1202AFE Financial Planning 1

Trimester 1, 2018

Full assignment instructions

Your task [Overall - Parts A and B]

Based on the interview transcript ‘Pete - Initial Client Interview’ (below) you are required to
prepare a detailed file note [‘strategy paper’] using the templates provided on L@G.

As detailed below and on L@G, your file note will be broken down into two parts, Part A and
Part B, to enable you to receive feedback on your initial submission. Please refer to the
submission section below and the specific Part A and Part B instructions for more
information on what is required for each part.

Overall, your final file note submission (Part B) should include an overview of the interview
with Pete, including his current situation, his goals and objectives and any issues raised; and
then based on this information, your strategic recommendations that address how he
should achieve these goals. These recommendations should include wealth creation (both
inside and outside of superannuation), wealth protection (insurance) and lifestyle
recommendations.

In practice, your file note would most likely go to a paraplanner who would use the
recommendations (and reasoning) given in your file note to prepare a Statement of Advice
(SOA) for Pete. However, you are not required to prepare a SOA.

Please note that 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 file note. Instead, the
focus of your file note should be your strategy recommendations (and reasons why etc) as
indicated in the Part A and Part B instructions.

Overall:

 Your submission must be prepared using the relevant 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;

 As illustrated in the templates and the example, please bullet point your responses.

The purpose of this assessment item

This assessment item is a practical, real world assessment task. It has been designed to
assist students in putting the course content into practice to enable greater understanding,
and also to increase student’s work-readiness for those intending on pursuing a career in
financial planning.

This assessment task is also designed to assist students in preparing for latter financial
planning courses, such as Financial Planning, Construction and Review which requires
students to complete a full SOA, the next step in the financial planning process.

Marking

It is important that you refer to the Part A and Part B Marking Rubrics (also in the
Assessment folder on L@G) which detail the expected standards of each section of the file
note.

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 1202AFE Financial Planning 1
Trimester 1, 2018

The assessment is worth a total 35% of your final grade, that is, 5% for Part A and 30% for
Part B. You will be advised of your mark via ‘My Marks’ on L@G.
Resources provided

Please refer to L@G (Assessment folder) for the required templates for Part A and Part B
and the detailed Part A and Part B instructions which provide more information on how to
complete these. You will also find several short videos to help you get started and to help
clarify certain areas of the assignment; these include:

 Assignment background: which contains further information as to the purpose of

the assignment and the rationale behind the assessment design.

 Getting started: how to complete Part A: which goes through how we would
complete Part A and some tips and tricks on completing your assignment.  

 Investment choices: which goes through what you need to include in the wealth
creation / lifestyle recommendations sections of your file note, including the level of
detail required.

 Future value calculations: which goes through how to complete the future value
calculations, why these are required as part of your file note, and what you need to
include in the Appendix to your file note.    

 Getting started: how to complete Part B: which goes through how we would
complete Part B and some common concerns to watch out for.

Please also refer to the ‘frequently asked questions’ document in the relevant assessment
folder on L@G for both Part A and Part B. This document will be updated throughout the
course for any additional questions asked that are likely to be relevant to the entire cohort.

Individual or joint submission

Students may complete the assignment (both Part A and Part B) individually or with another
student. The choice is up to each student. Groups of three or more are not permitted.

If students choose to complete the assignment together, then each student will receive the
same mark. The teaching team will not discuss any disputes or complaints from students
asserting that one student did more work than the other, given working with another student
is optional.

Accordingly, students should make sure that the person they choose to work with carries
their responsibilities and completes their allocated tasks on time and to the desired standard.

Please note, students choosing to complete the assignment with another student must

complete the group sign up process on L@G in order to see the joint assignment
submission points. Please refer to the group sign up sheet on L@G for more information.

If you are completing the submission with another student, only one member of the group is
required to submit the assignment, though both students will be able to see the submission,
the marks and any feedback provided.

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 1202AFE Financial Planning 1
Trimester 1, 2018

Submission

Your Assignment will be submitted in two parts as follows:

 Part A:  You are required to submit your intended wealth creation recommendations,
together with lifestyle recommendations for feedback. This will be worth 5% of your
final grade and is due on Wednesday 2 May by 1pm (AEST). More details on Part
A, including specific instructions, template and marking guide are available on L@G.

