or inacc$rate information -arning
Note that i0, 0or any reason, the in0or)ation on whi"h o&r advi"e is based &pon, is either
ina""&rate or not "o)plete, then it )ay be ne"essary to "onsider its appropriateness in
respe"t to yo&r parti"&lar "ir"&)stan"es, needs and ob>e"tives9
10
Your risk profile
All invest)ents have a "ertain ele)ent o0 ris;9 However, as a general r&le, invest)ent that
have high rates o0 ret&rn involve high levels o0 ris;, and )ore "onservative invest)ents
bear lower ret&rns9
(ro) o&r dis"&ssions, and 0ro) the answers o0 yo&r ris; pro0ile ?&estionnaire, we believe
that Mr9 Brown is a B1ro-t.2 investor and Mrs9 Brown is a BBalanced2 investor9
(or -rowth investors.
@o& are relatively assertive investors, probably earning s&00i"ient in"o)e to invest )ost
0&nds 0or "apital growth9 @o& are prepared to a""ept higher volatility in the short to )edi&)
ter) to a""&)&late growth asset over the long ter)9 @o& invest)ent will spread a"ross all
asset se"tors b&t will "onsist o0 )ore growth assets, whi"h wo&ld be.
About 30% in defensive assets, e.g. cash, fixed interest, and
About 70% in growth assets, e.g. Australian equities, international equities, property
The target asset allo"ation 0or yo&r ris; pro0ile is ill&strated below9
11
(or Balan"ed investors.
@o& are a "a&tio&s investor who is e?&ally "on"erned with ris; and ret&rn9 @o& are willing
to "hase )edi&) to long!ter) goals while a""epting the ris; o0 short to )edi&)!ter)
negative ret&rns9 @o&r invest)ent )i3 is li;ely to in"l&de an e?&al )i3 o0 assets whi"h
wo&ld be.
About 40% in defensive assets, e.g. cash, fixed interest, and
About 60% in growth assets, e.g. Australian equities, international equities, property
The target asset allo"ation 0or yo&r ris; pro0ile is ill&strated below9
12
Strategy recommendations
This section states:
what are our advices and why these are appropriate for Hardgraves
reasons for the recommendations
things to consider and risks of the advice
<ead this se"tion and as; i0 yo& have any ?&estions9
Personal Investment
2e re"o))end that.
Double your mortgage repayments on your home so as to remove the debt early
Use $17,500 from the inheritance to renovate the house.
keep $15,000 in bank account as emergency fund
maintain your share portfolio and reinvest the dividend proceeds
Personal Insurance Recommendations
,ame T*"e of cover Prod$ct Total amo$nt of cover
Ted 8i0e and TP: Mediassist ins&ran"e 5%,+$$,$$$
Eliza 8i0e and TP: ,6H ,&per (&nd 5%,$$$,$$$
Ted
7n"o)e prote"tion Ato age
*$D
*$ days waiting periodF
AB/ ,&per (&nd 5#,2 p9)9
Eliza
7n"o)e prote"tion Ato age
*$D
*$ days waiting periodF
,6H ,&per (&nd 5',4*' p9)9
Ted Tra&)a
Mediassist ins&ran"e
5%$$,$$$
Eliza Tra&)a
Mediassist ins&ran"e
5%$$,$$$
FA waiting period o0 *$ days has been re"o))ended as it is esti)ated yo& will have
eno&gh 0&nds available to enable yo& servi"e any debts 0or this period o0 ti)e9 A *$!day
waiting period will also red&"e the "ost o0 pre)i&)s9 The longer the waiting period, the
lower the pre)i&)s yo& pay9
A Prod&"t :is"los&re ,tate)ent AP:,D has been in"l&ded 0or the tra&)a prod&"t 0ro)
Medi (&t&re 7ns&ran"e9 This will e3plain all details o0 yo&r "over9
Altho&gh we are not a&thorised to provide general ins&ran"e, 7 wo&ld re"o))end that yo&
ens&re that yo&r ho)e and "ontents are reviewed with ade?&ate levels in pla"e9
13
Superannuation Recommendations:
Ted moves his current superannuation investment strategy from a balanced investment
to a growth investment.
Ted makes salary sacrifice contribution of $1,200 (about 10% of his salary) per month to
the superannuation fund
Eliza makes salary sacrifice contribution of $600 (about 10% of her salary) per month to
the superannuation fund
Personal investment
(ro) the /ash (low ,tate)ent in Appendi3 %, Hardgraves "&rrently have s&rpl&s 0&nds o0
544,4$$ per year, whi"h "an be invested9
This 0&nd "an also be &sed to in"rease the )ortgage repay)ent9 ,ooner the debt is paid
o00, the larger they will have disposable )oney9
,hares sho&ld be retained, as shares "an give the) long!ter) "apital growth9
<einvesting the dividends "an be a good way to in"rease the potential ret&rns9
S.are "ortfolio -it.o$t dividend reinvestment
7nitial
7nvest)ent
@ear % @ear 2 @ear ' 3 @ear @ear 4 @ear %$
Port0olio
Gal&e
52#,$$$ 52#,$$$ 52#,$$$ 52#,$$$ H 52#,$$$ 52#,$$$ 52#,$$$
:ividend
<e"eived
5%,#+$ 5%,#+$ 5%,#+$ H 5%,#+$ 5%,#+$ 5%,#+$
Total val&e in @ear %$ I 2#$$$ J %#+$F%$ years I &''(0)) = Total <et&rn I &/4(0))
S.are "ortfolio -it. dividend reinvestment
7nitial
7nvest)ent
@ear % @ear 2 @ear ' 3 @ear @ear 4 @ear %$
Port0olio
Gal&e
52#,$$$ 52,#+$ 5'%,*'$ 5'2,+4* H 54%,4$' 544,*% 54#,+$4
:ividend
<einvested
5%,#+$ 5%,*$ 52,$+$ H 52,++$ 52,#%+ 52,4%
Total val&e in @ear %$ I &'4(0)5 = Total <et&rn I &6)(0)5
<e!invest)ent o0 dividends will generate %%K )ore ret&rns "o)pared to retaining the
dividends ba"; to po";et every year9 Besides, )any "o)panies also have dividend
reinvest)ent plan that do not re?&ire additional transa"tion 0ees9 7t wo&ld be a "ost!
