This assessment item requires you to submit a working paper which includes an overview of the interview with Matt including his current situation goals and objectives and any issues raised and then based on this information your strategic recommendations that address how he should achieve his goals. These recommendations should include wealth creation both inside and outside of super annuation wealth protection insurance and lifestyle recommendations.
Financial Planning Assessment
Please refer to the instructions below which sets out what you need to cover for each section in detail. A reminder that this assessment item is worth 40% of your final grade.
In terms of this assessment item please note the following:
• Your submission must be prepared using the template provided on L@G;
• Your submission is a strategy document only, as such you are NOT required to price any actual quotes or recommend specific investment products;
• A standard SOA template generally contains generic information such as what is a managed fund what is total and permanent disability insurance etc. Accordingly you are not required to include generic information such as this in your working paper. Instead the focus of your working paper should be your strategy recommendations and reasons why etc as indicated in the instructions below.
• As illustrated in the template and the working paper example, please bullet point your responses. Please start a new bullet point for each separate point you make.
• There is no word limit for this assessment item. As a guide, your submission should be roughly 2,500 to 3,000 words (excluding the appendices though you may exceed this particularly if you are providing detailed explanations for each section with the aim of achieving an excellent result. However, please remember it is quality over quantity!
• Please ensure you refer to the Appendices at the end of this document. Appendix 1 contains information about the future value calculations required including the rates and fees you must use and Appendix 2 contains answers to frequently asked questions.
• Before starting we strongly suggest you watch the ‘Getting started: how to complete the working paper video on L@G.
• Finally please ensure you have reviewed the marking rubric and the checklist on L@G as well.
FSG and adviser profile / Scope of advice
There are no marks for these sections and therefore they have been completed for you. Please do not amend these.
Current situation :-
• Complete the tables provided as accurately and thoroughly as you can. Please refer to the working paper example to assist you.
• This should be fact based and is based on the information provided in the client interview.
That is his current situation now right, not after you have provided him with advice.
• Do not make up additional information if you do not have it.
Financial Planning Assessment
Potential issues / special consideration
• Detail any potential issues or special considerations that you would like to mention e.g. anything unusual or issues that may not be relevant to your current advice, but could be an
issue in the future etc. This may include anything you wish to expand on based on his current
situation.
• Overall please ensure these are relevant to your client rather than generic potential issues / special considerations. For example saying a client who is single could get in a relationship / get married / have children when there is no mention of these would be a generic consideration (i.e. could apply to anyone). Please do not include generic considerations but rather focus on those relevant to your client.
Objectives :-
• Clearly state all of Matt’s goals and objectives, including any non-financial objectives (e.g. ‘play more golf’) if relevant.
• Do not include your goals or objectives or what you will recommend to the client. This section simply covers what the client’s goals are. Your recommendations will be discussed later in the working paper.
• Please be as specific as possible, e.g. where possible include timeframes, priorities and $ amounts (i.e. prioritised SMART goals).
Risk profile :-
• State the risk profile you arrived at in the interview and any details arising from your discussion about risk.
• Include how you determined your client’s risk profile (e.g. did they just tell you or did you complete a questionnaire with them etc), what it means (in terms of timeframes, asset allocation etc) and what the client thought about this.
• If you will be recommending an asset allocation that is not in line with the client’s risk profile (as discussed in Topic 5), please include your reasoning for this in the recommendations section(s) below, as it is easier for us to identify your rationale when applied to the individual recommendations.
Financial Planning Assessment
Wealth creation / lifestyle recommendations – outside superannuation
Before completing this section, please watch the ‘Investment choices’ video on L@G.
For each wealth creation and lifestyle goal that you are advising on you need to detail your recommended strategy(s) which should be linked to the client’s objectives and the advantages and disadvantages of each strategy i.e. why your recommended strategy is appropriate for the client and any potential costs / downsides. You also need to include details of any alternative strategies considered and why these were not recommended. The specific requirements of each section are detailed below.
1.Objective 1 [change the title to the client’s objective you are advising on – try to make these ‘SMART’ goals where possible]
Financial Planning Assessment
Recommended strategy :-
• State your recommended strategy to achieve this goal, i.e. what should Matt do? This may be multiple steps if so a separate bullet point should be used for each step.