 Part B: You are required to submit your full file note as detailed above. This will be
worth 30% of your final grade and is due on Friday 25 May by 1pm (AEST). The full
file note includes any wealth creation / lifestyle recommendations for Pete, which
may or may not be the same as your Part A recommendations. Based on your
feedback for Part A, you can chose to update / change your recommendations as
desired.

All submissions must be submitted via the Blackboard Assignment submission point on
L@G (within the assessment folder) and an electronic coversheet must also be completed.
Further instructions on this are provided on L@G.

Finally, it is your responsibility to ensure you upload the correct file and the complete
assignment is submitted by the due date. Please note you may submit your assessment item
as many times as you like prior to the due date. Your final submission will be marked and
count towards your final grade. 

Academic integrity

A reminder that the assignment is an individual or joint assessment item. Accordingly,

please ensure the file note is your own work, or the work of your group. Plagiarism will not
be tolerated.

Plagiarism occurs when the work of another is represented, intentionally or unintentionally,

as one's own original work, without appropriate acknowledgement of the author or the
source. This includes copying ideas or concepts from other students. There are severe
penalties in place for those that breach the academic integrity provisions, both for the
person sharing the information and for the person copying. Accordingly, if you wish to see if
you are on the right track, we recommend you see the teaching team in our consultation
hours, rather than discussing your specific assignment recommendations with other
students.

Additional information on plagiarism can be found on L@G.

Additional information

Please ensure that you check the L@G Announcements regularly for any clarifications or
amendments to this assignment.

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 Pete - Initial Client Interview

Stage Adviser Client

Rapport Hi Pete, welcome to our financial planning No trouble at all thanks.

firm. Did you have any trouble finding us?

Can I offer you a tea or coffee? A coffee would be great thanks.

[Advisor organises this]

Nutshell Can I ask, in a nutshell – how can I help? Basically there’s a few reasons why I
wanted to see a financial planner, firstly, I
have a young daughter, so I want to make
sure she is financially protected if anything
was to happen to me. A workmate was
recently talking about insurance cover he’d
taken out and it made me realise that I need
to get this sorted too.

I also want to buy a house for us, so I need

some advice on saving for a deposit too.

Finally, I want to get my superannuation

sorted. I’ve never had the time to look into
this and I don’t know whether I’m in a good
fund or not. So some advice on this would
be great.

Bridge between That all sounds great, thanks for coming Her name’s Isabelle and she’s recently
rapport and to see us today. What’s your daughter’s turned 8. She’s really into her sport and
compliance name and how old is she? magic is her latest craze.

Sounds like fun! From what you’ve said so Great.

far I’m confident we can help you
achieve… [state the client’s goal(s)].

Before, we go any further, have you ever No, one of my workmates recommended I
seen a financial planner before? come and see a financial planner, as I know
I need to get my insurances sorted as well
as getting investment advice.

Ok great, we’ll look at this in more detail Sounds great.

shortly. What we’ll do today, is 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?

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 Stage Adviser Client

Advisor goes [Advisor goes through the Financial [Client signs acknowledgement that they
through FSG Services Guide (FSG), explaining: have received FSG]
 key points, including the company,
authorisation; services; fees and
the complaints process
 how the financial advice process
will work, including the various
stages, ongoing reviews etc

Bridge between Before I make any recommendations, I Sounds great – based on what I’ve heard
FSG and Fact need to understand more about your I’m keen to proceed.
Find 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 sit with
you?

Gather some Before we look more closely at your goals

personal and objectives – let me find out more
details about you personally.

[USING FACT FIND: collect details re

client’s background, goals and objectives
and current financial situation]

What is your date of birth? DOB: 2 / 2 / 1990 [aged 28]

What is your current marital status?
Do you have any dependents other than
Isabelle?
For completeness, Isabelle’s mother…?
Single
No, just Isabelle
Kerry and I separated when Isabelle was
quite young, a little less than a year old and
for various reasons I ended up with full
custody of her. Isabelle and her mum are on
quite good terms now, and she is involved,
just not from a financial perspective.

