Investment Analysis for Louis and Larissa

This assignment provides an analysis of suitable investment products for Louis and Larissa, considering their financial goals and risk tolerance. It compares Vanguard and Russell Investments Diversified 50 Fund Class A Units, highlighting the costs, features, and investment objectives of each product. The analysis concludes with a recommendation favoring Vanguard based on its lower costs and alignment with the couple's needs. Additionally, the document explores the concept of gearing in investments and explains how positive gearing can benefit Louis and Larissa.

Running head: FINANCIAL PLANNING
Financial Planning
Name of the Student:
Name of the University:
Author’s Note:

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Covering Letter
Louis and Larissa Edberg
Address Line: 22 Curve Street Hill Rise Victoria 3888
Dear Louis and Larissa,
I am highly obliged that you have given me the opportunity to have a meeting with you and
forward with the recommendations that have been framed in accordance to the information
that have been forwarded to me. These data would be helpful in undertaking investments
effectively and the income and the returns that would be received will be helpful in
improving your lifestyle and even life after post retirement.
The Risk Profile answers and the Fact Finder provided during the meeting has been very
helpful in as an effective knowledge about the current goals, objectives and the current
scenario that is existent and the mindset towards security, returns, risks and volatility.
The results that would be gathered can be used for the purpose of framing the SoA. This
report would act as a record that can be taken as an advice by you and your family thereby
would be helpful in attaining the individual circumstances and goals that even includes the
fees, interests and any other costs that have an influence over the advice.
In case there are any transformations in the lifestyle with the advent of time then, additional
advices can be given with the help of which the sustainable lifestyle can be maintained. I
therefore look forward to help you in any other advices and incorporation of the strategies
and the plans and thereby able to provide continuous assistance and services. The services

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and the recommendations that have been given are in compliance with the requirements of
ASIC.
Regards
John Johnson
Signature
Financial Adviser

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Executive Summary
The executive summary is actually a small synopsis that would be provided to the
couple by the financial consultant. The summary is actually the scenario, the goals and
objectives and the strategies that would be suggested thereby able to meet the goals and
objectives. The optimum result for the couple can be projected from the strategy
implementation and technique that has been used. The couple requires understanding and
going through the executive summary and gain effective understanding about the advices that
has been provided and being able to ascertain whether the goals and objectives have been
attained. There is adequate information which would permit the couple to undertake decisions
by observing the risks that are associated to it. The associated fees are even disclosed. The
information that has been provided in jotted down in a clear language with an absence of any
terminology and is suitable to their extent of the financial knowledge.
Personal Situation
By assessing the present condition, Louis and Larissa Edberg are married for a long
tenure and are both 48 years old. They have their home in Victoria and have two dependent
children Michael and Meena. Louis and Larissa have been working full time and earn
significant amount of money Louis has a yearly income of $ 180,000 and on the other hand
his wife Larissa has an annual income of $ 30,000. The couple, each one of them have super
life contribution that have a current value of $300,000 for Louis and $50,000 for Larissa
each. The house they reside in has existing mortgage and they have the idea of repaying their
mortgage before they retire. The couple have a holiday home for themselves where they
reside on family vacations and this holiday home has an existing mortgage as well. The
couple have the idea of using their holiday home for investment purpose if they desire. The
couple are aged 48 years and therefore have nearing the age of retiring and therefore they are

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looking to undertake investments in the managed funds in order to secure long term capital
growth and income which they can make use of one they retire. This income would be
helpful in maintaining their current lifestyle even after retirement. These are the factors due
to which the couple are seeking advice that would assist them in taking up investments .that
are suitable for them and thereby gain additional income from the same for the purpose of
retirement.
Goals and Objectives
The couple Louis and Larissa like any other couple are looking for long term
generation of income with the help of which they would have a secured future and would not
have to think about wealth once they retire. Risk is a key factor and therefore they are in the
idea of looking into the investments that would provide them with significant amount of
income and the level of risk would be moderate if the income return is able to mitigate the
risk. The couple are in the idea of paying out the mortgage for their house and the holiday
home that they have within the next 5 years. They are even in the idea of constructing wealth
with an idea of getting $200,000 invested in the next 10 years’ time. This amount would be in
terms with the present value of dollar. The couple even have the aim of reducing their level of
taxes wherever possible. They even want to acquire a car for themselves within the next 5
year with the help of the returns that would be attained from the investments. They would
even want to continue their charitable donations till they can and wants to have an
expenditure of $5,000 per annum. Their children are still dependent and therefore want to
save a significant amount of cash that they can make use of for meeting the expenses of their
children. Hence, they want to save money in order to pay for the university fees for their
children who have been projected to $50,000 for each of their children in the time period of
next 10 years and value is estimated in the current term of dollar. Larissa even has the aim of
increasing her income by completing her nursing degree and thereby has estimated that her