e00e"tive way to p&r"hase shares thro&gh reinvesting dividends9
14
Personal insurance
7ns&ran"e is a )ethod whi"h provides 0inan"ial prote"tion in a "ost e00e"tive way9 8i0e
ins&ran"es are designed in s&"h a way that i0 so)ething happens to the ins&rer than
0a)ilyCs living standard "an be )aintained9
An a)o&nt o0 5%,+$$,$$$ 0or Ted and 5%,$$$,$$$ 0or Eliza is appropriate at this ti)e9
These a)o&nts will "over the short0all as identi0ied in gap analysis9 Additional li0e and TP:
ins&ran"e is re"o))ended to Ted be"a&se he "annot ta;e o&t higher "over within his
s&perann&ation 0&nd9
Superannuation
Ted needs to "hange his s&perann&ation ris; pre0eren"e so as to )at"h it with his ris;
pro0iles9
Eliza is s&ggested to )aintain her s&perann&ation in a balan"ed invest)ent style9
The salary sa"ri0i"e "ontrib&tion will help the) to in"rease their wealth in a ta3 e00e"tive
way over the long ter)9
Paying off the mortgage
There )ay be early repay)ent penalty by ban;s whi"h sho&ld be ;eep in )ind be0ore
paying early9
15
ecommended asset allocation
HardgravesC invest)ent assets are invested a"ross di00erent asset "lasses as )entioned in
below table.

Table 1: Asset allocation
Asset Allocation
Ted Eliza
7eig.t
8is9
Profile
7eig.t
+ariance
:7eig.t;
7eig.t
8is9
Profile
7eig.t
+ariance
:7eig.t;
<efensive Assets
A&stralian /ash
'494K +K 2494K %49+K %$K 49+K
A&stralian (i3ed 7nterest
%29*K %+K !294K %#94K 2$K !29%K
7nternational (i3ed 7nterest
*9'K %$K !'9#K 94K %$K !%9%K
Total for <efensive Assets
0=.=> =)> 6=.=> '?.=> ')> ?.=>
1ro-t. Assets
A&stralia E?&ities
2#9K '+K !#92K 2*9K '$K !'92K
A&stralian Property
*9'K %$K !'9#K 94K %$K !%9%K
7nternational E?&ities
%29*K 2+K !%294K %#94K 2$K !29%K
Total for 1ro-t. Assets
'?.4> 4)> @6=.=> 0=.4> ?)> @?.=>
16
Table 2: Asset allocation for managed funds
Asset Allocation
Ed$cation Ao$ndation
nvestments A$nds
Defensive Assets
A&stralian /ash %+K
A&stralian (i3ed 7nterest 2+K
7nternational (i3ed 7nterest %+K
Total for Defensive Assets 55%
Growth Assets
A&stralia E?&ities 2+K
A&stralian Property %$K
7nternational E?&ities %$K
Total for Growth Assets 45%
1rand Total /))>
Table 3: Asset allocation after implementation of recommendations
Asset Allocation
Ted Eliza
7eig.t
8is9
Profile
7eig.t
+ariance
:7eig.t;
7eig.t
8is9
Profile
7eig.t
+ariance
:7eig.t;
:e0ensive Assets
A&stralian /ash
*9*K +K %9*K %+94K %$K +94K
%%9#K %+K !'9'K 2%92K 2$K %92K
#9K %$K !292K %%9*K %$K %9*K
Total 0or :e0ensive Assets
6?./> =)> @=.5> 'B.4> ')> B.4>
-rowth Assets
A&stralia E?&ities
4*9*K '+K %%9*K 2*9#K '$K !'9'K
A&stralian Property
#9K %$K !292K 49*K %$K !$94K
%49+K 2+K !+9+K %+9%K 2$K !494K
Total 0or -rowth Assets
4=.5> 4)> =.5> 0/.=> ?)> @B.4>
-rand Total
/))> /))> )> /))> /))> )>
17
Table 4: Asset value
Asset Allocation
Ted Eliza
C$rrent +al$e
+al$e after
recommendation
C$rrent +al$e
+al$e after
recommendation
<efensive Assets
A&stralian /ash
5%$4,$$$ 5%,%4 5%,+$$ 52#,4*4
5',$$$ 5'2,$+% 5%#,$$$ 54*,4+4
5%4,$$$ 52%,'*# 5,+$$ 5%4,4*4
Total for <efensive Assets
&/?/())) &4/(?)/ &''())) &B=(B56
1ro-t. Assets
A&stralia E?&ities
54,$$$ 5%2#,#+ 52+,+$$ 54+,4*
A&stralian Property
5%4,$$$ 52%,'*# 5,+$$ 5%*,44
5',$$$ 5+',4% 5%#,$$$ 52+,444
Total for 1ro-t. Assets
&/'/())) &6)6(0?5 &0/())) &BB('0/
Total +al$e
&=)6())) &64'(/4/ &50())) &/46(='=
18
Implementation
Ted and Eliza are s&ggested that in order to pro"eed with these re"o))endations, below
steps sho&ld be "o)pleted 0irst.
