Management of Personal Financial Risk - Project Assessment 2

This project assessment focuses on the management of personal financial risk. It involves reviewing the client profile, applying the risk management process, identifying risks, and completing a risk analysis. The rubric outlines the required structure for the Statement of Advice (SOA), including the introduction, current personal and financial situation, recommendations, required structure to implement strategy, disclosure of payments for advice, ongoing services, implementation schedule, authority to proceed, financial position before and after implementation of strategy, assumptions, and insurance product recommendations. The SOA must be comprehensive and relevant to the client's circumstances.

Steps to complete project:
1. Review the client profile. (same clients as Assessment 1)
2. Review your application of the risk management process (5 steps) to the
Smiths' situation (Assessment 1)
3. Discuss the risks you identified from Assessment 1 with your group. (Are
they similar, any missing? Collaborate.)
4. Complete the risk analysis.
5. Review the rubric and the following for guidance on what information
needs to be included in the SOA.
6. Discuss in your group what sections of the SOA each individual will work
on.
Project due date: 17 October 2021. End of Week 10
Summary of Rubric/Structure: Below is what we need in order to get HD for each heading
Intro/executive summary: must include situation, objectives, strategies, expected outcome and next
step.
outlined briefly & objectively.
Current Personal & Financial Situation
Client’s reasons for seeking advice, personal and financial information has been detailed objectively
to be able to prepare strategy recommendations.
Recommendations
Comprehensive explanation of the advice strategies, and the justification of recommendations.
Objective details on the risks/disadvantages and estimated outcomes relevant to the client's
circumstances.
Required structure to implement strategy
Comprehensive outline of additional information that the client needs to consider in order to have
complete understanding of advice. Examples: types of insurance, the sums insured, and ownership
structure, In addition, objective justification of any structure recommended.
Disclosure of Payments for Advice
Clearly details all forms of adviser fees in the categories of initial advice fees, ongoing advice fees,
commissions, any refund of commissions and how these fees will be paid.
Ongoing services
Comprehensive detail on the offer of on-going service, costs and value of service relevant to client's
circumstances
Implementation Schedule
Comprehensively detailed schedule to implement all the strategies; priorities, tasks, timeframe
Authority to proceed
Comprehensively details key elements that requires the client's express consent relevant to client's
circumstances; eg, changes in existing products, on-going advice contract
Financial position before and after implementation of strategy, eg risk needs analysis
Comprehensively detailed personal tax, cash flow and balance sheet tables/graphs are neatly
completed for before AND after scenario relevant to client's circumstances clearly demonstrating
value of advice

Assumption
Comprehensively details reasonable assumptions used to prepare tax, cash flow and balance sheet
figures and other related personal and economic assumptions, relevant to client's circumstances
Insurance Product recommendations
Types of Insurance Cover, eg personal, general, business covers
Comprehensive explanation of all types of insurance recommended, relevant to client's circumstances

Statement of Advice
Thank you for the opportunity to discuss your insurance needs. We are pleased to enclose your
personal insurance plan which outlines our recommendations.
This Statement of Advice has been prepared based on your objectives and your current financial
situation. Please take the time to carefully read and understand it, to ensure that it is consistent with
your views and reflects the information we discussed.
The recommendations in this report are based on current information and should only be considered
to be current for one month from the date of this report. After that time, or if you have had any
significant changes to your personal circumstances, you should contact us so that we can re-assess
their suitability.
Once implemented, the recommendations in this Statement of Advice should be reviewed on a
regular basis to ensure that they continue to meet your ongoing needs. Changes in legislation,
financial markets and your personal situation will occur over time, and as your financial adviser we
can work with you to update your financial plan so that you stay on track to achieve your goals and
objectives.
This Statement of Advice relates to you only and the advice contained in this document is not suitable
to anyone else. Please take time to review the fee disclosure section for an explanation of the fees
associated with the development and implementation of our recommendations.
We look forward to helping you implement the enclosed recommendations, and in the meantime we
remain available to assist you with any queries you may have in relation to this Statement of Advice.
Yours sincerely,
___________________________________
26 Swinburne