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income would get increased to $60,000 per annum. The most significant goal of the couple
has been to make sure that their wishes that have been expressed are fulfilled even after the
pass away. The couple are not in the idea of investing into superannuation and any other
estate planning as the couple have existing superannuation and holiday home and therefore
focus should be given on the investments.
The goals and objectives can be classified in accordance to the short, medium and
long term aspects.
Short Term Objectives
 To reduce taxation where possible
 To make charitable donations of $5,000 per annum
Medium Term Objectives
 To pay off house and holiday home in 5 years.
 To acquire a new car every 5 years
Long Term Objectives
 To build wealth with a goal of $200,000 invested in 10 years’ time (today’s dollars
terms)
 To save to pay for children’s university degrees (estimated at $50,000 each) in 10
years’ time (today’s dollars terms)
 To ensure that their wishes are carried out when they pass away
Appropriate Recommendations to meet the goal

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There are several recommendations that can be given in accordance to the goals and
objectives that have been highlighted earlier. They are as follows:
Wealth Protection
The protection of debt can be initiated with the knowledge of reducing level of debt
by taking assistive actions and thereby protecting their wealth. The wealth protection can be
undertaken with the help of effective assessment of the portfolio of the investments with
respect to the market which has a tendency to change.
Wealth Accumulation
In order to accumulate wealth, the couple needs to make use of the effective earnings
from their deposits and thereby increasing their income and therefore the client is in need of
investing in funds after maturity in distinct managed fund investments like in shares and
bonds and even in products of managed funds that would invest their money and saves time
of the couple of looking into their investments from time to time.
Estate Planning
The couple have two mortgages out of which one of the mortgage for the house where
they currently reside and another for a holiday home that they have. They want to pay out the
mortgage within 5 years’ time and thereby wants to pay their debt off before retirement. The
couple in order to increase their income can even opt for giving out the holiday home for rent
purpose to visitors as a holiday home with the help of which the couple can earn additional
income. This additional income can be helpful to meet the goals and objectives that have
been discussed earlier.
Projected Results of the Recommendations

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There are scope of several projections in accordance to the future expenditure that
needs to be regarded like the legislation associated to income tax, the rate of taxes, rate of the
investment returns and the level of inflation so that effective suggestions can be given. The
significant transformations in these components would helpful for reflective effects on the
future strategy and the financial position. It is essential to appreciate the projections and
thereby can act a guideline and the projected outcome may not be assumed with the level of
certainty.
The recommended and the projected outcomes discloses that the development of the
investment portfolio that consists of the several investments in the shares and equities and
also in certain bonds that can lead to the increase in the level of earnings and income that
would improve the financial scenario of the couple. The recommendations are inclusive of
undertaking investments in various bonds and shares so that the risk that is present is
distributed evenly with the help of which the level of income gets increased. There has been
an observation that the couple do not insurance for themselves and therefore should look to
purchase insurances for them in order to mitigate the risk of financial distress in case any
unprecedented things arises and even after death. In case of death, their spouse would receive
financial remuneration and thereby would be able to improve the financial scenario of their
family. Insurance can even be taken for the house and the holiday home with the help of
which these assets can be secured as well. The couple have car of their own and therefore
should look to purchase insurance for their car as well. The couple have the intention of
saving money so that they can pay for the university expenses of their children and therefore
even look to undertake comparison of the various products that are available to them in the
market. The process of comparison would be helpful in understanding the product that is
appropriate for them.