<ead, sign and ret&rn the A&thority to Pro"eed atta"hed9
<ead the atta"hed Prod&"t :is"los&re ,tate)ent and s&pporting )aterial9
/o)plete and sign the appli"able 0or)Ls "ontained in the Prod&"t :is"los&re
,tate)ent 0or Medi (&t&re 7ns&ran"e Pty9, 8td9
/o)plete and sign the appli"able 0or)Ls "ontained in the Prod&"t :is"los&re
,tate)ent 0or Ed&"ation (o&ndation 7nvest)ents, in"l&ding yo&r ta3 0ile n&)ber9
Arrange an appoint)ent with )e and bring any "o)pleted appli"ation 0or)s9
Note. The re"o))endations "ontained in this ,6A are "&rrent 0or '$ days only9 Please
"onta"t )e 0or 0&rther dis"&ssion i0 yo& are &nable to a"t on o&r re"o))endation within
this ti)e 0ra)e9
19
Authority to proceed
2e a";nowledge that the prod&"tAsD listed in the table below are to be i)ple)ented in o&r
na)es.
ns$rance Prod$ct Amo$nt of Cover
8i0e and TP: "over 0or Ted with Medi (&t&re 7ns&ran"e 5%,+$$,$$$
Tra&)a "over 0or Ted with Medi (&t&re ins&ran"e 5%$$,$$$
Tra&)a "over 0or Eliza with Medi (&t&re ins&ran"e 5%$$,$$$
nvestments Amo$nt
Ed&"ation (o&ndation 7nvest)ents (&nds 5*2,+$$
Be0ore signing this do"&)ent, please "he"; that 7 have.
given yo& the BB n @ Pvt9 8td9 (inan"ial ,ervi"es -&ide A(,-D
given yo& all the Prod&"t :is"los&re ,tate)ents 0or the prod&"ts re"o))end
"on0ir)ed that the personal in0or)ation 7 have "olle"ted is "orre"t
dis"&ssed yo&r goals and ob>e"tives
"on0ir)ed that yo& are happy with yo&r ris; pro0ile
dis"&ssed any ris;s in the re"o))endations
dis"&ssed 0ees that need to be paid
Also before signing this document, confirm that:
we have ;ept a "opy o0 the ,6A and we have had the opport&nity to read, "onsider
and &nderstand the do"&)ent, s&pporting )aterial and have as;ed ?&estions
the ,6A dated %4 6"t 2$%2 a""&rately s&))arises o&r "&rrent sit&ation, invest)ents,
ins&ran"es and 0inan"ial goals9 2e &nderstand that any ina""&rate or in"o)plete
in0or)ation provided to &s, )ay bring ris; to )eeting o&r needs appropriately
we have read and &nderstood the B:is"los&re o0 "o))issions, 0ees and bene0itsC
se"tion o0 ,6A
we &nderstand that the val&e o0 re"o))ended invest)ents )ay rise and 0all in line
with the )ar;et "onditions and yo& "annot g&arantee 0&t&re per0or)an"e
we &nderstand that this state)ent is solely 0or o&r &se o0 the "lients to who) it is
addressed and B n @ Pvt9 8td9 Pty9, 8td, does not a""ept any liability whatsoever to
third parties who &se or rely on the whole or any part o0 the "ontent, and
we hereby re?&est (inan"ial Planner to provide servi"es detailed in the se"tion
B6ngoing ,ervi"esC
20
2e "onsent to being "onta"ted by o&r adviser on an ongoing basis, in line with the agreed
ongoing servi"e review str&"t&re detailed within this re"o))endation9
6&r pre0erred ho&rs o0 "onta"t are between MMMMMM Aa)Lp)D and MMMMMM Aa)Lp)D9
,igned MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM :ate MMMM L MMMM L MMMM
/lient Na)e
/lient Na)e
(inan"ial Planner
21
SCA A""endi! / D Ainancial "osition #efore im"lementation of
strateg*
Cas. Alo- Statement
Ted Eliza ,otes
ncome from em"lo*ment
,alary 5%2$,#4 5*$,44$
,- /ontrib&tion 5%$,#4 5+,44$ 4K ,-
Salar* after salar* sacrifice &//)())) &00()))
<ental in"o)e
Nn0ran;ed dividends
(ran;ed dividends 5%,#+$ 2#$$$F*94K I 5%,#+$ A4*9#K 0ran;edD
(ran;ing Ai)p&tationD "redits 5#2+ %#+$FA'$L#$DF4*9#K I 5#2+
7nterest 54,2%' 54*'
%+$$$ O +K p9a9 I 5#+$
+$$$ O '9+K p9a9 I 5%#+
Total I 542+, +$K share I 54*' ea"h
#+$$$ O +K p9a9 I 5',#+$
6ther in"o)e, e9g9 ta3able bene0its
/apital gains P%yr
/apital gains Q%yr
Ta3!0ree "o)ponent o0 "apital gains
Assessa#le income &//?(?BB &00('?=
:ed&"tible e3penses
<ental e3penses, repairs et"9
Ta!a#le income 6)/6%6)/= &//?(?BB &00('?=
Ta! on ta!a#le income &=/(/66 &5(046
Non!re0&ndable ta3 o00sets Ae9g9 87T6L,AT6D
Medi"are levy 5%,#+$ 5'2
Medi"are levy s&r"harge
(ran;ing rebate !5#2+
<e0&ndable rebates and o00sets
Total ta! &=/(/'4 &/)(')'
ncome after ta! &B'(0'/ &'0()05
22
Aamil* cas. flo-
Ted Eliza Com#ined
ncome after ta! :as calc$lated a#ove; &B'(0'/ &'0()05 &/65(?))
