FINS3637 / FINS5537 Individual Assignment – Term 1 2021FINS3637 / FINS5537 Individual Assignment – Term 1 2021 Due to be submitted no later than 11.59 pm * Sunday the 18th of April 2021 in a soft copy format via the Turnitin link placed on the Moodle course website. *Please allow a minimum of 20 to 30 minutes to upload your assignment. Do not wait untill the due date to upload your assignment as the system can become slow closer to the due date. NO ASSIGNMENT WILL BE ACCEPTED VIA EMAIL OR ANY OTHER FORM/S This assignment will comprise a total of 40% of the marks allocated for this unit. The assignment consists of the preparation of an advice document in a form of a professional & compliant Statement of Advice (SOA) in relation to the case study. The SOA must adhere ASIC RG175 requirements in particular the “Clear, Concise and effective” requirement. Submission details The submission must include the following in ONE PDF document / file: 1. The assignment (SOA) in a PDF format, incorporating all the relevant elements to ensure the prepared SOA is compliant with the relevant financial services laws, technically accurate and professionally presented 2. PowerPoint presentation slides (10- 15 slides) to be copied and pasted into the SOA words document with your speaker notes summarising your Statement of Advice before you PDF the file to be submitted on Turnitin. The aim of the presentation is a way to present your advice to the clients in the case study Use the submission link provided on Moodle. Only submissions via the link will be accepted Late submissions will be accepted; however, they will incur 25% penalty for every 24 hours after the due date. HOWEVER, Please Note: YOU CANNOT overwrite your submission after the due date (No resubmission past the due date). VERY IMPORTANT _ Rules You Must adhere to The aim of this task is to demonstrate competence in constructing a professioan aand compliant SOA. The work therefore must be your own. Turnitin similarity reporting is strictly applied. Copying from other students work or starting from a template completed by a student who completed this course or a similar course at other educational institutions previously is considered plagiarism and will be penalised and likely lead to failing the assignment. Your similarity result should be in low single digit (less than 10%). Systematic plagiarism will be penalised regardless of the similarity score. Plain and simple this work must be your own work in its entirety. Similarity between 10 and 20% will be closely investigated Similarity exceeding 20% will not be graded You CANNOT use software or other licensees /companies’ templates. This assignment must be entirely your work cover to cover. 1 of 12Important Note: You need to answer the question in a Statement of Advice (SOA) format in accordance with ASIC guidelines (refer to RG 90 for examples only). The SOA must have a 2 page “Executive Summary” section where you summarise the client’s current situation, needs, concerns, goals, objectives and your recommended strategy. Important Notes: • The assignment must be typed (Font 11) • Attempt ALL questions and issues raised in the case study assignment • Ensure your SOA contains all the relevant sections, to ensure your SOA is compliant with the relevant financial services laws, technically accurate and professionally presented in line with the industry best practice • Your PowerPoint presentation needs to be professionally presented and represent an accurate summary of the SOA/ executive summary • Where appropriate, the use of tables, graphs, flowcharts, etc. is encouraged to help illustrate your point clearly • Show workings and calculations where applicable • Clearly state your source references. Be clear in answering the questions and or clients enquiry. • Assumptions must be clearly stated, assumptions need to be reasonable and logical and cannot conflict with the facts in the question/s • Provide the excel spreadsheet projection/working in the appendix of the SOA document. Assumptions o Inflation 2.5% o AWOTE 3% (use for wages inflation) o The investment growth rate is to be provided by you, however, you must apply due diligence on the rate provided and provide your source or research reference/s. This would be based largely off the investment and the asset allocation of your investment portfolio o Use 2020-21 tax rates where applicable Refer to the mark allocation and what is expected from you section below for further details and tips 2 of 12Case Study - The Cortez Family Louis Cortez (aged 40) is married to Sally (aged 35). They are living in Sydney. They have three children, Charlotte (aged 4), Sophia (aged 2) and new born Harvey Louis is a general manager at a financial services firm. Sally is an accountant, She is currently on maternity leave and planning to return to work in 12 months’ time. Louis and Sally have been discussing the need for them to see a financial adviser to help them put a plan in place to help achieve their goals and objectives. They would like to ensure they have appropriate budget to allow them to maintain their lifestyle and help them save for their key goals, including their children’s education, paying off their debt, while also making sure they have plans to ensure they are saving well for their long-term retirement objectives. Although Louis