Financial Planning Process for Simon and Nadia Johnson

This article outlines the financial planning process for Simon and Nadia Johnson, including the initial and ongoing services provided, remuneration, the process and steps taken to provide the best advice, potential problems that could arise, and the recourse available to clients in case of a dispute.

Applied Financial Planning
(FPC002)
Assignment
Total marks: 100
Personal ID: 1046
I have read the Assignment Guide in the ‘General assessment information’ and have applied the
word count principles to my work.
My word count for this assignment is: [Enter your word count] words
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Marker feedback
Comment on overall performance:
For marker use only.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 2 © Kaplan Higher Education

Instructions to students
• This assignment covers all topics and accounts for 50% of your final grade.
• There is one (1) case study in this assignment:
– Section A contains two (2) questions worth a total of 35 marks
– Section B contains three (3) questions worth a total of 65 marks.
You should answer all questions.
• The overall word limit for the assignment is 5,250 words. Marks will only be awarded for answers up
to the word limit (plus 10%) for each question. Any material written after this will not be counted
towards your mark for that question. Headings, quotes and references within the body of the answer
are included in the word count. Numerical tables, calculations, and reference lists are not included.
For more information on word counts and their rationale, go to Assessment  Assignment 
General assessment information.
• Refer to the Criteria-based Marking Guide for guidelines on what is expected for each question.
• The ‘General assessment information’ section in KapLearn contains information about format and
presentation, word limits, citations and referencing, collusion, plagiarism and other policies,
useful resources, submitting your assignment and accessing your results.
• Full workings must be shown for all calculations. Show all calculations in the text of your assignment and
NOT attached as an appendix, unless specifically stated in the question.
• Answers are to be in your own words. Reference and cite all your sources (within the text of your
answer) when quoting or using material from external sources. Include a reference list at the end of
your assignment. Refer to the ‘Referencing and Citations Guide’ available from the ‘Library Learning
Hub’ in KapLearn for further information on referencing.
• Indicative weightings are noted beside each question. Use these weightings to assist you with your
allocation of time and resources. The weightings indicate the relative importance of each question.
• State all assumptions used in providing your answer.
• Requests for special consideration or information pertaining to special consideration written in the body
of the assignment will not be considered by the marker. Refer to the ‘special consideration’ section of
the Assessment Policy on Kaplan’s website for more information.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 3 © Kaplan Higher Education

Learning outcomes (LO) mapping Marks
1. Apply techniques to establish and develop client relationships. 10
4. Conduct appropriate quantitative and qualitative research as part of the financial planning
process.
20
5. Assess clients’ goals and financial position to form the basis of advice. 30
6. Design a suitable asset allocation and investment strategy for a client. 10
7. Present recommendations of suitable products and strategies that you have developed. 20
8. Apply the financial planning process to ensure clients’ objectives and needs are met. 10
Total marks 100
Criteria-based Marking Guide
The Criteria-based Marking Guide provided at the end of each question is designed to assist students to
understand what is expected of them in each question 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.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 4 © Kaplan Higher Education

Background
You are a financial adviser employed with MoneySmart Financial Services. You are licensed to advise in all
types of securities, managed investments, superannuation and insurance. You have formal referral
arrangements with other advisers for estate planning and mortgage/debt advice, therefore you do not
need to cover these areas in any detail in your answers.
Assume you have provided your clients with a financial services guide. Your licensee’s approved product list
is at Appendix A.
Case study: Simon and Nadia Johnson
Simon and Nadia Johnson have been referred to you by their accountant for investment advice.
Nadia received an inheritance of $600,000 from her father’s estate two years ago. Shortly after,
their accountant established a discretionary trust for these inherited funds named the
Johnson Family Trust. The trustee is a company, Johnson Pty Ltd, of which Simon and Nadia are directors.
The beneficiaries of the trust are Simon, Nadia and their two children. Wills and enduring powers of
attorney have also been established. The family trust can take most forms of investment and registered
securities; however, no investment strategy has been established. The inheritance was originally placed in
a one-month Bank of Melbourne term deposit, which has been rolling over monthly since then and is
currently paying 1.0% p.a. interest. The trust costs them $2,000 p.a. to run.
Nadia has had little experience with investing but would like to increase her knowledge. Simon is more
confident about his knowledge of financial matters but like Nadia is time-poor. He understands the need for
diversification and the benefits of long-term growth assets. They have a long-term investment outlook of
10 years and are interested in both managed investments and maybe direct Australian shares.
Simon and Nadia’s completed fact find and risk profiling questionnaires are at Appendix B.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 5 © Kaplan Higher Education

Section A (35 marks)
Instructions to students
There are two (2) questions in this section. Answer all questions.
Question 1 (10 marks | Word limit: 700 words)
LO8: Apply the financial planning process to ensure clients’ objectives and needs are met.
Outline the details of the initial and ongoing services you will provide to Simon and Nadia. Your answer must
be written as a direct verbal response to the clients and should include the following (answer each section
separately):
(a) Explain what a financial adviser’s role is, and what services you can provide to your clients. (2 marks)
(b) How will you be remunerated and by whom. (Ensure your answer is FOFA compliant.) (1 mark)
(c) Explain the process and/or steps you will apply and the reasons why, in order to provide the best
advice for them and to satisfy your financial planning obligations. (4 marks)
(d) Describe the problems that could arise for both you and your clients if you do not fulfil your
obligations. (2 marks)
(e) Explain the recourse available to your clients if there is a dispute about the advice you provide to
them. (1 mark)
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 6 © Kaplan Higher Education

Criteria-based Marking Guide for Question 1(a)–(e)
Excellent (Mark range: 8–10 marks) Satisfactory (Mark range: 5–7.5 marks) Unsatisfactory (Mark range: 0–4.5 marks)
• clear and complete explanation of the
financial adviser’s role and/or
remuneration arrangements
* clear and complete explanation of the
process and/or steps to be followed in
the provision of the advice including to
satisfy financial planning obligations
• clear and logical explanation of the
research about a client that a planner
needs to complete and why, prior to
making recommendations
• full and correct description of all adverse
consequences for not meeting research
obligations
• well-articulated and detailed outline of
the dispute resolution process
• adequate explanation of the financial
adviser’s role and remuneration
arrangements
• reasonable explanation of the process
and/or steps to be followed in the
provision of the advice including to
satisfy financial planning obligations
• general explanation of the research
that needs to be completed and why,
prior to making recommendations
• describes some adverse consequences
for not meeting research obligations
• reasonably well articulated outline of
the dispute resolution process
• poor, incomplete or no explanation of the
financial adviser’s role and/or
remuneration arrangements
• unclear or poor explanation of the process
and/or steps to be followed in the
provision of the advice including to satisfy
financial planning obligations
• unclear or no explanation of the research
that needs to be completed and why,
prior to making recommendations
• unclear or no adverse consequences
described for not meeting research
obligations
• incorrect or unclear outline of the dispute
resolution process
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 7 © Kaplan Higher Education