[You can assume for the purposes of the assignment that Pete does not receive any
child support from Kerry and nor does he financially support her. That is, effectively treat
Pete as a single father from a financial point of view.]
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 Stage Adviser
Ok thanks for that, there are a few more
personal details we need to get:
Are you an Australian citizen?
What is your current address?
Do you own or rent this property?
What is your best contact number?
Email address?
Occupation What do you do for work? And can you
tell me what you earn per year?
What’s on your Thanks for that. You mentioned that
mind making sure Isabelle is financially
protected if anything was to happen to
you is concerning you, can you tell me
more about this?
That all sounds reasonable, we can
definitely look into this. We’ll discuss how
much insurance you may need shortly
when we do what’s called an insurance
needs analysis.
Now, you also mentioned that you would
like to buy a house and get your
superannuation sorted too, can you tell
me more these concerns?
How would you That’s definitely a common problem and
like to get something we can help with.
there?
Before we get into this, let’s look at these
concerns in a little more detail now.
In terms of buying your own home, have
you considered how much you will need
for a deposit and when you want to
purchase this?
Client
Yes, Australian citizen
35 Moolabar St, Morningside
Rent
Phone: 0412 345 678
Email: Pete.Molloy@gmail.com
I’m employed as an electrician, working for
a large electrical company earning around
$65,000 per year plus super.
Basically, I want to make sure that if I
passed away, or became seriously ill or
injured, she would be financially taken care
of and there wouldn’t be the added stress
about paying for her schooling or expenses.
I just want to sure she would be financially
set up if something did happen to me.
In terms of buying a house, I’d love to be
able to be able to do this, it would be nice to
have some more space, particularly as
Isabelle gets older. I’d also prefer to be
paying off my own mortgage rather than
somebody else’s.
I also want to make sure my super is sorted,
it’s an area I haven’t put too much thought
into. I have a couple of different
superannuation funds from different jobs
and have just put it all in the ‘too hard’
basket. So any help here would be
appreciated.
I want to make sure I have a 20% deposit
so I avoid the lenders mortgage insurance,
so I’m probably looking at being able to
afford what I want in around 5-6 years’ time.
In terms of a deposit, I would like to buy in
the same area we’re in now, as Isabelle has
a lot of friends here and the schools are
great. I’ve looked into what I would like and
it is quite an expensive area, plus given
house prices are increasing, I’d say I’ll
probably be looking at a house around
$550,000 in 5-6 years’ time, so I’d be
looking at a deposit of around $110,000
plus another say $5,000 for legal fees,
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 Stage Adviser
That sounds great! A white Christmas
would be pretty special. How much are
you expecting this to cost?
Ok great. Looking at your superannuation
now, you mentioned earlier sorting this
out and making sure that you’re in the
right fund is important to you. Though I
was wondering whether you’d given any
specific thought to your retirement at all?
That’s great. In terms of retirement
planning, it is an important consideration,
even for someone young, like yourself.
Though I understand you do have strong
goals outside of superannuation, so we’ll
look at this as part of reviewing your
superannuation funds.
What’s Let’s determine the priorities for each of
important to your goals now.
you?
Using a scale of low / medium / high, what
priority would you say getting appropriate
insurance cover in place was?
What about buying your own home?
Client
insurance, building and pest inspections etc.
So my overall goal is to have $115,000
saved up within 5-6 years.
What I didn’t mention before, was that I also
really want to take Isabelle to the UK for
Christmas next year [2019], as it’s her
great-grandfather’s 80th birthday party and
it would be a good chance to see some of
her relatives over there and to hopefully
enjoy a white Christmas.
Given it’s a long way to travel, I’d like for us
to stay for at least 3 weeks, and it would be
good to show her the sights while we’re
there, so at this stage I’m budgeting on
around $10,000.
It’s not something I’ve specifically thought
about, I tend to focus more on the day to
day stuff and making sure Isabelle’s ok.
At this stage, I’m more interested in making
sure I’m in the right fund and making the
most of my employer’s contributions than
anything else. Though I’m open to
discussing any extra contributions if you
think I need to be making these…
Sounds good.
Definitely high priority, it’s something I know
I need to get sorted.
It’s a medium-high priority, it’s something I
really want to do, though I know I need to
get everything else sorted first.
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 Stage Adviser
What about the holiday to the UK?
That makes sense. Just to confirm, would
you be happy delaying the purchase of
your own home if it meant that you and
Isabelle could go to the UK?
Sure. What about getting your
superannuation sorted? And planning for
your retirement?
Budgeting That all sounds reasonable. Now that I
have a good idea of what you want to do,
let's talk about your cash flow and
budgeting now.
Ok, that’s fine. Can you tell me how much
are you saving each month then?
Risk Profile Great, thanks for that. Now that I have a
Questionnaire 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?
Client
High priority. It’s higher than buying my own
home at this stage as my great-
grandparents are getting older and I really
want Isabelle to visit them before too much
longer.
Yes that’s correct, though I’d prefer not to
delay much longer than 6 years unless I
really had too.
Getting my superannuation funds sorted
and invested appropriately is definitely a
high priority and something I want sorted as
soon as possible. Though any retirement
planning would be a low priority given it’s so
far away. But I’m open to your thoughts and
advice on this.
I’ve actually done a lot of work on my
budgeting recently, so I’m ok with that side
of things, it’s more the investment advice
I’m concerned about.
I’m saving around $1,100 each month.
[Ryan produces bank statements with Best
Bank which show regular savings deposits
of approximately $1,100 per month over the
last 6 months].
[Pete gives his understanding of risk.]
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 Stage Adviser Client