Living e!"enses
Ho)e )ortgage 5%4,'+$ 5%4,'+$ 52,#$$
-eneral living e3penses 522,+$$ 522,+$$ 54+,$$$
A""o&ntantCs 0ee 52+$ 52+$ 5+$$
:onations 5+$$ 5+$$ 5%,$$$
Ann&al Holiday 5+,$$$ 5+,$$$ 5%$,$$$
Total e!"enses &B0(6))
,et cas. flo- &''('))
Assets and lia#ilities
Asset C-ner +al$e Lia#ilities ,et val$e ,otes
Personal assets
(a)ily Ho)e
1oint tenant
5+$,$$$ 5'$$,$$$ 5++$,$$$
Ho)e "ontents
1oint tenant
5+$,$$$ 5+$,$$$
/ar
1oint tenant
5%,$$$ 5%,$$$
Total &5/B())) &=))())) &?/B()))
nvestment assets
,&perann&ation Ted 5%4$,$$$ 5%4$,$$$
,&perann&ation Eliza
5+,$$$ 5+,$$$
/ash )anage)ent a""o&nt 1oint
5%+,$$$ 5%+,$$$
,avings a""o&nt 1oint
5+,$$$ 5+,$$$
/ash )anage)ent a""o&nt E
inheritan"e
Ted
5#+,$$$ 5#+,$$$
,hares Ted
52#,$$$ 52#,$$$
Total &=54())) &=54()))
,et -ort.
&/()/0()))
Lia#ilities
Loan C$rrent de#t
Percentage
ded$cti#le
nterest onl* 8e"a*ment
Ho)e loan
5'$$,$$$ No9 52'42 p9)9
Total
&=))()))

23
SCA A""endi! 6 D Ainancial "osition after im"lementation of
strateg* :6)/6%6)/= financial *ear;
Cas. flo- statement
Ted Eliza ,otes
ncome from em"lo*ment
,alary 5%2$,#4 5*$,44$
,- /ontrib&tion 5%$,#4 5+,44$ 4 K ,-
,alary ,a"ri0i"e /ontrib&tion 54,*$$ 54,$$
/ontrib&tion start 0ro) early Nov 2$%2,
e00e"tively )onth "ontrib&tions
Salar* after salar* sacrifice &/))(')) &0)(6))
<ental in"o)e
Nn0ran;ed dividends
(ran;ed dividends 5%,#+$ 2#$$$F*94K I 5%,#+$ A4*9#K 0ran;edD
(ran;ing Ai)p&tationD "redits 5#2+ %#+$FA'$L#$DF4*9#K I 5#2+
7nterest 5'#+ 5'#+
%+$$$ O +K p9a9 I 5#+$
+$K share I 5'#+ ea"h
6ther in"o)e, e9g9 ta3able bene0its
/apital gains P%yr
/apital gains Q%yr
Ta3!0ree "o)ponent o0 "apital gains
Assessa#le income &/)=(60) &0)(040
:ed&"tible e3penses
<ental e3penses, repairs et"9
Ta!a#le income 6)/6%6)/= &/)=(60) &0)(040
Ta! on ta!a#le income &6?(/0) &4(5B'
Non!re0&ndable ta3 o00sets Ae9g9 87T6L,AT6D
Medi"are levy 5%,+44 5#+4
Medi"are levy s&r"harge
(ran;ing rebate !5#2+
<e0&ndable rebates and o00sets
Total ta! &6?(54= &B(4'=
ncome after ta! &4?(644 &'/(B==
24
Aamil* cas. flo-
Ted Eliza Com#ined
ncome after ta! :as calc$lated a#ove; &4?(644 &'/(B== &//B(/)5
Living e!"enses
Ho)e )ortgage 52',4%# 52',4%# 54#,'4
-eneral living e3penses 522,+$$ 522,+$$ 54+,$$$
A""o&ntantCs 0ee 52+$ 52+$ 5+$$
:onations 5+$$ 5+$$ 5%,$$$
Ann&al Holiday 5+,$$$ 5+,$$$ 5%$,$$$
E( Managed (&nd O 5*$$ p9)9 0or )onth 52,4$$ 52,4$$ 54,$$
Medi (&t&re Tra&)a ins&ran"e "over 52*$ 524$ 5+$$
Medi (&t&re 8i0e and TP: "over 5%,2$$ 5%,2$$
Total e!"enses &//)(B==
,et cas. flo- &4(640
,oteE )ortgage e3pense in"l&des old repay)entsA1&ly 2$%2 E 6"t 2$%2D and new repay)entANov 2$%2 E 1&n 2$%'D
Assets and lia#ilities
Asset
C-ner +al$e Lia#ilities ,et val$e ,otes
Personal assets
(a)ily Ho)e
1oint tenant
5+$,$$$ 52#4,244 5+#+,#+%
