Financial Planning Fundamentals - Accounting & Finance Assignment Help

Assignment Task

Initial Client Interview
Stage Adviser Client
Rapport Hi Dougal, welcome to our financial planning firm. Did you have any trouble finding us?
No trouble at all thanks.
Can I offer you a tea or coffee?
A coffee white and one would be great thanks.
[Advisor organises this]
Nutshell Can I ask, in a nutshell – how can I help? Sure, well I’m conscious I’m approaching retirement age and I want to make sure my finances are in order, so I have enough money to do the things I want to do when I’m retired.
My wife Florence passed away 2 years ago. She used to do our finances, so I guess I’m feeling a bit lost as to what I need to do in this regard.
I’m sorry to about your wife passing away. Has the estate for your wife been finalised?
Yes, we completed all that before she passed. She had MS for many years prior and was in a nursing home the last year prior to passing. It’s been difficult at first but as a family we are coming to terms with the loss. The kids, family and friends have been wonderful support.
That’s good to hear. I’m glad you were able to rely on the family for support and you are in a positive place, it’s so important.
Definitely. With Florence passing, it made me realise that I need to get my financial affairs in order so I could plan my future. It is important to me that the kids would be financially ok if anything ever happened to me as well.
Bridge between rapport and compliance Ok, well we can certainly start to look at that in more detail, and work through any advantages and disadvantages. From what you’ve said so far, you’d like to achieve a comfortable retirement using super while affording some goals prior to retirement keeping my non-retirement funding goals outside super.
Yes, I’d like to have some flexibility with accessing my funds prior to retirement. Also, I’d like to have individual buckets for my savings plans so want to keep each goal and funds used separate. Can you do that?
Yes we can. It’s prudent to do it that way as your timeframes are likely to be different and we are going to need to develop and detail individual strategies. Before, we go any further, have you ever seen a financial planner before?
No, I never really had much of an interest in finance, Florence was the one who organised this. A colleague recommended I should see someone, particularly as I’ve recently finished paying off the mortgage.
Congratulations on paying off your mortgage, that’s quite an achievement! In terms of what we’ll do today, I’ll firstly explain how we work, ask a few more questions, and then get an understanding of your current situation. How does that sound? Sounds great.
Advisor goes through FSG [[Advisor goes through the Financial Services Guide (FSG), explaining:
key points, including the company, authorisation; services; fees and the complaints process; privacy act
how the financial advice process will work, including the various stages, ongoing reviews etc.
who the financial planner is; education; services they can provide; how they are remunerated.
[Client signs acknowledgement that they have received FSG]
Bridge between FSG and Fact Find Before I discuss your situation, I need to understand more about your goals and objectives and then we’ll consider your current financial situation.
Every financial plan is unique to each client. Having you achieve your goals is as important to us as it is to you.
To do this, if you can answer the questions as openly and accurately as possible – we can better understand your needs and concerns. Any details you don’t know – we’ll itemise them for follow up.
If you have any questions – don’t hesitate to ask – let me give you my card – for future reference. How does that sound?
Sounds great – based on what I’ve heard I’m keen to proceed.
Gather some personal details
Before we look more closely at your goals and objectives – let me find out more about you personally.
[USING FACT FIND: collect details re client’s background, goals and objectives and current financial situation]
Full legal name?
What is your date of birth?
Are you still single since you were widowed?
Do you have any children/dependents?
Are you an Australian resident?
What is your current address?
What is your best contact number?
Email address?
Dougal Longtail
12 June 65 [aged 56]
Yes, I am single (widowed) with 2 adult children, twins Sam and Dylan (aged 25). Sam is a builder and Dylan is a painter.
Yes
Address: 1 Wallaby way, Treetops QLD 4038
Phone: 04 4011 2256
Email: Dougal2256@gmail.com
Occupation What do you do for work? And can you tell me what you earn per year?
I’m a mechanic with Wheels to Go on the Gold Coast. I earn about $90,000 per year [before tax] plus 10% superannuation.
Thanks for that. That’s sounds like a wheely good job.
I have been a mechanic all my working life. A bit tired of it now. People have been driving me up the wall. It was all a running a bit rough for a while there but I seem to have my spark back now. Firing on cylinders you might say.