Insert your answers to Question 1(a)–(e) below this line
a) A financial advisors’ role is to develop investment strategies which will include both strategic and
product solutions to help clients meet their financial goals and objectives. An advisor must follow best
interest duty to ensure that the clients are placed in the better financial position. Examples of services
are as follow:
 Better manage income and expenditure to meet future developments
 Minimise debt
 Provide protection against loss or damage through using insurance
 Minimise tax within the permissible legal framework
 Invest a windfall such as inheritance
b) Remuneration for Financial advisers are as follow:
 Trailing commission as a result of FOFA reforms:
o Trailing commissions can no longer be paid on new investment products but
existing arrangements as at 1 July 2013 were unaffected. Trailing commissions
need to be disclosed to existing clients annually through an FDS
o Insurance products were originally excluded but will now be included as a result of
the life insurance reform regime. From 1 January 2018, initial commissions will be
capped at 60% and ongoing commissions at 20%. This will be phased in over a
three-year period. In addition, there will be a two-year upfront commission
‘clawback’ with 100% clawback in year one and 60% clawback if a policy lapses in
year two.
 Fee-for-advice/service: As a result of FOFA, the method for charging new clients is a fee-for-
advice/service arrangement. Financial advisers can charge:
o For work undertaken according to a cost schedule (e.g. prepare a written SOA for
$1,500)
o For work on an hourly rate
o A rate based on total assets under advice, usually as a percentage of the assets,
providing an agreed level of service.
c) The steps areas follow:
 Collect and assess client’s financial data & other relevant info
This is to better understand the clients’ current financial situation by using a data-gathering
tool, known as the fact find or the needs analysis questionnaires which represents of all
relevant questions and issues which need to be discussed with the client.
 Determine the client’s objectives & goals
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 8 © Kaplan Higher Education

This provides crucial information as to the reason why the clients seek advice and their
financial aspirations. Failing to determine goals and objectives may lead to the adviser
making recommendations that do not align with the clients’ expectations.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 9 © Kaplan Higher Education

 Identify any financial problems that may exist
This is about analysing all information collected and then conducting a gap analysis
between where the client is, what they want to achieve and what they will realistically be
able to achieve. An important element of this step is ensuring that the client understands
all associated risks of making changes to their financial activities.
 Prepare a written plan that contains alternatives and recommendations
Preparation of SOA which outlines the advice to the client as well as any other information
the client needs in order to make informed decisions about the. SOA must be a clear and
succinct document which complies with all compulsory elements pertaining to the advice,
including scope of advice, current position, goals and objectives, issues identified,
disclosures and recommended trade-offs, strategies and solutions; and it must meet all
best interests duty obligations. It should outline the risks and benefits of the advice, the
advantages and disadvantages of the advice and alternative strategies that have been
considered and rejected in favour of the advice provided.
 Present recommendations and implement plan
An SOA is presented to the client at a meeting where the adviser explains the reasoning
behind their recommendations and what the expected outcomes will be if the advice is
implemented. It is the adviser’s responsibility to ensure that the client understands both
the pros and cons of their recommendations, and to obtain agreement to proceed with
implementation of the plan by having the client sign an authority to proceed, noting any
changes or variations to the SOA that the client may request (e.g. requesting a lower life
insurance amount).
 Review plan
Client needs and circumstances are not static and will inevitably change over time. Periodic
reviews of a financial plan, once it has been implemented, ensure that the plan is adapted
or modified if required in response to changing needs and circumstances.
d) Clients may be placed in a difficult financial situation, and if ASIC finds an adviser is guilty of
misconduct they can be banned from providing financial advice, either for a period of time or for
life depending on the seriousness of the actions.
e) Clients should try to talk it over with the adviser, if that does not work, clients can make a
complaint via adviser’s internal dispute resolution system (this can be found within FSG). They must
provide a response to clients within 45 days. Should the clients still unhappy with the response,
they can contact the external dispute resolution (The business must tell you which scheme it
belongs to).
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 10 © Kaplan Higher Education

Words: 810
End of answers to Question 1(a)–(e)
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 11 © Kaplan Higher Education

Question 2 (25 marks | Word limit: 1,200 words)
LO1: Apply techniques to establish and develop client relationships.
LO4: Conduct appropriate quantitative and qualitative research as part of the financial planning process.
LO5: Assess clients’ goals and financial position to form the basis of advice.
Refer to Appendix B to answer the following questions. It provides a snapshot of the data that you have
collected at your first meeting with Simon and Nadia and contains necessary information about their
circumstances.
Note: You will need to determine Simon and Nadia’s individual risk profiles, based on their responses to the
risk profile questions and resulting scores to answer questions 2(b) and (c) below.
(a) Briefly describe both positive and negative criticisms regarding the qualitative and quantitative data
collected. (3 marks)
(b) You begin to conduct some risk profiling within the client needs analysis. Simon immediately
becomes defensive, saying to you: ‘I’ve undertaken my own risk profiling before coming in to see
you, and I’m comfortable and satisfied that I’m a high growth investor — weren’t you listening?’
As their adviser, what would you say in response to his comments? Your answer must be written as a
direct verbal response to Simon, and must:
(i) include demonstrations/examples of active listening and ‘non-verbal’ skills you would employ
while listening to and then responding to him (3 marks)
(ii) include open and closed questions in your response. (2 marks)
(c) What concerns would you raise with Nadia regarding her risk profile? Base your explanation on her
objectives, current asset class allocation and information in the case study, including her stated
investor risk type, and the investor risk type you think she is. (5 marks)
(d) (i) Create detailed net worth and cash flow statements for Simon and Nadia. (Refer Topic 9
activity.) Note: You do not need to create separate statements for the Johnson Family Trust.
(8 marks)
(ii) Calculate the following financial ratios for Simon and Nadia:
• net worth ratio (total net worth/total assets)
• liquidity ratio (liquid assets/current debts)
• savings (savings/net income)
• monthly debt service (monthly debt commitments/monthly net income).
Note: Show all workings. (2 marks)
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 12 © Kaplan Higher Education

(iii) Provide a short summary of your assessment of Simon and Nadia’s financial situation and
current ability to achieve their short and medium-term objectives based on parts (d)(i) and (d)
(ii) above. (2 marks)
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 13 © Kaplan Higher Education

