Securities and Managed Investments Assignment: Case Studies and Investment Strategies

This assignment explores various aspects of securities and managed investments through case studies. It covers topics such as establishing client relationships, identifying client objectives and needs, analyzing financial situations, developing investment strategies, presenting solutions, negotiating financial plans, completing documentation, and providing ongoing service. The assignment assesses competency in providing advice in securities and managed investments, analyzing financial market products, advising clients on financial risk, determining client requirements, recording and implementing client instructions, conducting product research, and providing appropriate services, advice, and products to clients.

Assignment
Securities and Managed Investments
(DFP4_AS_v2A1)
Student identification (student to complete)
Please complete the fields shaded grey.
Student number
Assignment result (assessor to complete)
Result — first submission (Details for each activity are shown in the table below)
Parts that must be resubmitted:
Result — resubmission (if applicable)
Result summary (assessor to complete)
First submission Resubmission (if required)
Section 1
Case study 1 questions
Not yet demonstrated Not yet demonstrated
Section 1
Case study 2 questions
Not yet demonstrated Not yet demonstrated
Section 1
Case study 3 questions
Not yet demonstrated Not yet demonstrated
Section 1
Case study 4 questions
Not yet demonstrated Not yet demonstrated
Section 2
Short answer questions
Not yet demonstrated Not yet demonstrated
Section 3
Short answer questions
Not yet demonstrated Not yet demonstrated
Section 4
Short answer questions
Not yet demonstrated Not yet demonstrated
DFP4_AS_v2

Feedback (assessor to complete)
[insert assessor feedback]
Page 2 of 52

Before you begin
Read everything in this document before you start your assignment for Securities and Managed
Investments (DFP4_AS_v2A1).
About this document
This document includes the following three (3) parts:
• Part 1: Instructions for completing and submitting this assignment
• Part 2: The assignment
• Section 1: Case Study Questions
– Case study 1: Establish relationship with client and identify client’s objectives, needs and
financial situation
– Case study 2: Analyse client’s objectives, needs, financial situation and risk profile to develop
appropriate strategies and solutions
– Case study 3: Present appropriate strategies and solutions to client and negotiate a financial plan,
policy or transaction
– Case study 4: Agree the plan, policy or transaction and complete documentation
– Appendices
> Risk profiles
> Approved products list
• Section 2: Present appropriate strategies and solutions to client and negotiate a financial plan, policy or
transaction
• Section 3: Agree the plan, policy or transaction and complete documentation
• Section 4: Provide ongoing service where requested by client
Note: Section 2–4 questions relate to Case Study 4.
Completing the assignment
The assignment
Complete Part 2:
Section 1
• Case study 1: Questions 1–4
• Case study 2: Questions 1–4
• Case study 3: Questions 1–4
• Case study 4: Questions 1–4
Section 2
• Parts A–C
Section 3
• Parts A–C
Section 4
• Parts A & B.
Page 3 of 52

Part 1: Instructions for completing and submitting this
assignment
How to use the study plan
We recommend that you use the study plan for this subject to help you manage your time to complete
the assignment within your enrolment period. Your study plan is in the KapLearn Securities and Managed
Investments (DFP4v2) subject room.
Word count
The word count shown with each question is indicative only. You will not be penalised for exceeding the
suggested word count. Please do not include additional information which is outside the scope of the
question.
Additional research
When completing this assignment, assumptions are permitted, although they must not be in conflict with
the information provided in the case studies.
You may also be required to source additional information from other organisations in the finance industry
to find the right products or services to meet your clients’ requirements, or to calculate any service fees
that may be applicable.
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your
work regularly.
• Use the template provided, as other formats will not be accepted for these assignments.
• Name your file as follows: Studentnumber_SubjectCode_Submissionnumber
(e.g. 12345678_DFP1B_Submission1).
• Include your student ID on the first page of the assignment.
Before you submit your work, please do a spell check and proofread your work to ensure that everything is
clear and unambiguous.
Page 4 of 52