Ho)e "ontents
1oint tenant
5+$,$$$ 5+$,$$$
/ar
1oint tenant
5%,$$$ 5%,$$$
Total &5/B())) &64'(6'5 &?'=(40/
FAss&)e that appro3i)ately 52+,#+% has been paid o00 ho)e loan 0ro) Nov 2$%2 t$ 1&ne 2$%'
nvestment assets
,&perann&ation Ted 52%',*#% 52%',*#%
,&perann&ation Eliza
54+,%4' 54+,%4'
/ash )anage)ent a""o&nt 1oint
5%+,$$$ 5%+,$$$
,hares Ted
52,#+$ 52,#+$
E( )anaged invest)ent Eliza
5*4,#$* 5*4,#$*
Total &'66(=?5 &'66(6?5
,et -ort.
&/()??()6)
FAss&)e "ontrib&tions period 0or s&perann&ation R )anaged invest)ent is 0ro) Nov 2$%2 to 1&ne 2$%'
Lia#ilities
Loan C$rrent de#t
Percentage
ded$cti#le
nterest onl* 8e"a*ment
Ho)e loan
52#4,244 No9 54#' p9)9
Total
&64'(6'5

25
SCA A""endi! = D S$"erann$ation ProFections
Table 1 Superannuation account balance projections
C$rrent sit$ation After recommended strateg*
Ted2s
age
<ate
Ted2s acco$nt
#alance at *ear
end
Eliza2s acco$nt
#alance at *ear
end
Com#ined
acco$nt #alance
Ted2s acco$nt
#alance at *ear
end
Eliza2s acco$nt
#alance at *ear
end
Com#ined acco$nt
#alance
42 6"t!2$%' 5%4$,$$$ 5+,$$$ 52#+,$$$ 5%4$,$$$ 5+,$$$ 52#+,$$$
4' 1&n!2$%' 52$4,$$ 54%,$$' 524+,$%% 52%',*#% 54+,%4' 5'$,%'
44 1&n!2$%4 522*,$4# 5%$$,'4$ 5'2*,4* 52+%,'$# 5%%%,$$4 5'*2,'%%
4+ 1&n!2$%+ 5244,+4 5%%$,2+# 5'+4,$+ 524%,**4 5%2#,*#* 54%4,'4$
4* 1&n!2$%* 52#4,44+ 5%2$,*24 5'4+,$#4 5''4,4'4 5%4+,2$2 54$,%4%
4# 1&n!2$%# 5'$$,# 5%'%,+'2 54'2,4%$ 5'%,'42 5%*',*24 5+44,4**
4 1&n!2$% 5'2,442 5%42,442 54#%,4'4 54'%,$44 5%2,4 5*%4,$
44 1&n!2$%4 5'+,#'* 5%++,$'4 5+%',##+ 544,4+4 52$','44 5*#,#4#
+$ 1&n!2$2$ 5'4$,'* 5%*#,#$2 5++,$#$ 5+4%,**+ 5224,#4$ 5#**,4$+
+% 1&n!2$2% 542',4+$ 5%%,$%' 5*$4,4*4 5*$',$%2 524#,2'2 5+$,244
+2 1&n!2$22 54+4,*$+ 5%4+,$$+ 5*+4,*%$ 5**,#44 52#$,#4 54'4,**
+' 1&n!2$2' 544#,4+ 52$4,#%' 5#$#,%#% 5#'4,''2 524+,#2* 5%,$'+,$+#
+4 1&n!2$24 5+'#,*4* 522+,%#' 5#*2,%4 5%4,4* 5'2%,44 5%,%'*,%#
++ 1&n!2$2+ 5+$,'%' 524%,42+ 52%,#'# 54*,$#' 5'44,'$ 5%,24+,'%
+* 1&n!2$2* 5*2+,*%% 52+,+$ 54,%% 54',$4$ 5'#,%#' 5%,'*%,2%'
+# 1&n!2$2# 5*#',#$' 52#*,4*4 54+$,%*# 5%,$#*,244 54$,+%4 5%,44,$4
+ 1&n!2$2 5#24,#*% 524+,'4$ 5%,$2$,%$% 5%,%#*,24$ 544$,4$ 5%,*%*,*4
+4 1&n!2$24 5##,4*4 5'%+,%% 5%,$44,%+$ 5%,2',+%4 54#',4'' 5%,#+#,44
*$ Mar!2$'$ 52%,$# 5''$,#2+ &/(/06(0== 5%,'*,44 5+$$,%4 &/(B?5(/BB
Table 1(a) Assumptions:
Value Ted: current Eliza: current Ted: strategy recommendations Eliza: strategy recommendations
Contribution amount: SG and any
other (pmt)
$906.60 before contribution tax
$770.60 after contribution tax
$453.30 before contribution tax
$2,106.60 before contribution tax
$1,790.60 after contribution tax
$1,053.30 before contribution tax
Contribution frequency Monthly Monthly Monthly Monthly
Rate = the rate of return of the fund,
net of inflation
6% p.a. 5% p.a. 7% p.a. 5% p.a.