Well it’s great that you are up and running again. Thanks.
What’s on your mind Now, you mentioned that you have started to consider your retirement and ‘getting your affairs in order in case anything happened to you’. Can you tell me more about these? Sure. I need my superannuation reviewed to make sure I will have enough money for when I retire. I haven’t previously taken any interest in my superannuation, so I’m not sure how it is invested or whether I should be making any extra contributions or what…
As to getting my affairs in order, I know I need to update my will and I also want to review my insurances, as I don’t want to be a burden on the kids if I was seriously ill or injured. Likewise, if I passed away, I want to make sure they would be financially ok.
How would you like to get there? Ok thanks for that. We can definitely review your superannuation as well as your insurance and estate planning needs. As part of this, we will consider whether it may be a good idea for you to make additional contributions to your superannuation fund or not.
In terms of your insurance needs, we’ll discuss this further when we do what is known as an ‘insurance needs analysis’ shortly.
Now, in terms of your retirement, do you have any ideas about when and how you would like to retire?
At this stage, my aim is to work fulltime until I am 64 and then work 3 days a week until age 68 assuming I have enough to retire.
Sounds like a good plan. What about your retirement lifestyle? Do you know how much money you would like in retirement?
I’m not sure about the exact amount of money I would need, but I want to have a comfortable lifestyle and I don’t have to worry about counting every penny.
Sounds great, do you have any other retirement planning concerns?
No, I think that pretty much covers it. Ideally, I’d like to travel a bit more when I go to 3 days a week work. I like to fish so aim to do a few more off-road long weekends away.
[Assume that after discussing this with Dougal and analysing his current spending and lifestyle requirements, you agree with him that he will need a minimum retirement income of $41,000 per year. Accordingly, using MoneySmart’s retirement planner please work on Dougal achieving a minimum income of $41,000 per year. Please refer to the Part B instructions for further information].
Now, is there anything else you were thinking about in terms of other goals, or anything else you were saving for, such as, a holiday, buying a new car, house renovations etc?
A few things actually.
I aim to book an outback off road adventure tour for this time next year. Not cheap but it will be all expenses paid.
I will also want to buy a replacement to my old Toyota Cruiser ute. That’s a bit away for when I go part time and start my long weekend away fishing trips. I will need something more reliable and able to go off-road.
I should have mentioned too, that I have $80,000 in a bank account that I got from Florence’s superannuation when she passed away. She was sick for years so never had much in super. Florence wanted to leave a legacy for the kids at their 30th birthday so I promised I would use that money to give the twins a start. Florence suggested I do more with the funds than leave them in the bank. Would you give me an idea of what would be a good idea for these funds until their 30th in 4.5 years?
Yes of course and that’s very nice of you wanting to give the children a start in life.
You mentioned you want to think about an adventure tour this time next year.
How long were you planning on taking for the holiday and how much money did you have in mind? Well, I have plenty of leave owing so will take the 4 week package for $17,700 and that covers everything including food and transfers. I’m really looking forward to taking a dirt bike for a spin and building my off-road driving skills.
I should point out that I will need to pay a $2,000 deposit shortly after booking with the balance due a few months before the start of the adventure but not really sure exactly when they are required. Covid is having an impact on when the operator require the final balance due.
Ok, how about the replacement 4wd.
How much do you think you would like to spend when you turn 64 and go part time? Also it’s a while away how do you feel about using superannuation for that?
I definitely do not want to use super for my plans other than retirement nest egg. I want flexibility and like to avoid complexity to things when it comes to my finances. There have been too many changes to super in my time.
As to the cost. Well knowing cars and prices as I do I am looking to by a second hand 4WD possibly a Ford Ranger with a budget of $50,000 in 8 years. I’ll be able to get a good deal then that should handle the off-roading and towing I have in mind.
Ok sounds good and it’ll be a great way to get away from it all.
It definitely will be!
When I look at options and I will take your super concerns into account.
Great. As long as the money for each goal is kept separate so I can see how plans are tracking, that’s probably a big thing.

Will you be trading in your current car? No, I was thinking of giving to one of the twins who likes to tinker with cars. It won’t be worth much then.