Criteria-based Marking Guide for Question 2(a)–(d)
Excellent (Mark range: 20–25 marks) Satisfactory (Mark range: 12.5–19.5 marks) Unsatisfactory (Mark range: 0–12 marks)
• clear and complete view and critique
of the quality of the two categories of
data collection
• written as a direct response, in terms
the clients will understand, flows well
and includes correct and
comprehensive examples of open and
closed questions and components of
active listening skills
• detailed and comprehensive
explanation of valid concerns
regarding the two elements of the
clients’ risk profiles; detailed and
strong justification for the concerns,
supported by an overall assessment of
the clients’ current asset allocation,
case study scenario and a
recommended investor risk profile
• net worth statement correct with no
errors
• detailed cash flow statement and tax
calculations correct with no errors
• financial ratio calculations correct with
no errors. Includes relevant ratio
formula
• comprehensive discussion of clients’
financial statements and ratios and
critical analysis of the impact on the
client’s ability to meet their financial
objectives
• adequate view and critique of the quality
of the two categories of data collection
• written as a direct response in terms the
clients will understand, flows well and
includes some correct examples of open
and closed questions and components of
active listening skills
• reasonable explanation of valid concerns
regarding the clients’ risk profiles;
adequate justification for the concerns,
supported by an overall assessment of the
clients’ current asset allocation, case
study scenario and a recommended
investor risk profile
• net worth statement correct with minor
errors
• cash flow statement and tax calculations
correct with minor errors
• financial ratio calculations completed with
some errors. Includes relevant ratio
formula
• reasonable discussion of clients’ financial
statements and ratios and reasonable
analysis of the impact on client’s ability to
meet their financial objectives
• poor, incomplete or no view or critique
of the quality of the two categories of
data collection
• not written as a direct response,
poorly structured and difficult to
understand
• Includes incorrect examples of open
and closed questions or components of
active listening skills or excludes them
altogether
• irrelevant or no concerns are raised
regarding the clients’ risk profiles with
poor or no justification for the
concerns; unsupported assessment of
the client’s investor risk profile
• no or incomplete net worth statement
• no or incomplete cash flow statement
and tax calculations
• no or incorrect financial ratio
calculations. Relevant formulas are not
provided
• poor or no discussion of clients’
financial statements and ratios and
poor or no analysis of the impact on the
client’s ability to meet their financial
objectives
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 14 © Kaplan Higher Education

Insert your answers to Question 2(a)–(d) below this line
a) Positive:
 Quantitative data can be used to construct Income and Expenses table as well as budget
 Can provide a snapshot of clients’ financial situation from budgets, cash flow and Net Worth
 Current financial standing can be used as future projections whether or not client will achieve
his/her financial goals.
Negative:
 Focus on quantitative (financial and circumstantial) data gathering and are often limited in the
area of qualitative (personal) aspects, views and preferences of the client
 Follow the data input sequence and order of various database or financial modelling software
programs rather than an effective and wide-ranging interview process
 May not address all of the areas relevant to a particular client or potential strategy (e.g. aged
care advice)
 Focus on information gathering and thus may offer only a limited ‘understanding’ of the client
unless it includes questions on the goals and reasons the client has sought advice.
b) Adviser: (While maintaining eye contact) “Simon, I appreciate that you had taken the time to provide
your risk profiling and I am quite confident that you are comfortable being a High-Growth Investor.
However, (Move eye contact to Nadia, smiling, and nodding) it is my duty and responsibility to take
Nadia’s profile into consideration as I will be managing the fund for the both of you (Move eye contact
back to Simon with open body posture) and I have to make sure that Nadia is comfortable with the
idea”.
Adviser: (While leaning forward with a smile and open body posture) “Simon, Nadia, have you both
had any discussions as to when do you wish to retire?, the reason I asked, (While maintaining light
eye contact), I noticed that you wish to invest for 10 years and you may not be of that age to meet the
condition of release on your superannuation fund in 10 years’ time” (Lean back with open body
posture to allow both clients to provide answers).
Adviser: (Nodding as they explain their decision, paraphrase when needed to clarify, maintain 75%
eye contact, additional encouragers can be used such as ‘go on’, ‘tell me more’) Now, as you
mentioned earlier, Simon, you are quite an experienced investor, how have you made your investment
choices in the past? (With open body posture and maintaining light eye contact, use gesture to
communicate and indicate for Simon to speak).
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 15 © Kaplan Higher Education

c) The very first objective is to keep pace with inflation, which it was rated as 5 (very concerned).
However, their current asset allocations are mainly CASH which includes Savings and Term Deposit of
1% will NOT provide her with the ability to keep pace with inflation. Also, Nadia mentioned that she
would like a return without losing capital which placed her as a conservative investor, however, she is
putting herself and the family prone to inflation risk which is one of her investment objective.
Considering Nadia does not wish to lose any capital, and yet, she is quite comfortable with investment
performing below expectations up to 5 years (which is a minimum requirement for High Growth
investors), she may be referring to a particular sum of funds for which she is quite comfortable to
invest and some should be available on the go. In addition, there is mentioned of easy access to
capital, how much to be considered accessible?
Based on the calculated points on the risk profile, Nadia is considered to be a ‘Balanced’ investor.
However, Nadia seems to be comfortable as ‘Growth’ investor.
d) i. Cash Flow Statement
Income and Expenses
Simon Nadia Combined Notes
Gross Salary $86,000 $55,000 $141,000
Salary Sacrifice - - -
Salary after Salary
Sacrificed
$86,000 $55,000 $141,000
Rental Income
Unfranked Dividends
Franked Dividends
Franking (Imputation)
Credits
Interest $105 $105 $210 ING Savings
Maximiser at 3%
p.a of $7000
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 16 © Kaplan Higher Education

Other Income (Trust
Income)
$3,168 $3,168 1% Term Deposit
of $600,000 with
$2,000 account
fee. Both children
receive $416 each
Capital Gains <1yr
Capital Gains >1yr
Tax-free component of
Capital Gains
Assessable Income $86,105 $58,273 $144,378
Deductable Expenses
Rental Expenses,
repairs, etc
Taxable Income $86,105 $58,273 $144,378
Tax on Taxable Income $19,531 $10,486 $30,017
Medicare Levy $1,722 $1,165 $2,888
Medicare Levy
Surcharge
Both have private
health insurance
Franking Rebate
Low Income Tax
Rebate
$126 $126 Nadia’s Taxable
Income is less than
$66,667
Other Rebates
Total Tax $21,253 $11,777 $33,030
Income after Tax $64,852 $46,496 $111,348 Taxable Income –
Total Tax
Expenses
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 17 © Kaplan Higher Education

Mortgage $22,800
Groceries / Takeaway $20,800
Utilities $4,000
General / Health
Insurance
$7,000
Clothing $5,000
Mobiles / Internet $5,200
Council Rates $1,600
Motor Vehicles $7,000
Miscellaneous $5,700
Entertainment $9,000
School Fees $20,000
Total Expenses $108,100
Net Cash Flow $3,248
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 18 © Kaplan Higher Education