26
Table 2Superannuation income analysis post retirement
Ted2s age Com#ined
acco$nt #alance
Ass$m"tions Com#ined f$nd
*$ 5%,*4,% <ate o0 ret&rn net o0 in0lation 'K
*% 5%,*+,2$4 (re?&en"y o0 drawdown Monthly
*2 5%,*%,%$4 7n"o)e per ann&) 5*$,$$$
*' 5%,+*,+
*4 5%,+2,+'2
*+ 5%,4,$4*
** 5%,4',42+
*# 5%,',**2
* 5%,'',#++
*4 5%,2,*4
#$ 5%,2',4
#% 5%,%,%%4
#2 5%,%2,+#
#' 5%,$*,#
#4 5%,$%,$%'
#+ 5%,#44,4*%
#* 5%,#,#24
## 5%,#2,24
# 5%,##+,*##
#4 5%,#*,+4
27
$ 5%,#*%,2'
% 5%,#+4,+#4
2 5%,#4#,%%4
' 5%,#'4,422
4
5%,#'%,44*
28
SCA A""endi! ' D Managed nvestment ProFections
Year HarriettGs age BillGs age <ate 7it.dra- A$nd Balance
% %%
6"t!2$%2 5*2,+$$
:e"!
2$%2
5*4,2##
2 %2 4
:e"!
2$%'
5#+,2#
5%2,$$$ 5*',2#
' %' %$
:e"!
2$%4
5#4,24%
5%2,$$$ 5*2,24%
4 %4 %%
:e"!
2$%+
5#',%'*
5%2,$$$ 5*%,%'*
+ %+ %2
:e"!
2$%*
5#%,4*4
524,$$$ 54#,4*4
* %* %'
:e"!
2$%#
5+,$+4
524,$$$ 5'4,$+4
# %# %4
:e"!
2$%
54','*+
524,$$$ 5%4,'*+
% %+
:e"!
2$%4
52#,42
5%2,$$$ 5%+,42
4 %4 %*
:e"!
2$2$
524,%%4
5%2,$$$ 5%2,%%4
%$ 2$ %#
:e"!
2$2%
52$,%#
5%2,$$$ 5,%#
29
Ass$m"tionsE
6pening balan"e. 5*2,+$$
Monthly /ontrib&tion. 5*$$
<ate o0 ret&rn net o0 in0lation. +9+K p9a9
All "ash withdraw will be )ade at the end o0 year
30
SCA A""endi! 0 D Mortgage ProFections
Year <ate
C$rrent sit$ation After recommended strateg*
A""o&nt Balan"e A""o&nt Balan"e
$
6"t!2$%2 5'$$,$$$ 5'$$,$$$
1&n!2$%' 524',#44 52#4,244
% 6"t!2$%' 524$,+2% 52*$,4+$
2 6"t!2$%4 52$,4$# 52%4,2+
' 6"t!2$%+ 52*4,*%* 5%#4,'$
4 6"t!2$%* 52+,%$2 5%2#,'4#
+ 6"t!2$%# 524+,%# 5#*,#
* 6"t!2$% 52'2,#$4 522,#4
# 6"t!2$%4 52%,#2' !5'4,2*
6"t!2$2$ 52$',$%
4 6"t!2$2% 5%#,#4
%$ 6"t!2$22 5%#$,4%
%% 6"t!2$2' 5%+2,#*+
%2 6"t!2$24 5%'',42+
%' 6"t!2$2+ 5%%2,#4%
%4 6"t!2$2* 54$,##4
%+ 6"t!2$2# 5*#,22
%* 6"t!2$2 542,2%
%# 6"t!2$24 5%+,4#4
% 6"t!2$'$ !5%',$*$
Ass$m"tionsE
6pening balan"e. 5'$$,$$$
Mortgage interest rate. *9+K p9a9
/&rrent )onthly repay)ent. 52,'42
<e"o))ended )onthly repay)ent. 54,#4
Please note.