Ok sure, was there anything else you are planning or thinking about?
No, I think that’s everything.
Great, thanks for that. Let’s determine the priorities for each of your goals now.
Using a scale of low / medium / high, what priority would you say ‘reviewing your superannuation and making sure you have enough money for when you retire’ would be?
It’s definitely a high priority. It’s something I’ve been putting off for a while now and I just want to get it sorted so I don’t have to worry about it anymore.
What’s important to you? Ok great, reviewing your insurance and estate planning needs is something that you said you wanted to get sorted now, though what priority would you say this is?
Definitely a high priority. Like my retirement planning I just want to make sure it’s sorted.
Sounds good. Now using Florence’s money to assist the boys. What priority would you give this?
It’s med-high priority. I’ve currently got the funds in a separate account, so I don’t really think of this as ‘my money’ as such. I know Florence would love to see the kids settled and they will remember the money helped them. A part of her they will remember for the rest of their lives.
Okay, thanks for that. Now purchasing a the 4WD car in 8 years what priority would you say this is?
Probably a medium priority. It’s a fair way off and may happen a little earlier but for now 8 years is a good timeframe and when I go part time.
Great, thanks for that. Now that I have a good understanding of your needs and objectives the next task is to look more closely at your risk preferences. To do this we will conduct a risk profile questionnaire. It will take a little time but it’s very important – it’s all about making sure you can sleep at night. With any investment there is risk. Understanding how much risk you are comfortable with and prepared to take is an important part of any financial plan.
Here is a copy of the risk profile questionnaire. Before we go through it – tell me what is your understanding of risk in terms of investment?

[Dougal gives his understanding of risk.]
Risk Profile Questionnaire Let's go through it together. The questions are designed to determine how to match your risk preferences with recommended investment strategies. When we've finished the questions, we’ll discuss your scores and whether or not you are comfortable with the outcome.
[Dougal answers the questionnaire].
[Advisor gives a detailed explanation of how risk and return works, how each investor could be categorised into one of at five different risk profiles etc. e.g;]
Your attitude to investment risk is a crucial factor in determining an appropriate investment strategy to meet your goals. Investing is considered risky because there is uncertainty about the investment and how it will perform over the short and long-term. Different types of investments experience different levels of volatility. Negative returns can happen at any time, so during periods of poor performance, remaining invested for the recommended minimum investment term will provide an opportunity for your portfolio to recover.
Dougal, you are a ‘balanced’ investor.
Your objective is to achieve a combination of income and growth but with low risk. Therefore, you would rather maintain a greater weighting of defensive assets such as fixed interest and cash (around 30%) within your portfolio. But you will also consider some of the less aggressive growth investments such as shares and property (around 70%) in order to provide capital growth.
The minimum suggested investment timeframe for a balanced investor is 4-6 years. The likelihood of negative returns for a balanced investor is less than 4 times in 20 years..Do you agree with this description?
Yes, that sounds about right, I’m a lot more comfortable with risk than Florence was.
[Key answers as part of Dougal’ risk profile questionnaire which lead to his result include:
Limited experience with investment markets, comfortable with some exposure to investment alternatives
Will accept some volatility of returns in order to achieve capital growth
Wants investments to keep pace with inflation
Interested in pursuing tax savings, though not at the expense long term capital growth
Comfortable with up to 15% positive and negative capital growth returns
Discussing Risk
I note you do not want to take on more risk than that of a ‘balanced’ investor even if long term in super. On the flip side we generally find when in retirement there is a tendency for people to become more conservative and reduce risk exposure when in retirement. Usually when people aren’t working anymore, they become a little more conservative given their super is generally their only source of income. This is important for our projections so as discussed in our risk profile discussions I will use a ‘conservative’ approach to investments when retired from age 68.
That sounds good to me. Because Florence, did all our finances, I don’t really have too much investment experience, though I’m willing to learn. So, if you think it’s appropriate, I’m happier to be more conservative with investments when I retire. I know Florence would be happy to hear that.
