Financial Planning and Business Loan Management

This assignment requires the development of a comprehensive financial plan for the Masons, including identifying their goals, risk tolerance, and current financial situation. A potential business loan product is also presented, with features, benefits, drawbacks, and fees listed. The assignment asks to identify options to reduce interest rate risk and provide solutions to maintain and develop the relationship with the Masons.

Questions
Identify and develop broking options for clients with complex needs
FNSFMB502
Present broking options to client with complex needs
FNSFMB503
Implement complex loan structures
FNSFMB504

Scenario 1
You are a Mortgage Broker for Careful Financial Services (CFF) Fedtown and have
been contacted by a prospective new client Tony Mason.
You have arranged to meet with Tony next week to discuss his requirements further.
Over the phone you have found out the following information:
Client’s names: Anthony and Lyn Mason
Tony is a partner in T& L Accounting Partnership, which has been operating
successfully for 5 years.
The Masons have recently sold their existing house for $650,000 and are purchasing
a new property for $1,000,000.
Their mortgage for $50,000 on their current property is held with Whatbank,
Thistown.
Tony finds that July to October is very busy and the business overdraft of $15,000 is
not enough during that time.
He currently leases the office that the business is located in but has been
approached by the owner to see if he is interested in purchasing it.
Tony mentioned that they will soon need to update the computer equipment in the
office to cope with the workload and changes in software that have occurred.
He is also concerned about rising interest rates.
Question 1(FNSFMB502 E1.1, 2.1)
Using the information provided above identify 5 needs that the Masons have and
complete the below table.
Need Details
Need for purchasing a new
property
They are need of purchasing a new property
that has a current value of $1,000,000
Paying off their current
mortgage amount
They have an existing mortgage of $50,000 with
What bank This Town and the Masons have the
intention of paying off the mortgage as soon as
possible.
Increasing their amount of
overdraft during the time of
peak business season
They currently have an overdraft amount of
$15,000 but during the months of July to
October they would be requiring additional
overdraft amount in order to continue their
business as the workload will be higher during

this peak season.
Purchasing the office which
they currently use in the
form of a lease
They want to purchase the office where they
operate and which is currently on lease in order
to reduce their amount of liabilities.
Upgrading their computer
equipment in order to cope
with the workload and even
thinking about the rates of
interest.
The Masons need to change their computer
equipment so that they can perform their
business in an effective manner according to
the changes in the working environment and
time.
Question 2(FNSFMB502 E 1.1, 2.1FNSFMB503 1.1)
In your own words provide 2 examples of closed questions and 2 examples of open
questions you will ask at the interview to ascertain further information on the client’s
needs/objectives.
Answer: The two close ended questions are:
Q1. Are willing to take risk in order to gain additional income benefit?
 Yes
 No
 May Be
 No Idea
Q2. Are willing you take a loan if there is a change in the rate of interest?
 Yes
 No
 May Be
 No Idea
The open ended questions are as follows:
Q1. Do you think changes in the rate of interest can hamper your plan of taking loan
and expanding your business?
Q2. What is the amount you are ready to pay as down payment for the purchase of
the new property and the total amount you desire from the bank?
Question 3(FNSFMB502 E 2.1 FNSFMB504E2.2)
Identify the four types of documentation you would need to obtain for the partnership
to:
 Identify the borrower and his/her/its representatives
 Clarify the capacity and authority to borrow and pledge security
 Verify the ability to repay the amount applied for.
Answer: The four types of documents that is required are:
 Proof of identity of the applicant (Passport, Drivers Licence etc)
 Address Proof

 Bank passbook or bank statement of applicant for the last 6 months
 Balance Sheet and Profit or Loss Account for the last two years, which is
certified by a qualified Chartered Accountant.
Question 4(FNSFMB502 E1.1, 1.4, 2.1, 2.2, 2.4, 3.4, FNSFMB503E1.1 1.4, 2.1 2.2)
Identify 3 personal products and 2 business products that may be suitable to meet
the Masons needs (based on the information provided above) and complete the
following tables with at least 3 items under each heading:
1. Product BCU Secured Freedom Loan
Features Redraw facility
Extra repayments
Fully drawn advance and
Secured
Benefits No early exit penalty
Can apply online
Can apply in branch
Drawbacks/risks Monthly fee charged
Application fee charged
Requires security to be held
Has ongoing fees
Fees and
charges
$624 monthly repayment
Upfront fee $250
2. Product ANZ Personal Loan Fixed
Features Extra repayments
Fully drawn advance and
Secured
Benefits Can apply online
Can apply in branch
Available for 457 visa holders
Suitable for both new or used car
Drawbacks/risks Monthly fee charged
Application fee charged
Has ongoing fees

Fees and
charges
Upfront fee $150 and monthly repayment of $652
3. Product Latitude Fixed Low Rate
Features Extra repayments
Fully drawn advance and
Secured
Benefits Can apply online
Drawbacks/risks Monthly fee charged
Application fee charged
Cannot apply in branch
Has ongoing fees
Fees and
charges
Upfront fee of $250 and monthly repayment of $652
4. Product ANZ Bank Business Loan
Features • Interest rate 7.02%
• 5 to 30 years minimum term loan
• $10,000 to $100,000,000 loan amount provided
• LVR 80%
Benefits • No Application Fees
• No Annual Fees
Drawbacks/risks Monthly fee charged
Has ongoing fees
Fees and
charges
$350 Upfront fee
5. Product Commercial Bank
Features • Interest rate 7.81%
• Maximum 15 years term loan provided
• $25,000 to $100,000,000 loan amount provided
• LVR 85%