The )ortgage will be 0&lly repaid in %#9* years i0 &nder "&rrent repay)ent
The )ortgage will be 0&lly repaid in *94 years i0 &nder re"o))ended repay)ent
31
SCA A""endi! ? D m"lementation sc.ed$le
Action B* 7.om Timeframe
Arrange ti)e 0or ne3t )eeting A2 wee;sD (inan"ial Planner 7))ediately
<ead and sign A&thority to Pro"eed Ted R Eliza % wee;
<ead Prod&"t :is"los&re ,tate)ent Ted R Eliza % wee;
/o)plete appli"ation 0or)s Ted R Eliza % wee;
Arrange to )eet with a""o&ntant to dis"&ss
a""o&nting Lta3 iss&es
Ted R Eliza % wee;
/onta"t s&per 0&nd to in"rease ins&ran"e Eliza 2 wee;s
/onta"t s&per 0&nd to "hange assetLris; allo"ation Ted 2 wee;s
/onta"t s&per 0&nd to add ins&ran"e Ted R Eliza 2 wee;s
/onta"t ban; to in"rease )ortgage repay)ents Ted R Eliza 2 wee;s
Meet with Ted R Eliza to "olle"t 0or)s and "he"; on
progress
(inan"ial Planner 2 wee;s
:eposit 0&nds 0ro) savings into )anaged
invest)ent
Ted R Eliza 2 wee;s
Arrange to )eet with soli"itor to &pdate 2ill and
powers o0 attorney
Ted R Eliza 2 wee;s
Arrange 0or review )eeting (inan"ial Planner * )onths

32
Section 3 Present appropriate strategies and solutions to the client and negotiate a
financial plan, policy or transaction
Part A
The SOA has been completed and a meeting has been organised with Ted and Eliza to present
the recommendations and, if they agree, to implement them.
Outline the steps that should be followed in presenting this advice to Ted and Eliza. In your
answer, you should address at least four of the following requirements regarding presentation of
advice:
the order in which you present the information
what back-up information and documents you might need
any risks associated with the solution
two predictable questions the Browns might ask you and the answers you will give
the language you will use to present the strategy to Ted and Eliza. (250 words)
The following procedures shall apply when presenting the advice to Ted and Eliza:
Restate the reasons why they come to seek the financial advice and they expectations (goals
& objectives)
Reconfirm whether there is any significant change to their situation
Revisit all information collected from the data find form and summarise their current situation
including the area where they can make improvement
Talk about their risk profile and explain the rationale behind
Go through each recommendations and explain how these recommendation can meet their
goals and objectives, including further explanation about particular recommended products
Product Disclosure Statement if necessary
Give a summary of recommendations and strategies; explain how their asset allocations can
meet with their risk profile after taking recommendations
Explain the cost of taking recommendations and associated risks
Disclose fees, commissions and benefit involved
Explain the ongoing service and implementation plan
Ensure they are clear about every forms that need to signed
It is also important to ask questions when following above steps to ensure both Ted and Eliza are
fully understand the plan and the implications of the advice provided.
FP3B-1SN3-2
Part B
Suggest a minimum of two concerns that the Browns might have with the strategy that you have
proposed. Explain how you would address each of these concerns. (100 words)
Concern 1: How are these investment funds selected?
These investments are all from approved product list (APL) of B n Y pvt. Ltd. This approved
products are optimized after extensive research, by simulation and practice. These investment
products are studied in detail and then ranked as the best options to suit the Hardgraves current
risk profile.
Concern 2: What if we do not like the investments you recommend?
If you are not happy with taking the recommended investment you can simply inform your
concerns. Prior to undertaking any actions on investment, we have to get your permission first.
Thats why the Authority to proceed is provided to you.
Part C
During the course of your discussion with Ted, you discover that he has suffered from a back injury
and you suspect that this may result in a premium loading being applied to his income protection.
Explain how you would justify the need for this policy to him, despite the extra costs. (150 words)
It would be beneficial to Teds family if he take adequate income protection insurance. Imagine he
is unable to work due to unexpected illness/injury/partial or total disability; the family will lose
approximately $84,000 annual income (after tax). They may even find difficulties to keep the life
style they used to enjoy as Elizas income can only cover their general living expenses. They
probably need to extend their mortgage, cancel their annual holiday, and save more for their
childrens future education.
Unlike life & TPD insurance (protection on death & disability) and trauma insurance (protection on
defined medical conditions), Income protection insurance can provide a monthly payment (usually
up to 75% of the income) if the insured is temporarily unable to work due to illness or injury.
Income protection insurance is perhaps the easiest policy on which to make a claim, given a
legitimate disability and a reasonable contract of insurance. This type of policy only requires the life
insured to be able to prove they are disabled at least one month at a time The Australian Taxation
Office allows tax deductions for insurance premiums where it can be proven that those premiums
relate to the earning of assessable income; therefore income protection insurance is also tax
deductible.
If Ted is more concerned about the cost of loading, certain adjustments on waiting period/ benefit
period may help to reduce the premium.
FP3B-1SN3-2
Section 4 Agree on the plan, policy or transaction and complete documentation
Part A
Ted and Eliza have finally agreed to proceed with your recommendations. Explain your fee and
cost structure to Ted and Eliza in plain English. (100 words)
The total fee for our advice and for the preparation of this Statement of Advice is $4000. B n Y Pvt.
Ltd. is entitled to receive $2000 and I will receive the balance amount of 2000.
If you wish to implement the products I have recommended, I will receive commission from the
issuer of the products I have recommended.
All fees and commissions are clearly disclosed in both the SOA and the PDS. All remuneration,
commission and other benefits are presented in dollar terms in the SOA.
A fee of $200 per hour will be charged for any additional services performed (e.g. ongoing service).
Part B
Prepare a timeframe for implementing the plan. Explain the reasons behind the timeframe.