and Sally can see the need to focus their attention on their key immediate priorities of paying off their debt and saving for their children’s education, however, they also would like to make sure their superannuation is well invested to help them save for their retirement. Both Louis and Sally have reasonable experience when it comes to investment and management of their financial affairs. Although in recent times Louis and Sally have been too busy to pay attention to their financial affairs, they feel with the appropriate help from the professionals in the field (financial adviser, accountant, etc.) they would be able take control of their finances and investments and be directed towards achieving their goals and objectives. Louis and Lisa have made wills soon after they got married, however, they haven’t updated them since. Louis and Lisa have a home and contents insurance cover they established back in 2016 when they purchased their current family home. They have their motor vehicle comprehensively insured. They also have family private health insurance coverage. However, they are unsure if their general insurance covers are adequate and appropriate. Their personal life insurance is limited to what they have inside their respective superannuation accounts. Louis and Sally have decided to come and see you. Sally made an appointment for both Louis and herself for an initial consultation with you. Louis and Sally have left you with the information below after the first interview. 3 of 124 of 12 Louis Sally Income salary & wages * (excludes employer SG contribution) $280,000 $210,000 Home (principal residence) Purchased in March 2016 $1,600,000 (Joint tenancy) Home loan (30 yrs loan) @4.2% variable (current schedule repayment is $8,000 p.m.) $1,200,000 Home contents $120,000 Motor Vehicle Purchased in Dec 2020 $85,000 Bank Account (at call) $15,000 (Joint) Term deposit @ 1.9% maturing in 2 weeks $80,000 (Joint) Employer superannuation (retail funds) BT Super $250,000 (Insurance inside the superannuation fund of $500k life and TPD) Investment option: High Growth Fund Australian Super $130,000 (Insurance inside the superannuation fund $500K life and TPD) Investment option: Balanced Australia share portfolio (Purchased in 2019) Market value $ 60,000 Cost Base $45,000 Managed funds Australia share (Purchased in 2018) Market value $ 50,000 Cost Base $30,000 Income requirement/ Living expenses (excludes Mortgage repayments ) $100,000 p.a # Louis and Sally’s current living expenses will continue until retirement. Notes to the supplied information: *The employer makes only the mandated employer contribution (SGC) to their nominated superannuation fund.5 of 12 You need to advise Louis and Sally on the issues below, taking into account the following specific issues and concerns: You need to clearly address the following issues: where you are providing advice on each of the points below you need to ensure you highlight the benefits and the risk of the advice relevant to the clients personal circumstances. You also need to clearly demonstrate how your advice to the client meets the best interest duty with the financial services legislations and regulations. • Analyse and address Louis and Sally’s goals, objectives, needs, and concerns and whether they can achieve their objectives including their retirement objectives and how. (You are strongly advised to provide them with options and alternatives where necessary and appropriate). o Retirement: Louis would like to retire once he reaches age 65. Sally is planning to retire when she reaches age 60. However, they are happy to postpone retirement for a few more years if this would help them achieve a more comfortable retirement as Louis is happy to scale down his work load and stay working on a consultancy basis for a few more years as a semi retirement plan. o Louis and Sally think they need an after-tax income of $80,000 in today’s dollars during their retirement as by then they think their debt will be paid out (assume this income can be produced tax free at retirement). You need to provide the calculation supporting your projections of their retirement needs. o They like to know if the latest superannuation changes that came into effect on the 1st of July 2017 impact their retirement and saving plan. Address the changes relevant to Louis and Sally’s current personal circumstances and their future plans. o They would like to pay off their debt as soon as possible. o They would like to save and invest to help them achieve their objectives o They are happy to consider the concept of borrowing to invest if they feel it can help them achieve their retirement aim. o Louis and Sally feel strongly about providing their children with good education, They would like to be able to provide a private school education for their children. They feel they should have a budget of around $24,000 p.a. in today’s per child for the 12 school years (at a minimum they would like to be able to assist in funding for the 6 years of high school if funding for the entire 12 school years is not affordable). o They would like to do some renovations on the house putting a new kitchen in the next 3-5 years. The expected cost is approximately $80,000 in today’s dollars. o They would also like to take a trip to the snow next year with the kids for which the