FPC008 Investment Advice Approved Product List Assignment 3

Learning outcomes (LO) mapping

LO1 Evaluate the investment advice processes in order to meet the client’s investment objectives and constraints. –

LO2 Analyse the relevance of portfolio management theories, frameworks and structures in the provision of effective investment advice.

LO3 Apply knowledge of asset classes, investment markets and tax considerations in the portfolio construction process.

LO4 Conduct appropriate quantitative and qualitative research in recommending suitable investment solutions.

LO5 Construct and evaluate effective investment advice.

Independent research

For some or all questions in this assignment, you will be required to complete independent research beyond the provided materials. You will also be expected to analyse this research and use it to support your own reasoned conclusions.

This includes:

• considering multiple sources beyond topic notes or other provided resources
• ensuring sources are academically sound and credible
• analysing and understanding the argument or information the source presents
• using the material appropriately to directly support your conclusions.

Where significant independent research is required for a given question, it will be clearly indicated in the question and the Criteria-Based Marking Guide.

Assignment referencing and presentation

Your assignment should be presented in a clear and appropriate format, with all sources correctly referenced and cited.

You are required to:

• structure a clear response to each question, using headings if required
• number questions (including sub-questions) and pages
• use correct font style and size
• ensure tables or graphs are clearly labelled and readable
• clearly set out calculations or workings, where they are required
• adhere to the assignment word limit
• cite sources and provide a reference list at the end of your assignment. It is recommended to use Kaplan Professional’s preferred referencing style, Harvard (see Kaplan Australia: Harvard Referencing Guide, available from the ‘Build Your Skills’ hub in KapLearn), but the consistent application of any other referencing style will also be accepted.

Case study

Clenard (aged 44) and Claire Ruinart (aged 54) have come to see you for help with organising their financial affairs.

Clenard is working as a sales consultant for a beverage company earning $145,000 p.a. (plus SG) and Claire is a senior consultant for a food manufacturing company earning $190,000 p.a. (plus SG).

They have no dependent children.

They both have superannuation with the XYZ Superannuation Fund. The platform fee in this fund is 0.3% p.a. In addition, there are fund manager fees, which can vary depending on the funds chosen within their superannuation.

Clenard has $300,000 in his superannuation, invested as follows:

They have selected their own investments within their superannuation funds, and the investments selected were mainly chosen because of recommendations by their close friends. They figured if they were recommended by friends, they would be good funds to invest in.

The mortgage for their home is with the Commonwealth Bank of Australia (CBA) and they have $520,000 outstanding. Interest is currently 4.7% p.a. The repayments are $3,500 per month.

They also have a joint CBA Complete Access bank account with a balance of $50,000. In addition, they have a further $100,000 in a CBA mortgage offset account.

Their other combined living expenses are $120,000 p.a. This amount does not include mortgage repayments.

You explained to them about risk profiles and asset allocation, and in doing a risk profile assessment found they had distinctly different risk profiles.

Your assessment of Clenard is that of a ‘Growth’ investor with a recommended asset allocation of:

They have heard about multi-sector funds and wonder if they should invest in multi-sector funds in their superannuation.

Claire has concerns about the environment and wants to know if there are investments that support sustainable companies, both within Australia and globally. She has not done much research and is seeking your guidance in terms of what is out there.

She has also noticed some significant falls in her superannuation and is concerned about that. One of Claire’s particular concerns is the big fall in the Eley Griffiths Group Small Companies Fund and would like to sell that fund because it has performed badly.

Clenard on the other hand has been doing a significant amount of research and is concerned the investments in his superannuation may not be the best for him. He realises that all his investments are index products and would like you to explain the difference between index managers and active managers. He has also heard that sometimes index managers and active managers can be blended together. He has asked you to consider recommending some active managers in his portfolio.

He has heard about improved investment opportunities in emerging markets and would like exposure to these markets in his superannuation to help maximise his investments returns.

Clenard is also thinking about setting up a share portfolio outside of superannuation using Exchange Traded Funds (ETF’s) or Listed Investment Companies (LIC’s) and would like recommendations on starting an investment portfolio of $50,000. He would like to put some of his surplus savings towards this investment portfolio to increase his exposure to shares.