Are there any changes you would like to make? Of course, I understand. Do you have any other investment concerns or questions you’d like to ask at this point? Well, there is one. The colleague that recommended I see a financial planner said I should talk to you about borrowing money to invest and using our home as security seeing as I’ve finished paying off the mortgage, but I just don’t know if I’m comfortable with this…
That’s a great question, I’m glad you mentioned it. As a very general comment, in certain circumstances we may recommend a client borrow money to invest, but only if it was appropriate for them and only if they are comfortable doing so. Though ideally, we wouldn’t want to put someone’s home at risk, so we don’t usually recommend borrowing against the family home.
Overall, if you don’t need to borrow any funds and aren’t comfortable doing so, we simply wouldn’t recommend this.
Ok, thanks for that and that makes sense. I definitely don’t want to put our home at risk, so that makes me feel a lot better.
Great. Do you have any further questions?
No, I think I’m good.
Great. Now let's talk more about your employment and income.
What are your employment arrangements?
I am employed on as a mechanic on a permanent, full-time basis and pretty much work a standard 40-hour week.
As I mentioned earlier, my salary is $90,000 per year [before tax], and my employer pays the 10% superannuation guarantee on top of this as well.
About your income and expenses Is your salary your only source of income?
Yes, that’s correct.
[Excluded from this assignment]
[For the purposes of this assignment, you can assume that Dougal is saving $1,445 per month now that he’s finished paying off the mortgage. However, please refer to the Part A instructions for further details].
Budgeting / Cash flow
Great. What is your available cash each month and what savings do you have?
[In terms of his $10,000 emergency fund please exclude this from any future value calculations. Refer to the Part A and B instructions (appendix) for more details.]
I’ve got $22,000 in a high interest savings account. I’ve been trying to build up the amount of cash I have available in case of an emergency, so I’d prefer to keep at least $10,000 of this in an emergency account just in case. The rest I’m happy to use to achieve my goals if I need too.
I’ve also got the $80,000 from Florence’s superannuation money in a separate savings account as well.
Until I paid the house off, I had this money in an offset account which helped me pay off my home quicker.
Available Cash Of course, it’s important to have access to some cash in case you were to need it urgently.
In terms of your cash flow, you said earlier that you now have a monthly surplus of $1,445 is this all available for investment / achieving your goals?
Yes, that’s correct. The $1,445 surplus is after all my expenses, credit card repayments etc. I really don’t need much to live on.
Perfect, let’s look at your assets now.
How much do you think this is currently worth?
Based on what my neighbours just sold their property for, around $810,000.
Assets Do you own any other assets?
A caravan worth about $45,000, 1995 Land Cruiser Ute $10,000, fishing boat $15,000 and home contents worth around $110,000.

Great. Let’s look at your superannuation now. Do you have just the one fund?
[Dougal produces his latest superannuation statements which show both funds are accumulation funds and are invested in the ‘defensive’ investment option].
I’ve got two super funds and I’ve got the statements here with me as well. I’ve got a balance of $190,000 with One Super which is where my employer contributions go and another $40,000 with Retail Super that I’ve had for a very long time but I haven’t done anything with. So, it would be good to look at whether I should be combining the two as well.
Superannuation Assets Of course, it’s something we’ll consider as part of our analysis.
Thanks for providing the superannuation statements too, it makes our job a bit easier.
[Upon further investigation, you find out that balance in Dougal’ One Super account is made up as follows:
tax-free component of $30,000
taxable component of $160,000
The balance in his Retail Super account has no tax-free component (i.e. is 100% taxable)].
Dougal, do you know if your employer allows you to salary sacrifice?
Yes, they do. My colleague also mentioned this and it sounded pretty interesting, though I don’t remember much about it to be honest…
[Advisor explains salary sacrificing and how it could apply to Dougal]
Ok that makes sense, thanks.
Let's look at your personal liabilities now. This section captures information about your personal liabilities so that we can consider the impact of these when providing advice to you.
Do you have any personal liabilities, such as personal or car loans, or credit card debts or outstanding afterpay or zippay commitments?
I do have a credit card, I have around $1,300 owing on it at the moment, though I pay everything off in full each month so I don’t pay any interest. That’s my only personal liability.
Personal liabilities including credit cards. That’s great, do you know your credit card limit and what the interest rate on this is?