Great, let's go through it together. The [Pete answers the questionnaire].

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.

Discussing [Advisor gives a detailed explanation of

Risk how risk and return works, how each
investor could be categorised into one of
at five different risk profiles etc. For
example;]

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.

Pete, you are a ‘growth’ investor. A

growth’s investor’s primary objective is to
achieve capital appreciation. The portfolio
will usually contain around 20% in
defensive assets such as cash and fixed
interest with the remaining 80% is
allocated to growth investments such as
shares and property to provide capital
growth. A growth investor is prepared to
accept high volatility in the short to
medium term to provide the opportunity to
achieve the capital growth desired in the
longer term.

The minimum suggested timeframe for a

growth investor is 5 to 6 years. The
likelihood of negative returns for a growth
investor is 1 year in every 4 years.
Yes that sounds about right. I’m fairly
Do you agree with this description? comfortable with risk.

Are there any In some cases it may be appropriate to That sounds good to me. I don't have any
changes you use a different risk profile approach to investment preferences, as long as I don’t
would like to your assets or strategies. For example, to have to manage the investments myself.
make? meet your retirement objectives, we may With Isabelle, I don’t really have the time to
9
 Stage Adviser
recommend that a specific risk profile be
applied to your superannuation
investment due to your timeframe, which
may be different to other savings you
have available.
About your Great. Now let's talk more about your
income and employment and income.
expenses
We collect details of your current
employment as this information can affect
your eligibility for certain insurances as
well as the cost of your insurance
premiums.
What are your employment
arrangements?
Thanks for that. Is your salary your only
source of income?
Available Cash Great. Now I see from the bank statement
you gave me earlier that you currently
have $32,000 in a high interest savings
account earning 2.5% interest. Do you
have any other savings / bank accounts?
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
$1,100, is this all available for
investment / achieving your goals?
Client
do this. Otherwise, I’m happy to go with
what you recommend.
[Assume that as part of the discussions on
risk / investment preferences, Pete confirms
that he is comfortable with shares as an
investment class, provided he doesn’t have
to manage these.]
I am employed on a permanent and full-time
basis, and I generally work 40 hours a
week, sometimes more.
As I mentioned earlier, I’m employed as an
electrician and my salary is $65,000 per
year [before tax], and my employer pays the
9.5% superannuation guarantee on top of
this as well.
Yes, that’s correct. I do get a little bit of
interest income but not a lot.
No this is my only savings account. I do
want to leave a minimum of $10,000 in this
account as an emergency fund, though I’m
happy to use the rest ($22,000), to achieve
my goals previously mentioned.
[Note that a high interest savings account is
not a term deposit, but rather a variable
savings account (e.g. NAB’s reward saver).
For completeness, if you decide to
recommend he continue to keep any of his
savings in a bank account please assume a
2.5% interest rate as per the Part A and
Part B instructions (refer Appendix).]
Yes, that’s correct. The $1,100 surplus is
after all my expenses, credit card
repayments etc.
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 Stage Adviser
Assets Great. Other than your bank account do
you have any other assets?
Superannuatio Thanks for that, let’s look at your
n Assets superannuation now. You mentioned
earlier you have more than one fund, can
you tell me more about these?
Thanks for providing those, it makes our
job a bit easier. For completeness, do you
know if your employer allows salary
sacrifice?
[Advisor explains salary sacrificing and
how it could apply to Pete]
Personal Great. Let's look at your personal liabilities
liabilities now. This section captures information
including credit about your personal liabilities so that we
cards. can consider the impact of these when