(100 words)
Action By Whom Timeframe
Arrange time for next meeting (2 weeks) Planner Immediately
Read and sign Authority to Proceed Ted & Eliza 1 week
Read Product Disclosure Statement Ted & Eliza 1 week
Complete application forms Ted & Eliza 1 week
Arrange to meet with accountant to discuss accounting
/tax issues
Ted & Eliza 1 week
Contact super fund to increase insurance Eliza 2 weeks
Contact super fund to change asset/risk allocation Ted 2 weeks
Contact super fund to add insurance Ted & Eliza 2 weeks
Contact bank to increase mortgage repayments Ted & Eliza 2 weeks
Meet with Ted & Eliza to collect forms and check on
progress
2 weeks
Deposit funds from savings into managed investment Ted & Eliza 2 weeks
Arrange to meet with solicitor to update Will and powers
of attorney
Ted & Eliza 2 weeks
Arrange for review meeting Financial Planner 6 months
Ted and Eliza should have enough time to read and review all the application and PDS during the
first week. They should also talk with their accountant to make sure they understand all the
accounting/taxation implications that may affect them after taking the recommended actions.
Increasing mortgage repayment involves lots of money; they may need more time to think about it.
Once their written confirmation and application are being received during the meeting in two weeks
time, further actions can be implemented. Lastly, it would be easy for them to meet with solicitor
when everything else has been arranged. Another meeting in 6 months time should be enough to
perform a review on their progress.
FP3B-1SN3-2
Part C
Identify the documentation that you may require from Ted and Eliza before proceeding with your
advice. (100 words)
The final updated SOA with Authority to proceed that signed by Eliza and Ted is needed before
implementing the advice. It simply gives the planner a permission to proceed with planned actions.
The application forms for recommended insurance and investment products have to be completed
and signed as well. The identity verification document (e.g. Drivers licence, passport) may also be
need for confirming the signature.
Part D
List the documentation that you may need to present to Ted and Eliza at this stage. (100 words)
A checklist of all the possible activities associated with the provision of financial advice
Product Disclosure Statements for all recommended insurance and investment products
Copies of all singed documents (e.g. SOA and application forms)
The implementation schedule
A letter to the solicitor that explains their needs for updating the Will and establishing powers of
attorney
A confirmation of next meeting for review
FP3B-1SN3-2
Section 5 Provide ongoing service where requested by client
Part A
Draft an outline of the level of ongoing service you intend to recommend to Ted and Eliza. In your
outline, discuss the type of information that you would regularly provide to Ted and Eliza in relation
to their portfolio. (250 words)
Ongoing financial planning reviews are important part of ensuring the financial plan remains
relevant over time. The ongoing review is similar to what have been done in the previous meeting
before implement SOA. The planner will collect data, examine resources, prioritise clients goals
and objectives, make recommendation and initiate implementation plan if necessary. The review
process will normally address changes to the following areas and adjusts the financial plan
accordingly:
Income and expenditure: its vital to maintain their budget in an acceptable level and make
sure Eliza and Ted have adequate savings. A change in career, or earning ability, may have a
significant impact on their lifestyle habits or retirement planning capabilities.
Balance sheet: it is important to ensure that all their assets and liabilities are reflected
accurately. These will affect not only the content of the advice relevant to them, such as level
of assurance cover, but also impact investments where tax is relevant.
Their family situation: they may be able to receive more social benefits as their family situation
changes.
Their financial planning needs and objectives should be reviewed before considering any
changes on your financial and investment strategies
Their insurance needs: their family member might need more health insurance cover as
everyone grows older.
The general economic environment: the economy can change without notice, a new regulation
or legislation will impact on their financial plan.
Superannuation: if either Ted or Eliza decides retire earlier, they would have to adopt relevant
adjustment to their superannuation so that to have sufficient income stream when they retire.
Investment product: there may be a new product available in the market which better suits
their risk profile and need.
Taxation: their taxation position and any relevant changes in the current tax law should be
updated regularly. There may be opportunities to reduce the tax payable.
Estate Planning: If they've had any life or family changes, such as a birth, adoption or divorce,
they may need to revise their beneficiary designations.
The above points should be reviewed at least once a year through a formal meeting. If there is any
change needs to be handled in an urgent manner, a special review can be arranged.
Reviewing their financial plan at least once a year could help ensure Ted and Eliza are on track to
reach their long-term goals. It is also an opportunity for them to compare their investment portfolio
performance with the original expectations. Although the purpose of the review process is not
necessarily to change the investment, making certain investment amendments may be needed if
there are significant difference between the existing performance and the expectation. The review
simply offers a chance to implement any new plan of action that has been developed in light of
changing goals or changing performance.
Any urgent issue should be reviewed immediately; the investment portfolio could be reviewed
every 3 to 6 months; a full review would be given on an annual basis.
FP3B-1SN3-2
Part B
What would you do to ensure that Ted and Eliza know the specific costs relating to an ongoing
service? (100 words)
Other than simply explaining the cost structure to Ted and Eliza, a written service fee schedule
should be given to them. Any remuneration, commission, fees or other benefits in relation to
providing ongoing service and how these cost are calculated shall all be explained and included in
the fee schedule. The estimated total cost of an ongoing service will be confirmed with them prior
to any work being commenced.
FP3B-1SN3-2

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Superannuation and Life Insurance Skills (Capstone project)

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