Answer To: Regulatory Guide RG 90 Example Statement of Advice: Scaled advice for a new client.pdf PLANFORIT SOA...
Preeta answered on Jun 09 2021
Contents
1. Summary of Advice: 3
1.1 Goals of the client: 3
1.2 Recommendation: 4
2. Basis of Advice: 6
2.1 Scope of advice: 6
2.2 Client’s current situation: 6
2.2.1 Personal information: 6
2.2.2 Goals: 6
2.2.3 Financial situation: 8
2.2.4 Issues and concerns: 9
3. Risk Profile and assessment: 9
4. Advice: 11
4.1 Assumptions: 11
4.2 Recommendation: 11
4.3 Justification: 13
4.4 Post implication projection: 14
5. Disclosure: 15
6. Disclaimer: 16
7. Next Steps and Actions Required: 17
References: 19
1. Summary of Advice:
The risk tolerance of the client is moderate and the investment advice has been made accordingly based on the goal of the client.
1.1 Goals of the client:
· A mortgage loan of $95,000 is due against the house and need to be paid off.
· Renovation of the house worth $65,000 within six months of the retirement that is by February, 2021.
· There is a debt on the credit card worth $5,000, which she wants paid off.
· She would like to give her son $150,000 after her retirement. She will also like to have the financial advice for her son as how he can strategically use that money.
· Europe trip in 2021 worth $20,000.
· Annual trip worth $15,000.
· She wants to give part of her real estate that is a bequest worth $20,000 to the council.
· A new car worth $30,000 is to be bought soon.
· She wants to take benefits of Centrelink.
· The current expenditures:
· Mortgage payment - $18,000 p.a
· Term life insurance premium - $3,500 p.a
· Building and contents insurance - $1,000 p.a
· Telephone and internet charges - $1,600 p.a
· Golf membership - $1,300 p.a
· General living expenses - $17,500 p.a
· Medical and dental expenditure - $1,200 p.a
· Discretionary leisure/recreation holidays - $10,000 p.a
· Utilities charges:
· Council rates - $2,000 p.a
· Water - $2,100 p.a
· Gas - $1,400 p.a
· Electricity - $2,200 p.a
· Home maintenance expenses - $2,500 p.a
· Motor vehicle expenditure:
· Third party insurance and CTP insurance (insured with GIO) - $1,250
· Servicing costs - $400 p.a
· Petrol - $2,000 p.a
· Total registration - $500 p.a
· Private health insurance - $2,600 p.a
· She estimates her other living expenses to be $40,000 p.a after the retirement.
1.2 Recommendation:
The following funds are to be used for spending:
Superannuation fund in Australian Super – Balanced Option
348,000
Superannuation fund in PodSuper
34,000
Account with local Community credit union
6,000
Bank Account
10,000
Sale of old car
12,000
Discontinue of term deposit
132,960
Total amount available
542,960
Payment for debt expenses and other expenses to be met:
Mortgage loan
95,000
Credit card loan
5,000
House renovation cost
65,000
Payment to son
150,000
Europe trip
20,000
Car
30,000
Yearly expense (living + travelling)
55,000
Total
365,000
Balance amount = 122,960
$120,000 is to be invested in listing property with 3% income and 3.5% growth for five years.
The cash flow is as follows:
Starting Value
Return
Value in the end with 3.5% growth
120,000
3,600
124,200
124,200
3,726
128,547
128,547
3856.41
133,046.15
133,046.15
3991.34
137,702.71
137,702.71
4,131.08
142,522.30
A part of the house can be rent out to meet yearly expense. $60,000 p.a income can be drawn from the house rent. Yearly expense is of $55,000 including living expenses and travelling expense. The rent is enough to cover those and there will be additional $5,000.
The things which are to be continued as it is:
· Insurance cover is to be continued since Pat is becoming old.
· The share investment portfolio of Pat and Jack is to be continued since the market condition is not well currently and so the price of the investment is low.
2. Basis of Advice:
2.1 Scope of advice:
Investment advice will be given to the client for insurance and other short term as well as long term investment plans based on her goals and current financial situation.
There is no conflict of interest since the financial planner do not take commission from any of the investment funds or has personal benefit in any of the funds.
2.2 Client’s current situation:
2.2.1 Personal information:
Patricia (Pat) Miller will be of 66 years of age in August, 2020 and wants to retire then. Her husband, Jack expired in a car accident and she is single since then. She has a 37 years old son Simon. She made a will around 20 years ago and made her husband, Jack the beneficiary and the executor. Now she wants to make the will in her son’s name. She works at an architect’s firm as the office manager.
2.2.2 Goals:
· A mortgage loan of $95,000 is due against the house and need to be paid off.
· Renovation of the house worth $65,000 within six months of the retirement that is by February, 2021.
· There is a debt on the credit card worth $5,000, which she wants paid off.
· She would like to give her son $150,000 after her retirement. She will also like to have the financial advice for her son as how he can strategically use that money.
· Europe trip in 2021 worth $20,000.
· Annual trip worth $15,000.
· She wants to give part of her real estate that is a bequest worth $20,000 to the council.
· A new car worth $30,000 is to be bought soon.
· She wants to take benefits of Centrelink.
· The current expenditures:
· Mortgage payment - $18,000 p.a
· Term life insurance premium - $3,500 p.a
· Building and contents insurance - $1,000 p.a
· Telephone and internet charges - $1,600 p.a
· Golf membership - $1,300 p.a
· General living expenses - $17,500 p.a
· Medical and dental expenditure - $1,200 p.a
· Discretionary leisure/recreation holidays - $10,000 p.a
· Utilities charges:
· Council rates - $2,000 p.a
· Water - $2,100 p.a
· Gas - $1,400 p.a
· Electricity - $2,200 p.a
· Home maintenance expenses - $2,500 p.a
· Motor vehicle expenditure:
· Third party insurance and CTP insurance (insured with GIO) - $1,250
· Servicing costs - $400 p.a
· Petrol - $2,000 p.a
· Total registration - $500 p.a
· Private health insurance - $2,600 p.a
· She estimates her other living expenses to be $40,000 p.a after the retirement.
2.2.3 Financial situation:
· Her current salary is $72,000 plus compulsory superannuation.
· Owns a house worth $ $1,100,000.
· She has a credit card with $40,000 limit.
· She has a superannuation fund in Australian Super – Balanced Option worth $348,000. This is contributed by her employer entirely.
· She has another superannuation fund in PodSuper worth $34,000. This is from a job she had long back. There is a management expense ratio (MER) of 2.5 % pa, member fee of $96 p.a and exit fee of $30.
· She has an investment...