Assets & Liabilities Table
Assets Owner Value Liabilities Net
Home Both $ 850,000 $ 275,000 $ 575,000
Car 1 Simon $ 18,000 $ 18,000
Car 2 Nadia $ 30,000 $ 15,000 $ 15,000
TOTAL $ 898,000 $ 290,000 $ 608,000
Superannuation $ -
SG Simon $ 180,000 $ 180,000
SG Nadia $ 110,000 $ 110,000
TOTAL $ 290,000 $ - $ 290,000
Credit Card $ 1,100 -$ 1,100
GE Money Interest Free Both $ 10,000 -$ 10,000
Savings Account Both $ 7,000 $ 7,000
Trust Beneficiary
Account Both $ 600,000 $ 600,000
TOTAL $ 607,000 $ 11,100 $ 595,900
Net Worth $ 1,493,900
ii. Net Worth Ratio = Net Worth / Total Assets
= $1,493,900 / ($898,000 + $290,000 + $607,000)
= 83.23%
Liquidity Ratio = Liquid Assets / Current Debts
= $607,000 / ($290,000 + $11,100)
= $607,000 / $301,100
= 2.02
Savings Ratio = Savings / Net Income
= $3,248 / $111,348
= 2.9%
Monthly Debt Service = Monthly Debt Commitment / Monthly Net Income
= ($1,283 + $1,100 + $833 + $150) / ($3,248 / 12)
= $3,366 / $271
= 12
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 19 © Kaplan Higher Education

iii. Simon and Nadia’s situation is that they are rich in assets but income poor. The family is only able to
save $3,248 annually which makes it impossible for them to save and achieve their short to medium
term goals. In addition, Nadia is thinking to quit her job in the next financial year, which will put a
stress on their cash flow and even push it into a deficit.
End of answers to Question 2(a)–(d)
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 20 © Kaplan Higher Education

Section B (65 marks)
Instructions to students
There are three (3) questions in this section. Answer all questions.
Notes to students regarding Questions 3, 4 and 5:
• The answers to these questions do not need to be set out in a compliant SOA format.
• Include all relevant concepts from the required readings and subject notes to support your advice.
• Demonstrate that you have undertaken an appropriate level of research.
• Clarity and conciseness are important, but full explanations are required. Ensure your explanations and
language reflect how you would communicate with a client.
• Clearly state all assumptions.
• You are not expected to provide detailed solutions that would be beyond the scope of your financial
planning authorisation.
• Use the tax rates and thresholds provided in KapLearn (Quick Reference Guide) for your analysis.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 21 © Kaplan Higher Education

Question 3 (25 marks | Word limit: 1,300 words)
LO5: Assess clients’ goals and financial position to form the basis of advice.
Write a detailed report on the Johnsons’ current position based on the information in the case study above.
Your report should comprehensively analyse:
(a) their current personal situation (including net worth statement from Question 2(d)(i)) (5 marks)
(b) their short and medium-term goals and objectives (5 marks)
(c) current detailed cash flow (from Question 2(d)(i))
(d) current asset allocation (3 marks)
(e) issues, gaps and potential risks (7 marks)
(f) recommend trade-offs for the issues you uncover, where relevant. (5 marks)
Criteria-based Marking Guide for Question 3(a)–(f)
Excellent (Mark range: 20–25 marks) Satisfactory (Mark range: 12.5–19.5 marks) Unsatisfactory (Mark range: 0–12 marks)
• a detailed, comprehensive and valid
analysis of the clients’ personal
details and current position which
will form the basis of advice
• clear and comprehensive outline of
goals and objectives included
(Tip: Think ‘SMART’ goals where
possible)
• excellent identification and
exploration of most gaps, issues and
risks
• justified trade-offs suggested to
address all potential issues and risks,
where relevant
• a valid analysis of the clients’ personal
details and current position which will form
the basis of advice
• partly correct goals and objectives outlined
• adequate identification or exploration of
some gaps, issues and risks
• some reasonable and relevant trade-offs
suggested
• little or no analysis of the clients’
personal details and current position
which will form the basis of advice
• unclear or incorrect outline of client
goals and objectives
• little or no identification or exploration
of any gaps, issues and risks
• poor or no relevant trade-offs
suggested
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 22 © Kaplan Higher Education

Insert your answers to Question 3(a)–(f) below this line
(a) Considering the Net Worth is sitting at $1,493,900, The Johnsons are relatively rich in assets. Moreover,
the Net Worth Ratio of 80% shows that they have a limited debt, however, these debt are non-tax
deductable debt which will not provide any benefit towards their financial strategy. Looking at the
Johnsons’ current cash flow, they do not have the ability to save to achieve their financial goals.
Nadia is considering to quit her job by the end of financial year will put the family’s income at risk as it
will push the cash flow into deficit. In addition to that, the surplus of $3,248 is basically funds from the
1% Term Deposit of $600,000. Hence, it seems that the family spends everything that they earned. 1%
return p.a. is relatively low, they can potentially earn higher rate of returns from dividends.
Asset rich and yet income poor, the Johnsons will need to have a strategy to turn these assets into an
income to meet their financial goals.
(b) From the information provided on the table, only the school fees of $20,000 are included in their cash
flow statement. Therefore, it is already considered achievable. However, the rest of the financial goals
are a little bit of a stretch considering their lacking in the ability to save. Based on the current cash
flow, they can only save $3,248 per year, hence, for the next 5 years, the family will only save $16,240.
With that amount of money, they can’t possibly achieve any other financial goals.
In order to achieve their short to medium-term financial goals, they will need to free up their cash flow
by cutting down spending and increase surplus to enable them to save more money. For instance, on
their household expenses there is $9,000 allocated for entertainment, this is about $187.50 per week
on their expenses, is it really necessary? Can it be reduce or completely eliminated? Also, there is
“miscellaneous” of $5,700, is this different from entertainment?
Another point is that there are Utilities/Mobiles & Internet of $4,000 and yet there is another
Mobile/Internet of $5,200. Is this a duplicate? There is a possibility to review both and an opportunity
for a bundle deal to get a cheaper price.
There is $600,000 inheritance which the Nadia can use to achieve all these goals, however, with the
left over, there may not be much room for them to manoeuvre around in terms of investment to
achieve any long term goal, such as, retirement.
(c) Cash flow is showing us that the family is spending what they earn which only leave with $3,248 which
is around the amount they earn from the 1% Term Deposit of $600,000. Their ability to save year on
year is very limited which makes it very difficult for the Johnsons to meet their financial goals.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 23 © Kaplan Higher Education