expected cost is approximately $10,000 in today’s dollars.6 of 12 o Louis and Sally have been contemplating borrowing and purchasing a rental property like what some of their family friends have done recently. They feel with their level of income they can take advantage of the benefit of negative gearing. Advice Louis and Sally and the pros and Cons of such a strategy. Be specific on relating you advice to Louis and Sally’s personal circumstances. o They have asked you about the ability of starting their own SMSF as some of Louis’s work colleagues have done just that. At present Louis and Sally’s superannuation contributions go to an employer nominated retail fund. They would like to know benefits and risks of establishing an SMSF relevant to their own specific and personal circumstances. They are particularly interested in the possibility of acquiring at some point in the future an office space through the SMSF for Louis one day to run his consultancy business as they come close to retirement. (You need to provide a clear recommendation with appropriate justification as to whether an SMSF is or is not appropriate to their specific needs). o Sally has heard from a colleague at work that the SMSF can borrow to purchase a property under a Limited Recourse Borrowing type arrangement. Louis and Sally would like to know more about this and the possibility to use such a facility through an SMSF to buy an apartment and rent it out to Sally’s sister who is getting married this summer. They are wondering whether they could also purchase a rental investment property through the SMSF. o Louis and Sally would like to get some advice on the share portfolio and the managed fund investment they hold and to be provide options on whether they should continue to hold the shares. Advise Louis and Sally on the pros and cons on holding the share portfolio and the managed funds investment, you also need to elaborate on what can be done to make their investment more diversified and potentially what other options they would have with regards to this investment. o The term deposit is maturing soon, and they would like some advice on what they could be doing and possible options available for them o Louis and Sally would like to ensure they have adequate general and personal insurance. For the personal insurance you are required to provide a clear needs analysis and make appropriate recommendations on the amount and type of covers required. You also need to provide insurance product recommendations and supply quotes of premiums. o They would like you to consider their estate planning and asset protection needs. You need to provide a clear recommendation on all their estate planning needs. (Avoid large generic contents in this section). Information provided needs to be relevant and specific to the clients’ circumstances. o Projections should be made up to Louis & Sally’s life expectancy + 8 years.7 of 12 Risk Profiling - Louis and Sally’s attitude to risk: o Louis likes owning shares as from his financial background he understands that Australian shares and shares in general may have a higher volatility than some other asset classes. However, he also understands shares tend to perform well over the long term. Louis is comfortable with taking risk if he can understand it and see that there are possible rewards. o Sally on the other hand was brought up in a very conservative family where her family had most of their money invested either in government bonds or term deposits with one of the major banks. Sally’s family have always talked in front of her that they dislike share investments as they feel they can't sleep for worry about market events. However, they have also said to Sally several times that she could never go wrong with property investment and have always encouraged her and Louis to buy a house when they first got married. Sally therefore is more conservative than Louis when it comes to risky investments; however, as a result of studying finance subjects at university she can see that sometimes there could be some merit in taking calculated risks to achieve better returns. o Louis and Sally have both indicated they wouldn’t mind taking some calculated investment risks to help them achieve their objectives. As part of your advice to the clients you need to address the following: • Asset allocations and diversification. • Investment portfolio recommendations, providing reasoning and justifications. • Cash flow and asset projections (include projections of cash flows for Louis and Sally, presenting both pre-tax and post-tax results). • Cash flow and net worth tables. • Provide assumptions used and justifications (cost, risk, suitability, etc.) where required. • Use diagrams and charts to assist with your illustrations. • Clear calculation of projections. Your task now is to prepare a complete Statement of Advice (SOA) for Louis and Sally. The information provided in the client scenario is to be used in preparing your calculations and advice. As the assignment is to be a SOA for clients, it should be in a suitable format and use appropriate language. Clarity and conciseness are important but full explanations are required. • Your SOA should clearly show the structure you recommend for their portfolio, how they can achieve their goals and where the capital and income will be sourced. Your