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The product disclosure statement and the investment plans need to be assessed by
undertaking a comparison with the past performances of the selected products thereby having
an idea about the present performance of the products and therefore aids in the undertaking of
the investment decisions. The statements are even assessed and compared with the disclosed
reports by the couple and the financial adviser in order to have some knowledge about the
various disclosure statement of the product.
The information that is quantitative in nature that has been gained from the data given
in the statements and thereby several changes that are taking in the economy and the market
so that effective developments can be taken by assistance of the products that would be
recommended to the couple.
Risk Profile
Risks related to investment can be explained as the likelihood and the probability of
the losses that can be incurred in association to the anticipated returns on any specific
investment. It is simply a measure of the extent of the uncertainty of accomplishing the
returns according to the expectations of the investors. It is the level of the unprecedented
results that needs to be realised. Risk has been a key aspect in the evaluation of the prospects
of an investment. Most of the shareholders and the investors while undertaking an investment
look for the kind of investments that have less amount of risks. The lower amount of
investment risks makes the investment much more attractive and lucrative. On the other hand,
the thumb rule has been that increased risks leads to enhanced returns.
The risk profile of the couple have been understood by gaining an idea of the
questions that have been answered by them. The risk profile has been constructed by
considering the investment strategy that is apt in accordance to the distinct circumstances that
has been concluded in the Risk Profile Questionnaire with the help of meaningful and precise

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assessment of the eagerness to accept the risk. The questionnaire that has been given answers
to the experiences, values and attitude. The couple are in the idea of undertaking investments
that would provide long term returns which would be for 5-7 years. The couple are even in
the intention of the being comfortable with this trade off in order to compete with the
inflation. They have significant amount of experience in the investment scenario and
therefore understand the importance of diversification. The most aggressive investments that
they have undertaken is the managed funds. They are very patient as an investor as in case of
decline in the investment portfolio they would be wait for the investment to recover as they
have the intention of long term benefits from the investments. The couple have their focus on
the capital growth and would like to reinvest the income that is generated by them. As their
aim has been to gain significant amount of income after their time of retirement, they are not
in the requirement of liquidity and therefore does not need to maintain easy access to the
funds that have been invested. The comfortable mix of the couple has been that they prefer
prospectively increased returns that would provide optimum saving of tax even though this
would mean increased risk and volatility. The volatility that is existent in the investment
values is acceptable given the increased term of the objectives of the capital growth.
The assessment of the risk profile of the couple has compelled to take the decision
that the couple are balanced investors. They are in the idea of having a balanced portfolio that
would work towards medium to long term financial objectives and therefore require
investment strategy which would cope with the impacts that can take place due to inflation
and tax. The couple accepts calculative risks in order to gain effective amount of returns. The
eagerness to grant the portfolio volatility and their return for the potentiality of the higher
returns. They would even want to generate capital growth and income in accordance to the
timeframe of the investment after paying out for the expenses that have been identified. The
appropriate allocation of the assets involves the allocating their investment in the

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international equities that comes to 21% and in the Australian equities amounting to 32%. It
would be appropriate to invest in property which would have a percentage of 20% and 19%
in the fixed income. The rest of 8% would be invested in cash. This extent of the asset
allocation is ideal for having a balanced risk profile and thereby would be able to meet the
goals and objectives of the couple. The table below highlights the same.
Asset Class Allocation Percentage
International Equities 19%
Australian Equities 24%
Australian Bonds 22%
Property 6%
Fixed Income 19%
Cash 10%
Total 100%
Product Recommendation and Explanation
There are various products that are available in the market and one has to take
extensive measures with the help of which the suitable for product for a particular investor
can be understood. By assessing the client profile and their needs and requirements, it is clear
that they are opting for long term capital development and they have the idea of investing in
funds that would provide significant amount of returns with moderate volatility. There are

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two investment products that are recommended to the couple and one has been the Russell
Investment Fund and the other has been Vanguard Investment.
When coming to the factor for investment, it is hard to determine a trend. Therefore
this company has concentrated on developing strategic allocation of the assets by
constructing a framework for the investment strategy that would be suitable for the risk
profile of the investors and thereby giving out a solid base for the investors to attain their
expectations and goals. The company generally invests in long term funds as they have the
idea that markets are volatile and is dependent on the various external factors like the
political, economic and social. Hence, it becomes difficult to understand the market activities
and therefore long term investments are important. The long term investments can be useful
for attaining the goals and objectives of the investor. The company even diversifies their
products and thereby distributing the risks that are existent with investments. The associated
costs are significantly low and have a product disclosure statement that explains the asset
allocation to the customers effectively. The asset allocation is distributed in such a manner,
that changes can be made in accordance to the requirement of the client. The risks that are
associated with the investments have been laid down in an effective manner so that
discrepancies are present in the mind of the customers. There are various products that are
offered by the firm and the one that is suitable for the client can be recommended for
purchase.
Russell Investment Management Ltd on the other hand, is a company that provides
operations in accordance to the operations of the fund in line with the Corporations Act
20011. The product disclosure statement of the product explains the process with the help of
which the funds work by explaining the process of investing and the fees that are associated
with it. The process of withdrawing the investment is even laid down so that the customers
can have an idea about the process and thereby complete their business with the company