The family will need to free up cash flow by sacrificing some of their household expenses and look into
some investment strategy which will provide additional income through dividends. Some securities
with 100% franking with high dividend yield can certainly help.
(d) The Johnsons’ asset allocation is a conservative portfolio at the moment as it consists of Cash and
Fixed Interest (Term Deposit). Although the risk is relatively low, the return is also considerably low.
However, they are exposed to the inflation risk, where under normal circumstances, an adviser must
create projections of 2.5% - 3.0% inflation year on year of an investment portfolio.
The Term Deposit of 1% p.a. is currently working just enough to maintain a surplus cash flow.
However, the $3,168 (Nadia’s income from Trust) will not be enough to be used as Savings year on
year to meet their financial goals.
In addition, their cash flow is already tight. Simon and Nadia will be placed in a difficult financial
situation as inflation occurs.
(e) 5 Year projections with 3% rise on income should they stay with the same job and put 3% inflation into
consideration.
Year 1 Year 2 Year 3 Year 4 Year 5
Combined Income After Tax
(3% rise year on year) $111,348 $114,688 $118,129 $121,673 $125,323
Expenses (Consider 3%
Inflation) $108,100 $111,343 $114,683 $118,124 $121,668
Savings Ability $3,248 $3,345 $3,446 $3,549 $3,656
Amount Currently in Savings $7,000 $10,248 $13,593 $17,039 $20,588
Total in Savings $10,248 $13,593 $17,039 $20,588 $24,244
On this projection, it is showing that with 3% inflation year on year, the family can still maintain
surplus on their cash flow. However, savings in not growing for them to achieve their financial
objectives such as renovations, buy a new car, or pay off the mortgage.
It was mentioned that Nadia wishes to quit her job on the next financial year. Looking at a simple
projection, this may not be possible because even at present with her $55,000, the family cash flow is
already tight as it is.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 24 © Kaplan Higher Education

At present time, the family does not require advice on insurance. However, considering the constraints
on the cash flow, they can’t afford to have anyone not working. Therefore, they need at least income
protection outside superannuation for 2 reasons. Firstly, should anything happen to them, their cash
flow can quickly turn into a deficit. Yes, they have Income Protection within Superannuation, which
brings to the second concern. Since the Income Protection is within Super, should anything happen to
them before they meet the condition of release, the income will only top up their super without the
ability for any of them to access the fund. Additionally, by having Income Protection outside super, it
presents the family for potential tax deductions.
The family concerns that the investment is not coping with inflation, however, their current asset
allocations are only Cash (savings and Term Deposits) which are prone to inflation risk. Moreover, 1%
return on Term Deposit is not competitive as there are many companies which are offering higher
rates than 1%.
(f) With the issues mentioned previously, Nadia is unlikely to be able to quit her job next financial year
because it will put so much pressure on the cash flow and will bring it to deficit. However, should
Nadia wishes to quit regardless, the family may need to review their current lifestyle and reduce their
current expenditures.
Both Nadia and Simon may need to prioritise on what is the most important in terms of their current
financial goals. For instance, is the new car really important and does it have to be $50,000. They wish
to put aside $100,000 for home renovation, what is it exactly they wish to do with the house? A
breakdown of what exactly needs to be done for home improvement may provide exact value as to
how much it is required to complete the project.
$100,000 renovation and Pay off $275,000 mortgage can be achieved by using the fund of $600,000
from Trust. However, calculations to be done as to whether it is better to use funds for Investment
Return or Debt Repayment.
Nadia mentioned that she does not wish to lose any capital, hence, she needs to decide what is more
important, Capital preservation or Income to keep pace with inflation. Capital preservation will only
allow the family to invest mainly in Cash and Fixed Interest which may not be able to keep up with
inflation. Also, by investing in capital preservation, the family may lose the opportunity to invest on
growth or income.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 25 © Kaplan Higher Education

End of answers to Question 3(a)–(f)
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 26 © Kaplan Higher Education

Question 4 (10 marks | Word limit: 550 words)
LO4: Conduct appropriate quantitative and qualitative research as part of the financial planning process.
You consider recommending that the clients purchase shares in any two (2) of the following companies:
• Commonwealth Bank of Australia (CBA)
• BlueScope Steel Limited (BSL)
• Cochlear Limited (COH)
• Westpac Banking Corporation (WBC).
Which two (2) companies would you recommend as a suitable buy for Simon and Nadia?
Justify your recommendations based on your research of each company and understanding of the clients’
situation.
Include an analysis of how you will ensure that the research is timely, appropriate and in line with
compliance obligations.
Notes: To answer this question, you should:
• Locate and analyse the latest annual or interim profit announcements for all the companies.
• Sign up for a free trial premium membership to Morningstar research to access the latest research on
the above companies. Please note that the free trial is valid for a period of four (4) weeks only, so you
will need to manage your access accordingly.
• Provide evidence that:
– the research is current and includes appropriate statutory disclosures
– you have sought feedback to monitor the appropriateness of your research activities
– the research is given to all relevant parties in a timely manner
– you have updated relevant records to meet compliance obligations.
Criteria-based Marking Guide for Question 4
Excellent (Mark range: 8–10 marks) Satisfactory (Mark range: 5–7.5 marks) Unsatisfactory (Mark range: 0–4.5 marks)
• comprehensive explanation of stock
selection methodology used
• demonstrated evidence of research
conducted and skilfully integrated
• clear, logical and well-reasoned
justification of why the recommended
‘buy’ is appropriate
• reasonable explanation of stock
selection methodology used
• some evidence of research conducted
and applied
• reasonably correct justification of why
the recommended ‘buy’ is appropriate
• explanation is just a summary of
Morningstar research
• little or no evidence of research
conducted or applied
• inadequate or no justification of why the
recommended ‘buy’ is appropriate
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 27 © Kaplan Higher Education

Insert your answers to Question 4 (below this line)
ASX Code Sector Income
Profile
Action
Signal
Franking (%) Dividend
Yield (%)
Forecast PE
Ratio (X)
2018 2019 2018 2019 2018 2019
CBA Financials Attractive
Income
4 Stars 100 100 5.6 6.3 13.5 12.2
BSL Materials Low Income 1 Star 100 42.9 1.0 3.1 10.7 11.0
COH Health Care Low Income 3 Stars 100 100 1.7 1.7 40.8 40.4
WBC Financials Income at
Risk
4 Stars 100 100 6.3 7.1 12.7 11.1
From the analysis of Simon and Nadia’s financials, the family is struggling with their cash flow and their
ability to saves. This means, we are looking for companies who can provide income to boost their savings
ability so that they can achieve their financial goals.
To compare the 4 companies, the tables above may provide indication why the 2 companies are chosen
and others are not. First and foremost, on the Franking (%), there are 3 companies for which provide 100%
franking for 2018 and 2019 which are CBA, COH and WBC. Franking (%) is important as it shows how much
in percentage that the companies have paid the tax on the dividends. This is good for the family as this
potentially help with their tax obligation.
Secondly, on “Dividend Yield (%)” section, this is a way to measure how much cash flow the family is getting
for each dollar invested in an equity position. As we are not looking for capital growth for now, hence,
capital gain is less important which makes dividend yield is effectively the return on investment for the
shares. 2 shares which provide high dividend yield are CBA and WBC.
Thirdly, COH seems to have the highest Forecast PE Ratio which means that there is a high expectation for
the company to achieve capital growth. Moreover, considering its low dividend yield, COH is keeping their
profit and re-invest it. For investors who are aiming for capital growth, this is the equity that suits them.
However, Nadia and Simon are in need for income, hence, this is not the option for them.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 28 © Kaplan Higher Education