• Make sure you are specific about the type of investment; i.e. not he should invest in x or y – which one? (or both?) How much should he invest? For how long? Should the investment have any particular features?
• Please be as specific as possible without actually recommending a particular product. Your advantages / disadvantages below should then be directly relevant to your recommendations (not just generic advantages / disadvantages that could apply to any client). Please refer to the investment choices video on L@G for more information.
• Over all your recommendations must be clear on where his savings (both current and any monthly surplus) are being directed to achieve his specific goals.
• Where he has a specific dollar ($) goal he is wanting to achieve make sure your recommendations do give him a chance to achieve this goal.
• For any goals greater than 1 year, you are required to prove your recommendations do give him a chance to achieve his goal. To do this, please either use the Future Value (FV) calculations (covered in Topic 3) or use an online calculator as shown in the Future Value calculations video [we recommend the latter]. For these calculations you are required to use the rates and fees provided in Appendix 1 below. As noted there for the purposes of this course you are not required to adjust these to take tax and inflation into account, so please
simply use the stated rates and fees provided below.
• Show any workings / online calculators used (including your inputs) in Appendix 1 below. Before completing this, please refer to the video, ‘Future value calculations’ on L@G.
• Make sure you do actually provide recommendations on how Matt can achieve his goals – leaving it up to the paraplanner (the person who will receive your working paper or saying we will discuss this further with Matt is not acceptable.
• The reasons for your recommendations should form part of your advantages below. This section is simply what Matt should do to achieve his first objective.
Advantages of strategy [reasons why]
• This is where you need to include the reasons why you have recommended the strategy(s) above.
• As per above and the marking rubric, please ensure you provide specific advantages for Matt not just generic advantages that may apply to any client / investor in that particular product. You should be explaining each decision you have made.
Disadvantages of strategy
• There are always disadvantages with any recommended strategy. For your recommended strategy(s) what are the disadvantages? Again be specific rather than general. For example rather than stating ‘taxation implications’ as a disadvantage you would need to explain what the taxation implications are and how this is a disadvantage for Matt.
• If there are severe disadvantages with your recommended strategy that cannot be overcome you should consider changing your strategy – particularly if your strategy means he can not achieve his goals.
Financial Planning Assessment
Alternatives considered
• You need to consider all reasonable alternatives and most importantly why these where not recommended.
• For example if you are recommending a defensive investment option you should include other defensive investment options and why these were not recommended. Like wise with any growth investment recommendations.
• Typically an alternative strategy is a strategy that still meets the client’s goal but one you haven’t recommended for a particularly reason(s). Please ensure you explain what these reasons are, so it is clear why your actual recommendation is more appropriate for your client.
• Remember too that one possible investment alternative is to do nothing.That is leave his current investment / savings as is. If you are not recommending this why not?
Repeat this process for all of Matt’s wealth creation and lifestyle goals including his superannuation goal below.
Please remember that you can only use the savings that your client has available to them as per the interview transcript and that once you have allocated these (e.g. for one goal they are no longer available for the other goal. This includes superannuation. This is discussed further in the investment choices video. Refer also FAQ 2 below.
Further as his goals have different time frames it is unlikely to be appropriate to combine all of his funds into one investment for both goals. Accordingly we suggest you work on one goal at a time as shown in the template.
Therefore for each goal you need to consider how much of his current savings if any and how much of the ongoing savings (if any) are you allocating towards this goal (remembering you can only use these once and how these funds are being invested. Please refer to the investment choices video on L@G for further information.
Wealth creation recommendations – superannuation
Over all Matt wants to ‘sort out’ his superannuation including making sure it’s invested appropriately.
As part of this there are two overall recommendations you need to make:
1.What investment option should he use for his superannuation fund?
2.Should he make additional contributions to superannuation?
Financial Planning Assessment
These are expanded on below. For completeness, please ensure any reasoning why / why not is included in the ‘advantages of strategy’ section below.
1.What investment option should he use for his superannuation fund?
• You should assume he does not have access to a defined benefit fund as these are generally closed to new members. Accordingly, any superannuation fund recommended will be an accumulation fund and therefore you need to recommend an investment option for him (e.g. conservative balanced growth high growth lifecycle or a single sector option(s)) and explain why you have recommended this.