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effectively. There can be circumstances where suspension of the transactions can be
understood as such circumstances can arise. The distribution of the funds that would be
undertaken by the firm is laid down to the client. The risk associated with the managed
investment schemes is even explained and thereby the client would be able to understand
their level of returns due to the risk that is associated with the investments. The benefits of
investing in the funds are addressed and their unique selling proposition to the quality of the
ingredients, effective incorporation and management of the multi-asset solutions are
highlighted to the client.
By examining the product that have been offered by the two companies, it is
suggested that investment product of Vanguard is ideal for Louis and Larissa as the goals and
objectives that they have would met by investing in Vanguard’s product. Vanguard Life
Strategy Balanced Fund is ideal for the couple rather than Russell Investments Diversified 50
Fund Class A Units. Vanguard Life Strategy Balanced Fund is actively associated for the
investments that balanced risk profile investors want to undertake. This product effectively
has a strategic allocation of the assets that ranges from 20-24% for Australian shares, 15-19%
from International Shares, 18-22% for Australian fixed interest, Properties within 1-5%.
These are the aspects where the couple wants to undertake investments and therefore this
product is ideally suitable for them. The product being focused on the balanced investors
have the minimum amount of risk with significant amount of stable returns with probabilities
of higher returns when the market is performing exceedingly well. There are certain chances
of the loss of capital but the level of capital growth is significantly higher if the investment is
maintained for a longer time period. The minimum suggested investment frame for this
product is 5 years and this is ideally suited for them. The fees associated with this product is
reasonable as well and this would reduce the investment expense for the couple.

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On the other hand, Russell Investments Diversified 50 Fund Class A Units is a good
product as well but there are certain traits that are not ideal for Louis and Larissa. The
associated costs for this product is relatively higher and the asset allocation investment has
been different with respect to the requirement of the client. There is no specific balanced
product that the client can purchase and therefore the risks associated with the product would
be a bit higher than Vanguard. Therefore, Vanguard is suggested for the client.
Analysis of Russell and Vanguard
Nature Russell Vanguard
Costs Establishment fee: Nil
Contribution fee: Nil
Withdrawal fee: Nil
Termination fee: Nil
Management cost for the
investment: 0.79 p.a
For every $5,000 that has been
invested, charge will be $0.
PLUS Management costs:
0.79% p.a. and for every
investment of $50,000 that is in
the Fund a charge of $395 each
year will be levied.
The total cost for the client will
depend on the fees that will be
negotiated with the financial
Establishment fee: Nil
Contribution fee: Nil
Withdrawal fee: Nil
Termination fee: Nil
The management cost for the
first $50,000 charge will be
0.75%, and 0.50% for the
second $50,000 and balance
over $100,000 have a charge
of 0.35%.

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adviser.
Features  Actively managed,
multi-asset solutions
 Quality Ingredients
 Effective
Implementation
 Competitive long
term performance
 Diversification
 Tax Efficiency
 Lost cost of investing
Investment Objectives The investment objective of the
fund involves the development
of the expected returns with
lower amount of risks
Increase invested returns
with diversification of the
investment in various
products and thereby
reducing the level of risk.
Gearing in investments
The process of gearing explains the level of the debt of an investment that is
associated with the equity and is addressed in the form of percentage. It is a measure for the
financial leverage of an investment and explains the extent to which the activities are funded.
Gearing is borrowing to invest and in other terms undertaking investments in the leveraged
assets. It is helpful in transforming the extent of risk in the investment strategy. The risks
associated with gearing involves the risk in the cash, shares, fixed interest and properties. In
accordance to the requirement and objective of the client, there has been an observation that
interest and other costs are lower than the income received from the investment. Therefore,
the couple can undertake positive gearing with the help of which they can claim for
deductions in the taxes for the costs and the interests with respect to the income from
investment. The taxable income would be subjective to income tax at the marginal tax rate.