ABN
Australian Financial Services Licensee
Licence No:
Table of Contents
1.0 Introduction 6
1.1 Summary of Advice 6
1.2 Scope of Advice 6
1.3 How my Advice is Appropriate 6
1.4 Risks in my Advice 6
1.5 Next Steps 7
2.0 Current Personal & Financial Situation 8
2.1 Personal Details 8
2.2 Existing Insurance 8
2.3 Financial Details 9
3.0 Recommended Insurance Details 10
4.0 Implementation 11
5.0 Ongoing Services 12
6.0 Disclosure of Fees & Commissions 13
7.0 Authority to Proceed14
Authorisation 15
Appendices – Financial Position/Risk Needs Analysis 16
Appendices – Assumptions 17
1. 1.0 Introduction

1.1 Summary of Advice
Nick & Lynn, we have analysed your personal insurance needs and
formulated a plan to address these requirements. (please take note that a
Statement of Advice is addressed to the client. Do not write this Statement of
Advice like you are writing to the unit lecturer)
We recommend you take out the following:
Give a summary here of the types of insurance covers recommended, the
recommended sum insured amounts
1.2 Scope of Advice
Whilst we have detailed the different types of insurance policies that may be
related to you, this Statement of Advice does not include a number of other
recommendations.
These excluded recommendations include the following:
- Taxation
- Investment Portfolio
- Centrelink
This Statement of Advice is strictly in relation to your current risk exposures
and how to minimise or eliminate this exposure, however, other
recommendations that may be useful in the future that is also not included in
this SOA are:
- Estate Planning
- Retirement Planning
1.3 How my Advice is Appropriate
The general meaning of insurance is to reduce or eliminate financial uncertainty whilst
also making those potential losses financially feasible. From the information that we
have gathered, we have developed our recommendations around your objectives, these
objectives being:
- Having sufficient financial resources to allow your twin daughters to
attend private high school next year (costing an annual amount of $22,000
per child or $44,000 in total).

- You would like to repay the mortgage on your primary residence within
the next 10 years (totalling $620,000).
- Being able to maintain the hiking and trail bike riding.
- Bernie, you would like to continue your rock climbing.
- You wish to sell your investment property at the time of your
retirements.
- You wish to make capital contributions into your superannuation
accounts to help fund your retirements.
- Deena, you would like your business to be safeguarded if an
unforeseen financial situation occurred.
- You both would like to have financial protection if either of you could not
work for an extended period of time or may never be able to work again.
Insert objectives here (from assessment 1)
1.4 Risks in my Advice
● If the information that you have provided us with is incorrect,
incomplete or misleading, then this may result in the insurance policy being
cancelled for breaching the terms and conditions of the contract.
● The underwriter may increase or decrease the premium cost if
they chose to exclude or include particular conditions in-relation to perceived
risk.
● If you have a Superannuation fund with insurance included, then
this will decrease the value of your fund.
1.5 Next Steps
Before either of you proceed on taking any further financial actions, you must
ensure that you carefully read our advice and that you are satisfied with it. If
you have any queries or suggestions please inform us so we can be ensured
that both of you are clear on the advice that we have recommended.
Therefore, if both of you wish to proceed then please refer to the ‘Authority to
Proceed’ section within this document and complete it.
2.0 Current Personal & Financial Situation

In order to accurately assess what you would like to achieve it is important
that we identify your current position. Detailed below are the key facts upon
which the recommendations in your personal insurance plan are based.
Please let us know immediately if the information contains any errors or
omissions as these might affect the appropriateness of our advice to you.
2.1 Personal Details
*Assumption – State of Residence - Victoria
2.2 Existing Insurance
Our understanding of your current protection arrangements based on the
information provided by you, is as follows:
Bernie Smith
MLC MasterKey Super SUPER: NON- PREMIUM:

Fundamentals N/A SUPER:
N/A
$810.00 /year
Superannuation
Life $100,000.00
TPD $100,000.00
Deena Smith
MLC MasterKey Super
Fundamentals
SUPER:
N/A
NON-
SUPER:
N/A
PREMIUM:
$810.00 /year
Superannuation
Life $100,000.00
TPD $100,000.00
*Assumption – They both hold an MLC MasterKey Super Fundamentals account.
*Assumption – The premium amount is the default amount
2.3 Financial Details
Our understanding of your current financial position based on the information
provided by you, is as follows:
Assets Ownership Amount

Primary Residence Bernie Smith
Deena Smith
$1,500,000
Current Savings Bernie Smith
Deena Smith
$24,000
Investment Property Bernie Smith
Deena Smith
$580,000
Dental Equipment Deena Smith $110,000
Biking And Sporting Equipment Bernie Smith
Deena Smith
$15,000
Motor Vehicle Bernie Smith $17,000
Motor Vehicle Deena Smith $105,000
Shares – ZNA Bank Bernie Smith $72,000
Offset Account Bernie Smith
Deena Smith
$45,000
Total Lifestyle Assets $2,468,000
Liabilities Ownership Amount
Primary Residence Mortgage Bernie Smith $620,000

Deena Smith
Investment Property Mortgage Bernie Smith
Deena Smith
$350,000
Total Liabilities $970,000
*Does not take into account living expenses of $78,000 pa because it is an
expense and not a liability.
I would recommend that you add in some of the key information here from
Assessment 1, Question1 – Risk Management Process. Take the opportunity to
educate the clients on what you see as the risks in their current situation. You need
to make them feel uncomfortable with their current level of underinsurance.
Whilst it seems that both of you are in a very desirable financial position with your net
wealth, you need to consider the amount that your insurance is covering. Based on our
information, both of you have been using the same insurance policy for the past 9
years, the major risk that comes with this is that the insurance policy is only covering
those assets that either of you had 9 years ago. It can be assumed that some of these
listed assets have been acquired within those 9 years resulting in them being uninsured
which means that if anything were to happen to the value of these uninsured assets,
then their original values cannot be restated. Therefore, both of you have the potential
to lose a very large amount of your assets because they have not been insured into
your insurance policy. It should also be noted that some insurance policies may have
lower premiums than what you are currently paying because you have not recently
revised your current policy.
2. 3.0 Recommended Insurance Details
Following our detailed analysis of your need for Insurance, we like you to consider acquiring the
following:
Student’s lose the bulk of their marks in this section of the SOA.
PLEASE address the following:

1. The type of cover you are recommending, eg term life, trauma, etc
The recommended cover would be the life term insurance that will insure the life of the owner. With
the term life insurance all the risk associated with the life of an individual would be safeguarded and
secured. As term life insurance plan are the specialized plan that are related with the enabling of life
cover and insurance for a specific period of time (Insurance, 2018). These are easy to get understood
and plays an important part towards securing of all life and circumstances within the course of life
(Dimkoff and Boersma, 2020).
2. Who is it for? Client or Partner or Both? - Both as they are both income
earners, the family relies on both being alive and earning income.
The life insurance is for the client and its partners. This is because as both are the income earners
and taking of life insurance would lead to safeguarding of the life along with enabling them tax
rebates. Likewise, their families are relied on them so taking of life term insurance would be highly
recommended. In addition of this it is also to be noted that it will cover for both because both are
the income earner and with the enabling of this insurance not only their lives will be saved but at the
same time both will get tax rebates that would serve for the purpose of income tax.
3. What is the ownership structure and WHY? Ie, who is the life insured and
who is the policy owner eg the insured, the partner or a superannuation
fund?
The ownership structure of the life insurance cover would be for each other i.e. for Deena the
owner would be the Bernie while for the Bernie the owner will be Bernie. This is because in
case of occurrence of any harm or the danger to any of the life then the benefits of the life
cover would be transferred and delivered to the other.
4. How much is being recommended and WHY? Ie the sum insured. This
section needs references to your need analysis calculations
The recommended amount would be 720000 (120000*6) for Bernie and 900000 (150000*6)
for Deena. As this amount is 6 times higher than the amount of their annual salary which be
right to considered and best for the term life insurance. This is because with the adoption of
this technique the most suitable amount in regard to the life and insured person would be able
to get analysed that would be considered as most suitable amount in association with the
saving of the life of the insurer. Also as the amount in association with the annual income is
high and six time more which state that the recommended amount would be kept and
considered as most sufficient and required with regard to the life of the insurer.
5. The benefits of the cover, eg what are some of the benefits the cover
provides – try and be specific and align these to the clients’ objectives
There are various advantages that are associated with the term life insurance is high sum
insured, multiple death benefits, accidental death benefit, tax rebates, return on premium,