• Note: as you are not required to recommend a specific product please do not make a recommendation on what superannuation fund he should be in. This will be discussed in latter courses. For this course please focus on the investment option instead.
2.Should he make additional contributions to superannuation?
• If yes – explain why he should be making additional contributions, and how much he should be contributing per month. Should the contributions be before tax (i.e. salary sacrifice and/or personal tax-deductible contributions or after tax? Why?
• When considering how much he should contribute you need to ensure you are still working within his available funds taking in to account the funds required to achieve his goals outside superannuation (remember, you can only use these funds once).
• If no – i.e. you are not recommending he make any additional contributions to super you should state this and your reasons why in the ‘alternatives considered’ section below to show you have thought of this and did not recommend it because of XXXX…
Advantages of strategy [reasons why]
• As per above (e.g. if you are recommending Matt make salary sacrifice contributions to his super fund what are the advantages / disadvantages of this for him? etc).
• You may choose to cover the advantages / disadvantages / alternatives for each of the 2 points above, or you may prefer to do these altogether.
Disadvantages of strategy
• As per above
Financial Planning Assessment
Alternatives considered
• As per above
• Note that this section should be quite comprehensive as it should include similar investment options (not all) as well as either;
o different contribution types – for example, if you recommended he salary sacrifice why not personal tax deductible contributions or after-tax contributions instead? (or vice versa); or
o reasons why additional contributions were not recommended for him.
Wealth protection (insurance) – recommendations
• Note 1: as per the topic content and discussed in the workshops, all insurance recommendations should be done on a needs basis. That is what are the financial con sequences if an accident / illness / injury occurred? Could he still achieve his goals and objectives?
• Note 2: in this course you are not required to price insurance (you will do so in later courses).
In practice any insurance recommendations out side of superannuation will have an impact on Matt’s cash flow though for the purposes of this assessment item you do not need to consider how he would fund this (i.e. feel free to use his entire monthly surplus for any wealth creation / lifestyle goals including superannuation).
• Note 3: if you are recommending Matt not take out a particular insurance cover you must explain why.
Financial Planning Assessment
1.Life insurance
• Advise whether you recommend Matt take out life insurance cover or not and why
• If recommending Matt obtain life insurance please advise whether this should be inside out side superannuation and why
• Provide any advantages / disadvantages for Matt with your recommendation
2.Total and permanent disability (TPD) insurance
• Advise whether you recommend Matt take out TPD cover or not and why
• If recommending he obtain TPD insurance please advise whether this should be:
o own occupation or any occupation TPD and why and
o inside / outside superannuation and why
• Provide any advantages / disadvantages for Matt with your recommendation
If recommending he obtain IP insurance, please advise:
o What level of cover he should obtain (e.g. what % of his income);
o What his waiting period and benefit period should be;
o Whether this should be held inside / outside superannuation; and
▪ For each of the above points, please ensure you explain your reasons why.
• A reminder that all new IP policies must be indemnity policies
• Provide any advantages / disadvantages for Matt with your recommendations
Financial Planning Assessment
3. Income protection (IP) insurance
• Advise whether you recommend Matt take out IP cover or not and why
• If recommending he obtain IP insurance, please advise:
o What level of cover he should obtain (e.g. what % of his income);
o What his waiting period and benefit period should be;
o Whether this should be held inside / outside superannuation; and
▪ For each of the above points, please ensure you explain your reasons why.
• A reminder that all new IP policies must be indemnity policies
• Provide any advantages / disadvantages for Matt with your recommendations
4.Trauma insurance
• Advise whether you recommend Matt take out trauma cover or not and why
• A reminder trauma insurance must be held outside of superannuation
• Provide any advantages / disadvantages for Matt with your recommendation
Financial Planning Assessment
5. Private health insurance
• Should Matt continue to hold his hospital and extras cover? Why / why not?
Other
• Insert any other objectives / issues that you have not previously dealt with.
• If you have previously covered everything, you wouldn’t be expected to have anything for this section – so just delete.
• A reminder that Estate Planning is excluded from this assignment so please do not make recommendations regarding this.
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