Benefits • No Application Fees
• No Annual Fees
Drawbacks/risks Interest rate higher and monthly fee charged
Fees and
charges
$350 upfront fee

Question 5(FNSFMB503E1.3, 1.4, 2.1)
Assuming that one of the options suitable to meet the Masons needs is a
Commercial Loan over 10 years complete the following loan options table that you
will then present to the Masons. The current rates available are:
Variable rate 8.50% p.a.
Fixed rate 1 year 9.00% p.a.
Fixed rate 5 years 9.50% p.a.
Loan options and repayments for Commercial loan over 10 years
$545,000
Product details
Monthly repayments
Current rate Increase by 1.5%
Principal
& Interest
Interest
only
Principal &
Interest
Interest only
Commercial
Bank product
(Variable)
$591,325 $46,325 $599,500 $54,500
Commercial
Bank product
(Fixed) 1 year
$594,050 $49,050 $594,050
(Fixed rate)
$49,050
(Fixed rate)
Commercial
Bank product
(Fixed) 5 years
$596,775 $51,775 $596,775
(Fixed rate)
$51,775
(Fixed rate)
Question 6(FNSFMB502 E 3.5)
If the Masons were to have a complaint about your dealings what would you advise
them to do?
In case the Masons have any kind of complain against us, then they are free to write a written
grievance letter or mail and mention all the issues that they face regarding the dealings that
are offered so that accordingly changes can be made for their plans. In case, the dealings that
have been suggested is the best for them, then in that case the clients are made aware of the
benefits they are to receive in the long term. The clients can even approach the grievance
redresser department where they would sort their problems and issues out.

Question 7(FNSFMB502 E1.1, 3.1,FNSFMB503 E1.1, 2.1)
The Masons have asked you to prepare a PowerPoint presentation for your
scheduled meeting next week – their solicitor and accountant will also be at the
meeting
Prepare 3 slides (not required in PowerPoint application) to use in this presentation –
ensure that each of the 3 slides contain different types of information(this could be in
relation to details on products, identifying customer needs, information on your
business etc):
Slide No 1
Product name: Commercial Bank Business Loan
Features:
• Interest rate 7.81%
• Maximum 15 years term loan provided
• $25,000 to $100,000,000 loan amount provided
• LVR 85%
Slide no 2
Example slide
PRODUCT: STANDARD VARIABLE RATE LOAN
FEATURES BENEFITS DRAWBACKS/RISKS FEES and
CHARGES
 Variable Interest Rate
 Flexible Repayments
 Redraw
 Offset/All in One
 Extra repayments any
time
 Loan Portability
 Repayments
decrease if interest
rates go down
 Repayments can
be altered between
weekly, fortnightly
or monthly
 Offset/All in One
reduces interest
payable
 Extra repayments
reduce interest
payable
 Extra repayments
can be withdrawn
as required
 Loan Portability
reduces fees when
selling and buying
a new home
 Interest rate slightly
higher than some
other loan products
 Repayments increase
if interest rates rise
 Cost of additional
features built into
interest rate and/or
monthly fees
 Establishment
fee and/or
Application fee
 Monthly
account service
fees
 Redraw fees

Benefits:
 No Application Fees
 No Annual Fees
Slide No 3
Drawbacks:
 Interest rate higher and monthly fee charged
Fee and Charges:
 $350 upfront fee
Question 8(FNSFMB502 E1.2, 3.3)
The Masons have mentioned that they are risk averse and are concerned about
interest rates rising. Identify and describe 3 options the Masons could consider to
reduce their interest rate risk.
Answer: The three ways in which the Masons would look to reduce their interest rate
risks are:
 Increase the level of cash holdings: This is a very conservative approach in
case the rate of interest is increasing. In this case, it is advisable to sell off
certain stocks and bonds and convert the same into cash. The cash can be
deposited into the bank account.
 Invest in short term bonds: The bonds are much secured and are even very
stable and therefore the money will be protected and would mitigate the rise in
the level of interest.
 Invest in variable rate securities: These securities do not guarantee a distinct
rate of interest but changes according to the changes in the market.
Question 9(FNSFMB503 E4.4)
List and explain 3 things you will do in the next 12 months to maintain and develop
the relationship with the Masons.
Answer: The three things that need to be done in order to maintain and develop the
relationship with the Masons are as follows:
 Maintain a cordial relationship with the customers and maintaining contact with
them either through meetings or telephonic conversations in order to have
knowledge about what they desire and changes they want to make

 Fix a meeting with the client either, quarterly, semi-annually or annually in
order to explain them about some changes that could be made in their
financial plan or to make them aware how their investments are performing
 Provide them with additional amenities like wishing them on their birthdays,
anniversaries, Christmas etc and gifting them gifts on the special occasions