In addition, we shall not overlook history and forecast of NPAT (Net Profit after Tax) year on year as higher
profit may present higher dividends in combination with the shares dividend yield. From the 4 companies,
CBA are leading with ($m) 9,881.0 in 2017, ($m) 9,933 in 2018, and forecasted ($m) 10,010.3 in 2019,
followed by WBC with ($m) 8,062.0 in 2017, ($m) 8,065.0 in 2018, and forecasted ($m) 8,323.1 in 2019.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 29 © Kaplan Higher Education

On another note, since we are looking for the companies which can provide extra income, BSL and COH
both fell under “Low Income” Income profile which makes them not suitable for the Johnsons. Not to
mentioned that they are both 1 star and 3 stars in comparison to CBA and WBC which are 4 stars in rating.
In conclusion, the 2 companies recommended are CBA and WBC, although under normal circumstances, it
is better to diversify by choosing 2 different sectors. However, given limited options, both CBA and WBC can
potentially provide the extra income that they need to build up savings and achieve their financial
objectives and goals.
End of answers to Question 4
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 30 © Kaplan Higher Education

Question 5 (30 marks | Word limit: 1,500 words)
LO6: Design a suitable asset allocation and investment strategy for a client.
LO7: Present recommendations of suitable products and strategies that you have developed.
Assume your recommended trade-offs from Question 3 were accepted by the clients.
(a) Determine the appropriate asset allocations for Simon and Nadia and compare them to the
benchmark asset allocations for their risk profiles. (3 marks)
(b) Build an investment strategy for Simon and Nadia, including:
(i) strategy recommendations (6 marks)
(ii) specific product recommendations, including the two (2) direct stocks chosen from Question 4.
(2 marks)
(c) Present your recommendations to Simon and Nadia, including:
(i) an explanation of why each of your recommendations is suitable for them, giving due
consideration to their goals, needs and objectives (5 marks)
(ii) a comparison of their current investment strategy and expected outcomes of your
recommended strategy (provide projections covering five years). (Note: Attach Excel
projections as an appendix) (5 marks)
(iii) appropriate disclosures (including fees, risks, limitations) (5 marks)
(iv) all assumptions (2 marks)
(v) an explanation of how you will ensure that the implementation of the recommendations is
completed, including establishing the ongoing service. Cover all people, processes and
monitoring procedures required for all internal and external actions associated with the
recommendations. (2 marks)
Note: A complete strategy with dollars to invest and a discussion of risks should be presented.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 31 © Kaplan Higher Education

Criteria-based Marking Guide for Question 5(a)–(c)
Excellent (Mark range: 24–30 marks) Satisfactory (Mark range: 15–23.5 marks) Unsatisfactory (Mark range: 0–14.5 marks)
• clear and concise explanation of
benchmark asset allocation
• clear, logical and well-reasoned
justification of why the
recommended asset allocation is
appropriate
• investment strategy addresses all
issues, goals and objectives
• clear and comprehensive product
recommendations
• relevant and well-justified
recommendations
• excellent and accurate explanation
of advantages and/or disadvantages
of each recommendation
• demonstrated evidence of research
conducted
• relevant commentary on projected
outcomes is provided, highlighting
benefits and risks to the clients
• comprehensive and detailed
disclosures are included
• reasonable and justifiable
assumptions are specified and
included
• all details of the steps of the
implementation process are
explained clearly
• mostly correct explanation of benchmark
asset allocation
• mostly correct justification of why the
recommended asset allocation is
appropriate
• mostly correct investment strategy
provided
• some relevant product recommendations
• adequate and reasonably clear
justification of suitability for clients
• adequate explanation of advantages
and/or disadvantages of
recommendations
• some evidence of research conducted
• mostly correct and relevant commentary
on projected outcomes is provided
• all disclosures included with mostly
correct explanations
• some reasonable and justifiable
assumptions are specified and included
• reasonable explanation of all steps of the
implementation process is included
• no reference to or explanation of
benchmark asset allocation
• no or inadequate justification of why the
recommended asset allocation is
appropriate
• partly correct investment strategy
provided
• no or few relevant product
recommendations
• unclear, irrelevant or no reasoning
provided
• poor or no explanation of advantages
and/or disadvantages of
recommendations
• little or no evidence of research conducted
• unclear or irrelevant commentary on
projected outcomes is provided
• incorrect or minimal disclosures included
• reasonable and justifiable assumptions are
not specified and/or excluded
• most/all steps of the implementation
process are outlined
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 32 © Kaplan Higher Education

Insert your answers to Question 5(a)–(c) below this line
End of answers to Question 5(a)–(c)
a) The risk analysis of Nadia has directly indicated that she is a balanced investor, while it can be argued
that one of the growth attributes is also present within her. However, the risk profile of Simon directly
indicates that he has risk profile of growth. The risk analysis of Nadia is mainly considered growth as the
overall point was at the level of 205, while growth section starts from 211. Hence, it could be assumed that
Nadia can be a growth investor. The asset allocation of growth profile relevantly consists of 30% defensive
stock and 70% growth stock. The investment will be conducted in ASGARD Elements fund, which can
eventually help in improving the overall returns. The funds will comprise of 30% defensive sock and 70%
growth stocks. The defensive stock will comprise of Advance Defensive Multi-Blend Fund WS, while the
growth stock will comprise of Advance Growth Multi-Blend Fund WS, Advance High Growth Multi-Blend
Fund WS and Magellan Global Fund. The overall investment in ASGARD Element has been chosen, as both
Nadia and Simon need easy access to the funds, which will be provided by the funds, where no exit fees
and time is issued. Therefore, the selected investment scope of Simon and Nadia can eventually help in
generating high level of returns from investment. The fund can adequately provide stable returns over the
period of time and generate higher income from investment. The returns of growth fund for 2018 is mainly
at the levels of 11.91%, while the benchmark returns are at the levels of 10.56%. In addition, the defensive
stock returns during 2018 was at 7.84%, while the benchmark gives return of 6.95%. Hence, the
combination of the fund might eventually hep in generating high level of income from investment.
b.i) The relevant strategy in that 30% defensive, where the defensive stock will comprise of 5% in cash,
19% in domestic Fixed interest, 16% international fixed interest. In addition, the investment is conducted in
70% growth, where the asset comprises of 23% domestic equity, 6% domestic property, and 26%
international equity, which can eventually help in generating high level of returns from investment. This
combination of assets in domestic sphere will mainly conducted for adequate securing the returns from
investment. The growth stock comprises of adequate investment option, which can eventually help in
detecting higher returns from investment. The current investments of Simon and Nadia is mainly conducted
in CFS Wholesale Balanced Super, Suncorp Conservative Super and Trust, where both the individual has
adequate exposure in relevant investment scope, which can allow them to generate high level of returns.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 33 © Kaplan Higher Education