SOA should address a long-term plan to provide income and should include projections.8 of 12 Individual Assignment Rubrics and marking guidance The rubric below is read conjunction of the assignment expectation listed beloe Very Good to Excellent ( D – HD) Satisfactory (Pass to Credit) Unsatisfactory • Clear and appropriate SOA/assignment layout and structure • Clearly addressing and providing in depth analysis of all the clients goals, objectives, risks and concerns • Clear and thorough analysis in determining the client risk profile addressing different goals and time horizon (i.e. utilizing goal-based risk profiling) • Clearly identify strategies to help the clients achieve their objectives, with addressing clear alternatives/ scenario analysis • Clear and concise and effective articulation in addressing the required contents requested in the assignment question • Good and efficient use of Visual aids (table, graphs, headings, etc.) for illustration • The SOA is Professionally presented flow nicely and reader friendly • Meeting the compliance requirement of an SOA. • Clearly demonstrating the advice meets Best interest duty • Highlighting the risk of the advice and how they can mitigated • Meeting best practice standard • Providing clear cash flow projections • Regularly relating the advice to the client personal circumstances and facts in the case study • Little or no generic information in the body of the advice • Professionally prepared and presented PowerPoint slides with detailed speakers notes • Clear evidence of independent research and analysis incorporated throughout assignment asrequired • Appropriate use of referencing where necessary • Thoroughly Addressing all the points of what expected of you below • Very Low Similarity (Turnitin report) • Adequate SOA/ assignment layout and structure. • Clearly addressing and analysing the clients goals, objectives, risks and concerns • Clear and adequate analysis in determining the client risk profile addressing different goals and time horizon (i.e. utilizing goal based risk profiling) • Clearly identify strategies to help the clients achieve their objectives, with addressing clear alternatives and scenario analysis • Clear and somewhat concise and effective articulation in addressing the required contents requested in the assignment question • Adequate use of Good and efficient use of Visual aids (table, graphs, headings, etc.) for illustration • The SOA is reasonably Professionally presented and reader friendly • Meeting the compliance requirement of an SOA. • demonstrating the advice meets Best interest duty • Clearly highlighting the risks of the advice and how they canmitigated • Providing clear cash flow projections • Adequately relating this advice to the client personal circumstances and facts in the case study • Some generic information in the body of the advice • Clearly prepared and presented PowerPoint slides with detailed speakers notes • Some evidence of independent research and analysis as required • Appropriate use of referencing as required • Covering the key points of what expected of you below • Low Similarity (Turnitin report) • Poor assignment layout and/orstructure • No Adequately addressing or analysing the clients goals, objectives, risks and concerns • No clear analysis in determining the client risk profile addressing different goals and time horizon (i.e. utilizing goal-based risk profiling) • Vague or unclear strategies • Failing certain compliance requirement. • Not adequately demonstrating the advice meets Best interest duty • Not highlighting the risks of the advice and how they canmitigated • No or unclear cash flow projections • High use of generic information • Poor presentation overall • No demonstrated independent research or analysis • Little or no use of references • Not adequately Covering the points of what expected of you below • High Similarity (Turnitin report)Assignment mark allocation & what is expected from you Mark Allocation Marks breakdown between both tasks SOA and presentation slides (out of 100) Overall Presentation SOA and presentation slides 20 Marks Disclosure and compliance 15 marks Analysing current situation , identifying the client goals, objectives needs and concerns (including risk profile) 20marks Projections and illustrations 15 marks Strategy and recommendation 30 marks What is expected from you Deliver appropriate advice that address all the clients goals, objectives, needs, concerns and special circumstances. The advice need to meet best interest duty and demonstrate the client will be in a better position in following the advice and recommendation you have presented. You need to clearly identify the risks of the advice and how they can be mitigated . Your SOA The SOA need to be professionally presented and reader friendly, aiming for best practice and not for minimum standards. The statement of advice based entirely on your own work. The SOA need to be compliant with all the financial services regulation for the format, the advice itself and all appropriate and required disclosures. Providing a compliant statement of Advice (i.e. disclosure, meeting the best interest duty, regulatory etc.). The SOA must adhere ASIC RG175 requirements in particular the “Clear, Concise and effective” requirement Current situation: Building and structuring the