Claire and Clenard are also wondering if they should be making additional contributions to superannuation. Claire would like to retire once she reaches age 60, and Clenard would like to continue working until he reaches age 70.

They would like the following advice:

• Review the investments in their superannuation.
• Consider the amount of additional superannuation contributions they should make and where the additional contributions should be invested. They understand there are tax benefits for making additional superannuation contributions and they would like to take advantage of these benefits to help build savings for retirement.
• Set up a $50,000 share portfolio using only ETF’s and/or LIC’s for Clenard. He would like to have an investment portfolio outside of the superannuation system, which is not subject to preservation rules. However, this investment will be long term and he wants growth investments to help maximise returns (capital and income) on these investments. They also wants you to advise if they should take $50,000 from their Commonwealth Bank account or mortgage offset account for this initial investment.
• Recommend what regular savings can be deposited to expand Clenard’s share portfolio and where the additional regular savings are invested. He would like to maximise the growth of his share portfolio and he believes that adding regular investments will help to grow the portfolio. He feels they should have sufficient cash flow surplus they could save and add to the share portfolio.
• Provide an amount of $25,000 per year for holidays. They want to know how it should be funded. You are to provide specific recommendations in relation to this.

Assignment background

This assignment is based on the above case study. You are to analyse the quantitative and qualitative information provided about Clenard and Claire Ruinart’s situation and prepare an investment report and recommendations.

Read the following instructions to students carefully before commencing the assignment.

Note: You must use a consistent referencing style in this report. For referencing instructions, refer to your Assignment details section.

Client report structure

The layout of the report and recommendations you are to provide to the clients is to be in the following format:

1. Executive summary
   This section provides a summary of the clients’ situation, investment considerations and recommendations provided.
2. Introduction
   This section should provide clarity on what the investment strategy report is about. The introduction should cover:
   • scope and limits of the strategies presented
   • the clients’ investment objectives, preferences and timelines
   • commentary on the clients’ risk profiles and allocations
   • investment surplus/cash flow surplus.
3. Investment considerations and recommendations
   This section covers product research, product selections and investment strategy recommendations. The discussion should cover product asset allocation, investment styles, fees on each investment (excluding establishment fees), performance, volatility and other information you feel is relevant. The discussion should clearly connect and justify the strategies and recommendations provided to the clients’ situation (e.g. needs, goals, risk profiles and timelines). The commentary should include a discussion on the specific client considerations that are noted in the case study facts.
4. Conclusion
   This section should emphasise the benefits of the recommendations made and how they are relevant to the clients’ objectives. It should also consist of the closing statements of the arguments presented in the investment considerations and recommendations.

Important notes to students:

• Clenard’s and Claire’s portfolios of assets within the XYZ Super fund should be aligned to their identified risk profiles.
• You should construct a portfolio outside of super using ASX listed ETF’s and LIC’s for Clenard as he requested.
• You should address Clenard’s request to discuss the use of active funds.
• You should address Claire’s request to sell the Eley Griffiths Group Small Companies Fund.
• You should consider Clenard’s request to consider emerging markets and Claire’s request to consider sustainable Australian companies.
• Use real investment products and assume for the purposes of this assignment that the APL in Appendix 1 can be used for both the superannuation and non-superannuation investments.
• You are expected to demonstrate that you have conducted appropriate analysis and research of the existing funds in the XYZ Super portfolios, as well as the funds that are being recommended for inclusion in both the superannuation and non-superannuation parts of the portfolios.
• Word count and Appendices: For the purposes of the assignment factual information about funds contained in tables are not included in the word count. For example if a table was creating showing the performance, MER and other factual information about the funds in Clenard and Claire’s portfolios then this would not be included in the word count.
• Appendices are a valuable tool for including supporting information that may not be essential to the main body of your work but can provide additional context, evidence, or data to strengthen your arguments. The appendices should be supplementary rather than integral to the core content of your assignment. They can include materials such as raw data, lengthy tables, complex calculations, lengthy quotations, detailed methodology descriptions, survey questionnaires, or any other supporting material that would disrupt the flow of your main text. By relegating such supporting information to the appendices, you ensure that your assignment maintains a smooth and coherent narrative.
• It is important to note that while appendices can enhance the overall understanding and depth of your assignment, the body of your work should be able to stand independently and convey your ideas effectively even without the appendices. The main purpose of your assignment is to present a clear and coherent argument within the main body, ensuring that your reader can grasp the essential points and follow your reasoning.