critical illness coverage and various others (Pearson, 2021). Likewise, the rate of term life
insurance is low in comparison with the whole life insurance. It will also enable benefits in
terms of free from mental tension and pressure among the clients with regard to their life and
unforeseen circumstances.
6. The shortfalls/risks/disadvantages of the recommended cover
The biggest disadvantage of the term life insurance is the high amount of premium that would
be charged with the raising age of the individual. This means if it would be taken at the later
stage in life the the sum assured and the premium amount will be high. In the same way
another biggest risk that is associated with the term life insurance is non saving of money
(Boodhun and Jayabalan, 2018). This means that it will not enable the saving of money and
enable capital need while the living of an individual. This would be used only on the
occurrence of the accidents and death.
3. 4.0 Implementation - Tessa
6. Action 7. By Who 8. By When 9. Priorit
y
Searching of best
insurance company
It can be performed by the
owners
It can be performed before
the age of retirement or at
the early stage
High
Calculation of the
term and sum insured
This can be performed by
the insurance company
and the insurer
It can be performed at the
time of insurance
Medium
Payment of
installation premium
It will be performed by the
owner
It will be performed during
the course of terms
insurance premium
Medium
As term life insurance is being adopted and recommended to Bernie and Deena, so an
adoption and performance of the above-mentioned steps and action would lead to have an
adequate implementation of the insurance. This is because with the searching of most suitable
insurance company and making of calculation regarding the amount of term insurance it
would be able to get executed and implemented. In the same way as by setting up of the
priority level in association with the actions the implementation of the plan and the required
action would be able to get easy to perform.
10. 5.0 Ongoing Services - Tessa

Demonstrate the nature of any ongoing services and their value to the client
to reach any goal.
To ensure our job is completed effectively and promptly, we believe it is necessary to touch in with you in
regard to the overall protection of your financial position.
We understand it is difficult to keep updated on what the average cost for a premium is each period or
what cover you need at each stage of your life. We believe it is necessary to continue service reviews
every 2 years to ensure overall objectives are achieved and you are receiving the most efficient and
effective cover possible.
For the value of ongoing success, we recommend your covers and aligned premiums should be
reviewed frequently. This is important to ensure all recommendations are upholding their role of
proficient cover. We also recommend our further services if any of the outlined risks arise. This way
we can ensure you are covered with our immediate service to continue relevant advice.
Out review service programs:
• We would be asking for your permission to ensure you continue to meet your lifestyle goals. This
would firstly be by reviewing your financial position and circumstances every 18 months, commencing
on 30 June 2022.
• It is important to us that you choose your recommendations wisely and are content with those you
chose. With consistent follow-ups you will be able to continue to mitigate foreseeable risks and adapt
to them with your best interest.
• As well as this, we also allow access to high standard quality insurance companies who are
experienced in quality and outstanding advice to deal with risks, which create popular results to
individuals. In previous experiences, we are able to confidently say we have continued to regularly
follow up with clients and help them through unexpected issues which arise. We have dealt with
individuals similar to your goals and we are proud to say what we do helps.
We hope you understand our values and the value we hold on providing you service to achieve your
goals. With our assistance we look forward to achieving your needs through our hard work. The
decisions we make are in your best interest, reasoning why we hope to continue services to assist
you.
Please discuss with us your concerns or inquire on continuing services with us. We are happy to
explain this further.
11. 6.0 Disclosure of Fees & Commissions - Tessa
Declaration by your Financial Planner
As required under the Corporations Law, we advise that as an Australian Financial Services License
Holder, on behalf of your adviser, is entitled to receive commission from Product Providers initially and
on an ongoing basis. The rates applicable to your recommendation are shown below.
Fee Type Initial Fee