b.ii) Commonwealth Bank of Australia and Cochlear Limited is the overall investment instruments that
can be used by Simon and Nadia for raising the required level of returns from investment to support their
medium-term goals. The overall investments are mainly conducted in 5% in cash, 19% in domestic Fixed
interest, 16% international fixed interest, 23% domestic equity, 6% domestic property, and 26%
international equity. The investment in Australian equity is mainly conducted in only two companies, which
can improve profits from investment. The combination of both defensive and growth stock would
adequately generate higher rate of returns from investment, while reducing the total risk attributes. The
selection of the appropriate investment in different segment of the funds would eventually allow the funds
to minimise the required risk from investment and create growth, which is needed by both Nadia and
Simon. In addition, the investment in direct shares can be conducted in Commonwealth Bank of Australia
and Cochlear Limited, which can be eventually help in generating high level of income from investment,
while reducing the total risk attributes. The investment in direct shares can eventually help in generating
higher rate of return over the period of five years, as the dividend yield of both the selected companies are
relevantly higher in comparison to other stocks. The calculations relevantly indicated that the investment in
above stock might eventually help in generating high level of returns from investment.
c.i) The recommendation is mainly for the ASGARD Element Fund, which can eventually increase returns
from investment. Furthermore, the product has been recommended in accordance with the financial need
of the couple, where growth structure in investment has been conducted. In addition, there are overall fees
for the funds that will be included in the ASGARD Element, which are depicted as follows.
Investment Option Fees
Advance Defensive Multi-Blend
Fund WS
0.40%
Advance Growth Multi-Blend Fund
WS
0.65%
Advance High Growth Multi-Blend
Fund WS and
0.70%
Magellan Global Fund 1.36%
However, the overall fees of the investment are relevantly low, which can eventually help in generating
high level of investments. The past performance of the fund is a deque, while it cannot ensure the exact
returns in future. Hence, investment in above investment options can eventually reduce the level of fees
cost and ensure higher returns and growth from investment.
c.ii)
Investment Return Amount
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 34 © Kaplan Higher Education

Cash 1250 3% 37.5
Domestic Fixed interest 4750 5% 237.5
International fixed interest 4000 6% 240
Total (return of 515 p.a) 25000 515
The yearly returns of $515 will be derived from cash and fixed interest investments. Researchers
mentioned that creation of adequate investments might eventually allow investors to maximise their
returns, while reducing the risk from investment. Therefore, investors using the measure can eventually
allow the couple to maximise the level of returns from investment while reducing the total risk.
c.iii) The relevant disclosures are mainly conducted regarding the fees, risks, and limitation of the selected
recommendations. From the evaluation, it is detected that Nadia and Simon relevantly conduct total fees of
1% MER each for identifying the level of expenses that might be incurred. Further evaluation indicates that
there are certain risks and limitation of the recommended securities, which can eventually help in detecting
the risk attributes of the investment. The risk attribute is relevantly low for Colonial First Choice and
ASGARD Elements, which might eventually help in generating high level of income from investment.
However, the major limitation of the investment is the low capital that is saved by Simon and Nadia.
c.iv) There is specific assumption that has been taken into consideration, while preparing the investment
scope for the couple. The major assumption is that Nadia is still working and cannot be left home, as it
might negatively affect the overall income of the family. In addition, the investment in ASGARD Element
would also allow the individual to generate high level of income, which can eventually help in growth in the
invented conducted in the firm.
c.v) The recommendation relevantly indicates that the overall investment might be conducted with
adequate internal and external action that needs to be conducted by Simon and Nadia. The investment
scope directly requires Simon and Nadia for signing different documents, which is required for supporting
their goals. The internal actions require using the trust fund for the overall expenses, which will dismantle
the trust fund and to support the ongoing expenses, which was being incurred by Nadia.
relevantly comprise of different signatures that needs to be conducted for investment options.
Furthermore, the external actions are also needed for monitoring the overall investment that will be taken
by the couple, as to understand the returns generated from different investment scope.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 35 © Kaplan Higher Education

Reference List
https://www.investopedia.com/university/stockpicking/stockpicking6.asp
https://www.investopedia.com/terms/f/frankeddividend.asp
https://www.moneysmart.gov.au/investing/shares/choosing-shares-to-buy
https://www.investopedia.com/university/peratio/peratio1.asp
https://www.investopedia.com/terms/d/dividendyield.asp
END OF ASSIGNMENT
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 36 © Kaplan Higher Education

Appendix A
Approved product list
Approved list Investment options
ASGARD Elements All
Colonial First Choice All
MLC Wrap All
Vanguard Exchange Traded Funds Property, Australian shares and international shares
Direct shares All ASX 50
Notes to APL:
• Where a client has an existing investment which is not on the APL, you are allowed to recommend
they hold the investment.
• All investment options that are available through the above platforms are also approved as stand-alone
investment options with an additional 1% MER each.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 37 © Kaplan Higher Education

Appendix B Fact find for Simon and Nadia Johnson
Personal details
Client name Mr Simon Johnson Name of spouse Mrs Nadia Johnson
Age 50 Age 45
Health status Good Health status Good
Marital status Married Marital status Married
Occupation Sales manager Occupation Teacher
Employer Software Wizards Employer Education Board
Dependants
Full name Karen Johnson Luke Johnson
Age 15 12
Financial dependants Yes Yes
If yes, until age 21 21
Occupation Student Student
Marital status Single Single
Investments
Asset Value Ownership Notes
Principal residence $850,000 Joint
Motor vehicle 1 $18,000 Simon To be replaced with new car
Motor vehicle 2 $30,000 Nadia
Cash at bank $7,000 Joint ING savings maximiser at 3.0% p.a.
CFS Wholesale Balanced Super $180,000 Simon Balanced fund
Suncorp Conservative Super $110,000 Nadia Conservative fund
Liabilities
Description Amount Ownership Notes
Home loan $275,000 Joint Fixed term at 5.6%, ends in 12 months
Credit card $1,100 Simon Paid off in full every month. Amount is included in
the household expenses below
GE Money — interest-free line
of credit
$10,000 Simon Three-year interest-free offer ends in 12 months
with full payment due, or interest at 19.9%
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 38 © Kaplan Higher Education

Fact find for Simon and Nadia Johnson
Personal details
backdated to purchase date
Car loan $15,000 Nadia Fixed term at 6%, ends in 6 months
Household expenses p.a. (combined)
Groceries/Takeaway $20,800 Miscellaneous $5,700
General/Health insurances $7,000 Entertainment $9,000
Motor vehicles $7,000 Clothing $5,000
Utilities/Mobiles & internet $4,000 Council rates $1,600
Mortgage payments $22,800 Mobiles/Internet $5,200
Total $88,100
Investment objectives
Rate your investment objectives using a scale ranging from 1 (not concerned) to 5 (very concerned) as shown in the table below.
Income to keep pace with inflation 5 Legal, logical and appropriate tax relief 5
Easy access to capital 5 Regular income from investments 4
Easy to administer 4 Capital growth 3
Volatility 3
Short to medium-term financial goals
The Johnsons would like to set aside money over the next five years to do the following:
Renovate home $100,000 School fees $20,000
Purchase new car $50,000 Other $5,000
Overseas holiday $25,000
Pay off home mortgage $275,000
Total $475,000
File notes
• The $20,000 school fees listed above will continue as an ongoing yearly expense.
• The clients have not outlined any long-term financial objectives. They are focused on their short to medium-term goals for now.
• Nadia’s father’s estate was finalised two years ago and there are no carried forward capital gain issues or other costs.
• The trust was established to allocate income on a discretionary basis to the beneficiaries — after the running costs are met, any
surplus income is distributed to the children ($416 p.a. each) and the balance to Nadia.
• Simon would like to have a core holding of wholesale index funds as this would reduce the likelihood of large income
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 39 © Kaplan Higher Education