client current situation (including pre advice cash flow and net worth) Clearly analysing the fact in the case study Appropriately addressing all the client goals, objectives, needs, concerns and special circumstances Providing a client with strategy that addresses all the client goals, objectives and concerns and aims to meet the client goals Providing client with options and solutions – providing alternative strategies Highlighting how the strategy is in the best interest of the client – i.e. meeting the best interest duty Highlighting the risk of the strategy (if any) Addressing how the risks can be mitigated 9 of 12Providing post advice cash flow and net worth & the requested projections going forward Providing specific product recommendations to execute the strategy Obtaining Authority from the client to proceed with the recommendation Retirement Advice: you need to perform appropriate calculation to identify the amount required to fund retirement income and other expenditures (if any) the clients intending to undertake. You need to clearly demonstrate through both cash flow and net worth projections how the clients is able (or unable if they don’t have sufficient resources) to fund their retirement Insurance Advice: you need to perform needs analysis based on the clients’ facts and special circumstances listed in the case study. You need to identify needs and gaps and provide clear recommendations of what insurance covers should be sought, increased or upgraded, cover type, sum insured, etc . For Insurance quotes, you can make appropriate and reasonable assumptions (i.e client is in good health and is a non smoker, providing there no information to the contrary in the case study). Estate Planning Advice: needs to be clear and non-generic recommendations. The advice in this section must relate specifically to the client. You need to address more issues than generic issues related to wills and Power of Attorney Risk profile section – you are required to address the key issues and justify accordingly. You therefore needed to make clear reference to how you determine the client risk profile (Client risk tolerance, Time horizon, Goals and objective, Liquidity needs and investment experience, etc.) SMSF & Superannuation Advice: you need to avoid including generic information and general pros and cons. Your advice related to SMSF (to set or not to set up, to keep and not to keep, etc.) need to be specific to the client’s circumstances and facts listed in the case study. Other superannuation advice need to be provided with clear justification maintaining or switching. All super switching advice need to refer to ASIC information sheet INFO182. Switching Advice: All switching advice (superannuation, investment and insurance) need to be clearly justified. Projections Clear cash flow and net worth projection to be provided- you need reference to your projection in the body of the SOA in relation to the specific goals (i.e retirement funding, etc.) Cash flow projections and net worth projections to justify strategy and demonstrate if financial goals and objectives are met. Presentation – needs to be professionally presented and your SOA document must flow nicely and need to be reader friendly 10 of 12Disclosure & Compliance – Appropriate disclosure of fees and benefits and meeting the regulatory requirement of advice documentation Technically accurate advice - It’s critically important to provide accurate advice for the client to rely on Again, always relate to the clients' specific circumstances throughout the SOA and ensure you are specific when explaining concepts, rules, regulations, legislative changes in terms of highlighting their impact on the clients specific and relevant. Key sections you must include in the SOA: • Covering letter • Cover page • Table of Content • Executive summary (2-3 pages max) • scope of advice • Assumptions • Current situation- information about the client • Goals and objectives analysis including needs, concerns and special circumstances • Risk profile analysis • Your advice and recommendations • Investment advice • Retirement planning advice • Insurance advice • Estate planning advice • Superannuation and SMSF advice • Other advice related to specific goals and objectives (education funding, specific questions, etc.) • Meeting best interest duty • Risks of the advice and how they are mitigated • Disclosure sections – meeting all legal and best practice disclosure requirements: • The cost of the advice and how you are paid. • All fees, commission and other benefits including soft dollar commissions • Specific disclaimers. • How to proceed. Authority to proceed and actions to proceed • Implementation schedule • Appendices 11 of 12SCHEDULE & MILESTONE TO ACHIEVE Week one: Analyse all the facts in the case study including goals, objectives, needs, concerns and special circumstances + cash flow and net worth pre advice – formulate the current situation part of the SOA Week Two: Start Building the skeleton of the SOA, do your research including calculation of all financial targets and commence projections. Week Three: Finalise projections and final draft of strategy recommendations Week Four: Product research and finalise strategy recommendations Week five: Bring it all together constructing and finalising the SOA and PowerPoint presentation |