Risk SOA Fee $1,500
Implementation Fee $800
Ongoing Advice Fee $2,200
Total $4,500
Upon the acceptance and completion of new business, the product suppliers pay commission to from
which I receive a percentage as my remuneration. In addition to this, part of my remuneration may
also be by way of fees paid by clients for agreed services. These fees are payable to our office by the
specified payment method, from which I receive a percentage after they deduct their fees.
Commissions paid by the product issuer: Personal insurance products
Product Initial commission paid
to advisor
Ongoing commission
paid to advisor
Will this commission be
refunded?
Each Insurance
Premium
0% 0.05% No
Total 0% 0.05% No
The amount of ongoing commission received by our licenced firm will depend on the premiums you
pay.
NOTE: For Life Insurance Products, Commission is included in the premiums payable to the Life
Insurance Company, it is not charged separately as an additional amount to you.
12. 7.0 Authority to Proceed - Tessa
Bernie & Deena, if you would like to follow my advice, please sign and return the authority to
proceed.
Before you sign this authority, I would like you to check that I have:
□ given you my Financial Services Guide (FSG)
□ given you a Product Disclosure Statement (PDS) about each financial product that I have
recommended
□ talked to you about your personal circumstances, insurance needs and financial goals in a way
you understand, and answered your questions
□ discussed the risks involved in investing and how much risk you are prepared to take

□ discussed any fees you will have to pay
If I haven’t done all of these things, don’t sign the Authority to proceed.
Before you sign this authority, please also make sure that you have:
□ read all the documents I have given you
□ checked that your personal information in this document is accurate
□ asked me any questions you have.
Adviser Declaration
I declare that this Statement of Advice is an accurate and complete record of the advice and
recommendations that I gave to the Customer. The products recommended were considered
appropriate for the identified needs and objectives of the customer.
Signed
:
26 Swinburne
Date:
1. Authorisation
We have read and received a copy of this report and confirm that it reflects the information that I have
provided to 26 Swinburne.
□ I confirm that the recommendations contained in this report are consistent with our needs and
priorities at this point in time. I confirm that the recommendations contained within this
document are to be proceeded with.
□ I have decided not to proceed with all of the recommendations and understand that in choosing
this course of action I risk making a financial commitment to products that may not be
appropriate to our needs and objectives.
I request the following variations to the recommendations:
◦
◦

◦
◦
◦
◦
□ I have decided not to proceed with any of these recommendations.
Signed
:
Signed
:
Mr. Bernie Smith Mrs. Deena Smith
Date: Date:
13. Appendices – Financial Position/Risk Needs Analysis
14. Appendices – Assumptions
The strategic assumptions that were identified and tested include:
Key Client Assumptions
•
Key Economic Assumptions
•
Key Legislative and Regulatory Assumptions
References
Books and journals
Boodhun, N. and Jayabalan, M., 2018. Risk prediction in life insurance industry using supervised
learning algorithms. Complex & Intelligent Systems. 4(2). pp.145-154.

Dimkoff, G. and Boersma, B., 2020. Comparing Term Life Insurance Policies. Journal of Financial
Service Professionals. 74(6).
Insurance, T.L., 2018. Term Life Insurance.
Pearson, S., 2021. Life Insurance 101. In A Pediatrician’s Path (pp. 315-320). Springer, Cham.