providing advice to you.
Do you have any personal labilities, such
as personal or car loans, or credit card
debts?
Ok great, just to confirm, you don’t
currently owe any money on your car do
you?
Insurance Sounds good! Let’s move on to insurance.
What insurance cover do you currently
have in place?
Client
A car that’s worth around $15,000 as well
as some home contents worth around
$20,000.
I’ve got the superannuation statements
here. My current employer’s default fund is
Max Super which has a balance of just over
$22,320 and I have another $18,525 in Top
Super.
[Pete produces his latest superannuation
statements which show both
superannuation funds are accumulation
funds and that Max Super is invested in the
default ‘balanced’ investment option,
whereas Top Super is invested in the
default ‘lifecycle’ option (e.g. QSuper).]
Yes they do, I was at a seminar recently
when they went through it, though I don’t
remember much about it to be honest…
Ok that makes sense, thanks. I’m not that
keen on putting extra money into super
because I can’t access it for so long, but if
you think it’s in my best interests I’ll
definitely consider it.
I do have a credit card, I have around
$1,500 owing on it at the moment, though I
pay everything off in full each month so I
don’t pay any interest.
No that’s correct. I actually paid for this in
cash several years ago now, my parents
always encouraged me to pay for my cars in
cash rather than use finance.
I’ve got comprehensive car insurance with
Budget Direct though that’s it. I’ve also been
considering getting private health insurance
that includes Isabelle too, though I’ve heard
quite a few ads about the price increasing
recently, so I’m not sure.
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 Stage Adviser
Is there a particular reason you’ve been
considering private health insurance?
Yes that’s always is a concern! We can
look into this for you as well.
Looking at your superannuation
statements now, I can’t see any
information here about any insurance
policies held within super, do you know if
you have any?
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.
Do you have any particular health
concerns that you are worried about or
any family history that I should know
about?
Insurance Ok great, sounds like you have it under
Needs Analysis control. Now, 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 Pete].
Client
Well you never really know what’s going to
happen or when you will need hospital
cover. Children’s health care is quite
expensive too… I can see Isabelle costing
me a lot of money in dentist bills!
Great.
I’m not sure, I have a vague recollection that
I ticked no to those boxes when I joined,
thinking I didn’t need them, though I’m not
100% sure.
If you can do this that would be great, I’m
happy to sign this.
[Assume Pete signs an authority to release
information form which allows you to
contact his superannuation funds. After
doing so, you confirm that he has no
insurance cover in either Max Super or Top
Super].
No, overall, both Isabelle and I are pretty
healthy.
However, there is a family history of
prostate cancer on my dad’s side of the
family. So I make sure I get tested regularly
for this.
Ok sounds good.
[As part of this process, Pete reiterates his
concern of making sure that Isabelle’s
financially protected should he pass away,
or become ill or injured and can’t work for a
period of time.
Also, assume that as part of these
discussions, Pete advises that he has
approximately 30 days of sick leave and 30
days of annual leave owing to him.
Please note an INA and/or the amount of
cover Pete needs is not required as part of
this assignment and will be discussed
further in 2202AFE].
12
 Stage Adviser Client

Estate Planning [Excluded from this assignment].

Wrap Up Ok, thanks for all of the information you No – I think we’ve covered everything. I’m
have provided today. Now I have asked happy to proceed with the advice.
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?

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 2 – 3 weeks’ time.

So can we diarise the next appointment? [Set the date, pay the deposit]
How would you like to pay the deposit?

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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