Fact find for Simon and Nadia Johnson
Personal details
distributions from capital.
• Simon is not interested in managing a direct share portfolio and Nadia agrees.
• Simon does not intend to change his work situation. His annual salary is $86,000 plus superannuation.
• With both children now in high school, Nadia is thinking of quitting her job at the end of the current financial year to spend more
time with them. She wants to know if their current financial situation (taking into account the inheritance, their living costs and
liabilities) would enable her to do this. Her current annual salary is $55,000 plus superannuation.
• They do not have any other source of income.
• Both Simon and Nadia have appropriate levels of life, TPD and salary continuance insurances within their superannuation funds
and do not require advice on insurances. They would like advice on whether their superannuation is appropriately invested.
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 40 © Kaplan Higher Education

Risk profile: Clients’ responses are highlighted Simon
Points
Nadia
Points
Determining your investor risk profile
This investor risk profile questionnaire has been designed to help you understand the type of investor you are,
so that with the help of your adviser, you can choose the investments that best match your financial objectives.
Which of the following best describes your current stage of life?
Single with few financial commitments. You are keen to accumulate wealth for the future. Some funds must be
kept available for enjoyment such as cars, clothes, travel and entertainment. 50 50
A couple without children. You may be preparing for the future by establishing and furnishing a home. There are
a lot of things you need to buy. You are probably better off financially now than you may be in the future. 40 40
Young family. This is the peak home purchasing stage. You have a mortgage and a very small amount of savings.
Probably dissatisfied with your financial position and the amount of money saved. 35 35
Mature family. You are in your peak earning years and have got the mortgage under control. Many partners also
work and any children are growing up and have either left home or require less supervision. You are starting to
think about retirement, although it may be many years away.
30 30
Preparing for retirement. You probably own your own home and have few financial commitments. However, you
want to ensure that you can afford a comfortable retirement. Interested in travel, recreation and self-education. 20 20
Retired. No longer working you must rely on existing funds and investments to maintain your lifestyle.
You may be receiving the pension and are keen to enjoy life and maintain your health. 10 10
What return do you reasonably expect to achieve from your investments?
A return without losing any capital 10 10
3–5% p.a. (after tax) 20 20
6–12% p.a. 30 30
13–15% p.a. 40 40
Over 15% p.a. 50 50
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 41 © Kaplan Higher Education

Risk profile: Clients’ responses are highlighted Simon
Points
Nadia
Points
If you didn’t need your capital for more than 10 years, for how long would you be prepared to see your
investment performing below your expectations before you cashed it in?
You would cash it in if there were any loss in value 10 10
Less than 1 year 20 20
Up to 3 years 30 30
Up to 5 years 40 40
Up to 7 years 45 45
Up to 10 years 50 50
How familiar are you with investment markets?
Very little understanding or interest 10 10
Not very familiar 20 20
Have had enough experience to understand the importance of diversification 30 30
Experienced with all investment sectors and understand the various factors that may influence performance 50 50
If you can only get greater tax efficiency from more volatile investments, which balance would you be most
comfortable with?
Preferably guaranteed returns before tax savings 10 10
Stable, reliable returns, minimal tax savings 20 20
Some variability in returns, some tax savings 30 30
Unstable, but potentially higher returns, maximising tax savings 50 50
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 42 © Kaplan Higher Education

Risk profile: Clients’ responses are highlighted Simon
Points
Nadia
Points
Six months after placing your investment you discover that your portfolio has decreased in value by 20%.
What would be your reaction?
Horror. Security of capital is critical and you did not intend to take risks 10 10
You would cut your losses and transfer your money into more secure investment sectors 20 20
You would be concerned, but would wait to see if the investments improve 30 30
This was a calculated risk and you would leave the investments in place, expecting performance to improve 40 40
You would invest more funds to lower your average investment price, expecting future growth 50 50
Which of the following best describes your purpose for investing?
You want to invest for longer than five years, probably to age 55–60. You are mainly investing for growth to
accumulate long-term wealth 50 50
You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-term wealth
from a balanced fund 40 40
You have a lump sum (e.g. an inheritance or an eligible termination payment from your employer) and you are
uncertain about what secure investment alternatives are available 30 30
You are nearing retirement and you are investing to ensure that you have sufficient funds available to enjoy
retirement 20 20
You have some specific objectives within the next five years for which you want to save enough money 20 20
You want a regular income and/or to totally protect the value of your savings 10 10
Investor profile total points 265 205
Investor risk profile summary
0–50 Defensive
You are a conservative investor. Risk must be very low and you are prepared to accept lower returns to protect capital.
The negative effects of tax and inflation will not concern you, provided that your initial investment is protected.
51–130 Moderate
You are a cautious investor seeking better than basic returns, but risk must be low. Typically an older investor seeking to protect
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 43 © Kaplan Higher Education

the wealth that you have accumulated, you may be prepared to consider less aggressive growth investments.
131–210 Balanced
You are a prudent investor who wants a balanced portfolio to work towards medium to long-term financial goals.
You require an investment strategy that will cope with the effects of tax and inflation. Calculated risks will be acceptable to you to
achieve good returns.
211–300 Growth
You are an assertive investor, probably earning sufficient income to invest most funds for capital growth. Prepared to accept higher
volatility and moderate risks, your main concern is to accumulate assets over the medium to long-term. You require a balanced
portfolio, but more aggressive investment strategies may be included.
301–350 High growth
You are an aggressive investor prepared to compromise portfolio balance to pursue potentially greater long-term returns.
Your investment choices are diverse, but carry with them a higher level of risk. Security of capital is secondary to the potential for
wealth accumulation.
END OF APPENDICES
For office use only
Section A 1a 1b 1c 1d 1e 2a 2b(i) 2b(ii) 2c 2d(i) 2d(ii) 2d(iii)
Max 2 1 4 2 1 3 3 2 5 8 2 2
Awarded x x x x x x x x x x x x
Section B 3a 3b 3d 3e 3f 4 5a 5b(i) 5b(ii) 5c(i) 5c(ii) 5c(iii) 5c(iv) 5c(v) TOTAL
Max 5 5 3 7 5 10 3 6 2 5
5 5 2 2 **
Expres
sion is
faulty
**
Awarded x x x x x x x x x x
x x x x **
Expres
sion is
faulty
**
1046_FPC002_AS_v6 44 © Kaplan Higher Education