Criteria-Based Marking Guide for investment strategy report and recommendations

The Criteria-Based Marking Guide is designed to assist students to understand what is expected of them and to let them know how their performance will be judged. It provides advice about the criteria used in the marking of the question and what discriminates between an excellent, satisfactory and unsatisfactory answer.

Summary of Assessment Requirements

The FPC008 Investment Advice Approved Product List Assignment 3 requires students to prepare an investment strategy report and recommendations for clients, Clenard and Claire Ruinart. The report must:

• Align investments within their superannuation to their respective risk profiles.
• Review existing portfolios and recommend changes to achieve goals.
• Evaluate active vs index management and consider a blended approach.
• Address client-specific concerns (Claire’s sustainability focus and underperforming fund; Clenard’s emerging markets interest and ETF/LIC portfolio).
• Construct a $50,000 share portfolio outside super using ASX-listed ETFs/LICs.
• Advise on super contributions for retirement goals.
• Plan for annual holidays ($25,000 p.a.) and provide funding strategies.
• Ensure independent research is applied with credible sources, investment performance analysis, and fee structures.

Present findings in the required structure:

• Executive Summary
• Introduction
• Investment Considerations & Recommendations
• Conclusion

1. Understanding the Case Study
   Mentor guided the student to carefully extract key client details (ages, incomes, mortgage, super balances, surplus cash flow, retirement goals, holiday funding, investment concerns).
   Risk profile differences between Clenard (Growth) and Claire (Balanced/Sustainable preference) were highlighted.
2. Structuring the Report
   Explained the importance of adhering to the required format (Executive Summary → Conclusion).
   Emphasised clarity, concise language, and referencing using Harvard style.
3. Executive Summary
   Mentor advised drafting a snapshot of client situation, key recommendations (portfolio restructuring, super contributions, ETF/LIC allocation, sustainability considerations, and holiday funding).
4. Introduction
   Guidance was given on covering:
   • Scope of strategies (super review, non-super investments, contribution planning).
   • Clients’ objectives (retirement timelines, sustainability, emerging markets).
   • Risk profiles and asset allocations.
   • Cash flow surplus identification (available for super contributions and portfolio growth).
5. Investment Considerations & Recommendations
   Mentor guided in breaking it into subsections:
   • Superannuation Review → Aligning portfolios with risk profiles, selling underperforming small companies fund, introducing sustainable and emerging market funds.
   • Active vs Index Management → Explanation and suggestion of blended approach for diversification.
   • ETF/LIC Portfolio for Clenard → Recommended diversified mix (ASX200 ETF, Global Equity ETF, Emerging Markets ETF, LIC for dividend yield).
   • Super Contributions → Salary sacrifice to maximise tax benefits, contribution split between growth and sustainable options.
   • Holiday Funding → Advised setting aside funds annually from surplus cash flow to avoid eroding investments.
6. Conclusion
   Mentor explained this section should summarise the benefits: alignment to goals, risk-adjusted returns, tax efficiency, sustainability, and diversification.
7. Research and Referencing
   Student was guided to use credible financial sources (Morningstar, ASX, fund fact sheets, academic journals).
   Mentor reinforced the importance of performance comparison, fee analysis, and volatility measures in justifying fund recommendations.

Final Outcome

The student produced a structured investment strategy report addressing all client requirements.

Quantitative and qualitative analysis was applied to assess existing funds and recommend suitable replacements.

Independent research was used to justify investment options, sustainability products, and ETF/LIC portfolio design.

All learning outcomes (LO1–LO5) were met through evaluation, portfolio theory application, market/product analysis, research integration, and constructing effective advice.

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