I believe my limit is $10,000 and the interest rate is around 17.2%.
Ok great, let’s move on to insurance. What insurance cover do you currently have in place? I’ve got home and contents insurance and comprehensive car insurance for the campervan, both with RACQ. I also have top hospital cover with BUPA Health Fund.
I think I may have some insurance within my super as well, though I’m not 100% what these are or what they cover. I did get a letter from Retail Super about this recently but I didn’t do anything about it...
Insurance That’s fine, we can contact your superannuation funds to confirm this. If you’re happy to let us do this, we just need to get you to sign a ‘authority to release information’ form.
If you can do this that would be great, I’m happy to sign this.
[Dougal signs an authority to release information form which allows you to contact his superannuation funds. After doing so, you confirm that he has $88,000 of life insurance cover within his One Super fund. This cover reduces with age and expires fully when Dougal turns 70.
You confirm that Dougal did have both life and any occupation TPD insurances inside Retail Super as well, however, that these insurances were automatically cancelled on 1 July 2019 under the ‘protecting your superannuation’ reforms.
You also confirm that Dougal has a non-lapsing binding death benefit nomination (BDBN) for his One Super fund, which allocates 100% of his superannuation death benefit to his wife Florence. He has no BDBN for his Retail Super fund].
Do you have any health concerns that you are worried about or any family history that I should know about?
Not particularly. My mother did pass away quite early (aged 55) from a heart attack, though otherwise, our family is generally pretty healthy and I make sure I’m exercising regularly.
I’m sorry to hear that, though it’s good the rest of your family are pretty healthy. Keeping up the exercise will definitely help too. Yeah, it’s hard at my age when you see so many friends and family members being diagnosed with all sorts of things. It’s made me realise how important it is to make sure my affairs are in order, which is one reasons why I wanted to see you today.
I understand and it’s great that you’re getting advice now.
In this regard, to help me understand how much insurance you need we need to talk about your requirements and do what is called an Insurance Needs Analysis (INA). So let's outline your key insurance requirements.
[Advisor goes through INA with Dougal].
Ok sounds good. I really want to make sure I’m not a burden to my kids if I was seriously ill or injured and of course, make sure they don’t have to pay for anything if I was to pass away.
[Assume that as part of these discussions, Dougal advises that he has approximately 120 days of sick leave and 35 days of annual leave owing to him.
Please note an INA and/or the amount of insurance cover Dougal should take out is not required as part of this assignment and will be discussed further in Personal Risk Management. Please refer to the Part B instructions for further information].
Insurance Needs Analysis Thanks for that, let’s look at your Estate Planning now - do you have a will? And if so, when was it last updated?
I do have a will, though it hasn’t been updated since Florence passed away, so I know I need to get that sorted too.
I’ve brought a copy with me as I wasn’t sure whether you want to see it or not…

Estate Planning Thanks, if I could take a copy that would be great. Is that ok?
Sure, of course.
[Upon review, you note that Dougal’ will was last updated on 25 August 2005 and that Florence is listed as the sole executor.].
Great, thanks for that.
Do you have a power of attorney or an advance health directive?
I do have an enduring power of attorney, but that’s still in Florence’s name too… I don’t have an advance health directive though. The kids were a bit too young then, and she had always done the financial stuff.
Ok, thanks for all of the information you have provided today. Now I have asked all the standard questions – and feel I have a strong understanding of your situation.
But I have just one last question …
Is there a question – related to your financial situation – that I haven’t asked – or one that you hoped I wouldn’t ask? No – I think we’ve covered everything. It’s all sounding good so far.
Wrap Up Great – so my job is to go away and analyse the information you have given me and prepare my recommendations based on this. In doing so, we may have further questions or may require further information from you. In either case, we will be in touch.
Once we have all of the required information, we will prepare your Statement of Advice. This will go through 2 compliance checks and will be ready in approximately 3 weeks’ time.
Can we diarise the next appointment? Just one more question. You can pay for my fees via Bpay. Is that ok?
[Set the date, client has agreed to pay via Bpay and signs the initial advice engagement agreement.]
Thanks for that, until our next meeting here’s a little reading material – a couple of good news stories about people just like you – working effectively to create and protect their wealth.

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