Financial Planning Fundamentals Assignment
The case study - Steve and Crystal Riley
Questions -
Question 1a -
The first four steps of the safe harbour are repeated below. They all form part of this stage in the financial planning process and you need to address all four steps in this first question.
- Step 1: Identify the objectives, financial situation and needs of the client that were made known through the client's instructions.
- Step 2: Identify the subject of the advice the client is looking for (whether explicitly or implicitly).
- Step 3: Identify the objectives, financial situation and needs of the client that would reasonably be considered relevant to the advice sought on that subject (the client's relevant circumstances).
- Step 4: If it is reasonably clear that information relating to the client's circumstances is incomplete or inaccurate, make reasonable enquiries to get complete and accurate information.
Briefly describe the clients' financial situation, their objectives and needs as initially explained by them?
Question 1b -
(i) What is the subject of the advice the clients are seeking? What advice have they asked for?
(ii) What additional advice do you think they need from what you know about their circumstances?
Question 1c -
Assume you have asked more questions of the clients and have explained the areas where you think they need advice.
Read the fact find thoroughly and identify all the issues they are concerned about. Identify what you consider would be reasonable objectives for the clients. In your answer describe between six (6) and ten (10) objectives.
Question 1d -
List five (5) other clarifying questions you would ask them. This task requires you to identify what gaps there are in your understanding of the client's situation.
Question 2a
Determine how much Crystal will receive from Centre link in family benefits, listing in your answer the type of benefit and calculated amount. You will need this information for Question 2b.
Question 2b -
Analyse their current position when they are renting the cottage.
(i) Compile tax and cash flow statements and a statement of net worth. Note: Please review the Kaplan resource on how to complete cash flow tables.
(ii) Describe the conclusions you have formed on the outcome of this analysis.
Question 2c -
Calculate the costs of a 25 year mortgage if they borrow $224,000. You should determine an illustrative interest rate from searching amongst mortgage providers. Whilst a honeymoon interest rate may give short-term benefits you should also illustrate repayments if rates were higher than today. Use an online mortgage calculator or develop your own using Excel. Set out your assumptions and workings.
Question 2d -
(i) Compile a cash flow statement if they go ahead and buy the house. Consider every item in the statement. How will their income change? Some costs in their budget (like rent) will not apply and be replaced by mortgage repayments. Some cost items are likely to increase and some may decrease. Some new cost items will apply. In answering this question use your judgement to create a cash flow statement that you can show to Steve and Crystal to illustrate the possible outcome if they buy the house.
Note: You may search for average council rates to use them in your answer. Only a reasonable assumption is required for this question, students are not assessed on their ability to assume a correct figure for council rates.
(ii) Write some notes explaining the differences you have identified such as changes in Centre link benefits.
Question 3a -
(i) Consider their debt management position. If they had the capacity, in what sequence should they pay off the debts? Explain your reasoning.
(ii) What strategies could they adopt to reduce their current debts?
Question 4a -
Describe what risks there are to the client's financial position.
Reread the fact find and think about what risks they face. You should consider all the risks to their lifestyle not just the traditional ones that can be insured.
Question 4b -
Although you do not need to provide specific, tailored risk management and estate planning advice, you can identify issues for the clients to consider and provide strategic advice that will assist them.
Briefly describe what risks Steve, Crystal and their family faces if either or both of them die and what general recommendations do you believe they should consider to mitigates these risks.
Question 5 -
In Question 1c you identified between six (6) and ten (10) objectives for Steve and Crystal.
For each objective, set out your recommendations to assist Steve and Crystal achieve that objective. Refer to 'Step 3 Development of recommendations' in Topic 10 for one way to present your answer. You can provide your recommendations as dot points.
Question 6 -
Identify two issues that Steve and Crystal may wish to change in your recommendations. Refer to the negotiations that occurred in the advice process in Topic 10. Explain how you would deal with their objections/concerns and how you would incorporate them into your recommendations.
Question 7 -
Steve and Crystal agree to join your ongoing service plan. Identify four specific issues related to their financial circumstances that you will raise with them at a review meeting in 12 months.
Attachment:- Assignment File.rar