FIN 4026: Real Client Scenario - Financial Planner with a Specialty in Risk Management - Finance Assignment Help

Assignment Task:

Background 

You are a financial planner with a specialty in risk management. You love your career and have built a  successful practice based mainly on referrals from your satisfied clients.  

Jack, age 49 (Born July 3rd), and Jill, age 48 (Born August 7th) have been referred to you. Jack is Vice President of Marketing at a mid-sized systems firm. His salary is $190,000 + bonus. Last year his bonus  was $40,000. Jill is an accountant in private practice. She works from home and typically bills $150,000 a  year or $100,000 after expenses. They feel comfortable financially but have asked you to flag any gaps in  their risk management strategy. They also have specific questions that they’d like you to address. 

Jack and Jill are married with two children who live at home: Tracey, age 20 and Travis, age 17. Jill’s  widowed mother, Lauren, age 75 moved in with the family after the recent death of her husband.  Financially independent, Lauren contributes to the family’s expenses and is especially devoted to her  granddaughter, Tracey.  

Tracey, a happy and outgoing woman, was born with Down syndrome, a common genetic disorder.  Tracey will never be able to live on her own or support herself but she is otherwise in good health and  could easily live to age 60. Jack and Jill would like to keep Tracey at home but they are concerned about  her ability to adapt if one or both of them dies unexpectedly. As a result, they’re considering moving her  into a group home in their city. The group home provides full support to residents. The fee for this year  is $58,250. Tracey has seen the place and likes it, in no small part because her boyfriend lives there.  

Travis will finish high school this year and start university in the fall. He’s been accepted into the systems  engineering program, considered the top such program in Canada. As the university is in his home town, he’ll be able to live at home. On graduation, he hopes to find employment locally so he can continue to  live near his sister, with whom he’s very close.  

Goals 

While managing the diverse needs of both children has frequently been a struggle, Jack and Jill love  them and want to make sure they’re financially secure. They hope to retire in 18 years and spend all  their hard-earned money having fun! As they plan to use the capital in their home and invested assets to  fund that “fun”, they want enough life insurance on both their lives to cover the following needs if either  of them dies prematurely: 

• Any outstanding debts discharged  

• $50,000 for final expenses, including any tax liability on the death of the second spouse

• Sufficient funds to support Tracey in the group home for as long as she lives

• Travis’s annual tuition and related expenses of $15,000 covered for the next six years, in case he  decides to pursue a graduate degree  

• Once he graduates, an additional $1/2 million for Travis to buy a home or start a business.  They’re not sure if their existing life insurance is sufficient to cover these needs, but that’s their plan.

Insurance Coverage 

Jack’s group benefits include: 

• Life insurance: two times salary (not including bonus or commission) to a maximum of $200,000 • Dependant life insurance: $10,000 on the employee’s spouse, $5,000 on each dependant child • Disability insurance of 60% of salary up to a maximum of $4,000 per month, “regular  

occupation” definition for the first two years defaulting to “any occupation” thereafter, 180-day  elimination period, benefit period to age 65 and partial disability benefits.  

• Extended health benefits. The plan covers Jack, his spouse and dependants. There are no  deductibles and no maximums. Coinsurance is 80% on prescription drugs, 90% on other  extended health benefits except vision which is reimbursed at 100% to a maximum of $300  every 24 months and 100% for semi-private hospital.  

• Dental benefits. Jack’s plan provides Basic and Major coverage. Coinsurance is 80% for Basic and  50% for Major. The annual combined maximum is $2,500. There is no orthodontic coverage. 

In addition to his group benefits, Jack owns a Manulife Universal Life insurance policy. (Note: An  abbreviated version of this policy is posted on Blackboard for your reference.) Jack’s beneficiary on his  life insurance policies is Jill. He also has a long-term disability policy that he bought years ago. The  benefit is $2,000 per month in the event of his total disability, defined as the worker’s “regular”  occupation and defaulting to “any occupation” after two years. The elimination period is 60 days and  the benefit period is to age 65. There are partial but no residual benefits.  

Jill has no group benefits; however, she has private coverage for life and LTD insurance and individual  health insurance (no dental or hospital) with a 75% coinsurance (except vision), a $50/$100 deductible,  a lifetime maximum of $10,000 for drugs for herself only, and $500/year maximums per practitioner for  paramedical benefits, and $250 every 24 months for vision care which is reimbursed at 100%. Her policy  has a COB clause. She has a $25,000 participating Whole Life policy that her parents took out on her life  when she was a child. The dividend option on the policy is “cash”. She also has a $250,000 Term 10  policy that she purchased a few years ago. Jack is the beneficiary of both policies. Her LTD coverage will  provide a monthly benefit of $3,800 on total disability, defined as “regular occupation”. The policy has a  rider that extends the regular occ definition of disability to age 65. The elimination period is 60 days.  Like Jack’s plans, there is partial coverage but not residual. Both Jack and Jill pay the premiums for all  their LTD coverage. 

Jack and Jill estimate the value of their home at $1,675,000. They have a “small” mortgage of $215,000  with BMO. This is their only debt. The mortgage is insured with BMO and the outstanding balance will be repaid should either Jack or Jill die. They recently updated their home and car insurance.

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