Submitting the assignment
You must submit your completed assignment in a compatible Microsoft Word document.
You need to save and submit this entire document.
Do not remove any sections of the document.
Do not save your completed assignment as a PDF.
The assignment must be completed before submitting it to Kaplan Professional Education.
Incomplete assignments will be returned to you unmarked.
The maximum file size is 5MB. Once you submit your assignment for marking you will be unable to make
any further changes to it.
You are able to submit your assignment earlier than the deadline if you are confident you have completed
all parts and have prepared a quality submission.
The assignment marking process
You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
Should your assignment be deemed ‘not yet competent’, you will be give an additional four (4) weeks to
resubmit your assignment.
Your assessor will mark your assignment and return it to you in the Securities and Managed Investments
(DFP4v2) subject room in KapLearn under the ‘Assessment’ tab.
Make a reasonable attempt
You must demonstrate that you have made a reasonable attempt to answer all of the questions in
your assignment. Failure to do so will mean that your assignment will not be accepted for marking;
therefore you will not receive the benefit of feedback on your submission.
If you do not meet these requirements, you will be notified. You will then have until your submission
deadline to submit your completed assignment.
How your assignment is graded
Assignment tasks are used to determine your ‘competence’ in demonstrating the required knowledge
and/or skills for each subject. As a result, you will be graded as either competent or not yet competent.
Your assessor will follow the below process when marking your assignment:
• Assess your responses to each question, and sub-parts if applicable, and then determine whether you
have demonstrated competence in each question.
• Determine if, on a holistic basis, your responses to the questions have demonstrated overall
competence.
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‘Not yet competent’ and resubmissions
Should sections of your assignment be marked as ‘not yet competent’ you will be given an additional
opportunity to amend your responses so that you can demonstrate your competency to the required level.
You must address the assessor’s feedback in your amended responses. You only need amend those sections
where the assessor has determined you are ‘not yet competent’.
Make changes to your original submission. Use a different text colour for your resubmission. Your assessor
will be in a better position to gauge the quality and nature of your changes. Ensure you leave your first
assessor’s comments in your assignment, so your second assessor can see the instructions that were
originally provided for you. Do not change any comments made by a Kaplan assessor.
Units of competency
This assignment is your opportunity to demonstrate your competency against these units:
FNSASICW503 Provide advice in securities
FNSASICT503 Provide advice in managed investments
FNSFMK502 Analyse financial market products for client
FNSFMK503 Advise clients on financial risk
FNSCUS505 Determine client requirements and expectations
FNSCUS506 Record and implement client instructions
FNSINC501 Conduct product research to support recommendations
FNSIAD501 Provide appropriate services, advice and products to clients
We are here to help
If you have any questions about this assignment you can post your query at the ‘Ask your Tutor’ forum in
your subject room. You can expect an answer within 24 hours of your posting from one of our technical
advisers or student support staff.
Page 6 of 52

Part 2: The assignment
Section 1: Case Study Questions
Case study 1 (Arthur and Gwen)
Background information
Arthur (61) and Gwen (62) have recently sold their four-bedroom home of 35 years, downsizing into a new
‘over 55s’ townhouse. This has generated net proceeds of $250,000, and as this is the first time they have a
significant amount of surplus funds, they have decided to seek some investment advice. After some
discussion, you have determined the following facts.
Employment
Arthur is still working, but will look to retire from the workforce in two years time. Arthur earns $120,000
(including super) as a meteorologist. Gwen does not work and has no intention of rejoining the workforce.
Savings and spending
Arthur is not currently making any contributions into super apart from his employer’s 9.5% SGC.
Since paying off their mortgage a few years ago, they have tended to save about $5000 every year from
Arthur’s income, which has been going to their savings account. They have looked at their budget over the
years and they figure that they spend about $1000 per week on bills, food and lifestyle expenses. This level
of spending will likely continue after Arthur is retired.
Page 7 of 52

Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home Joint $500,000 $0 $500,000Recent purchase price
Home contents Joint $130,000 $0 $130,000Replacement value
Car Arthur $18,000 $0 $18,000Hyundai Excel bought 9 years ago new
Car Joint $10,000 $0 $10,000Toyota Rav4 bought 3 years ago
second-hand
Transaction account Joint $10,000 $0 $10,000Usually maintain float of $10,000;
surplus transferred into savings account
periodically
Total personal assets $668,000 $0 $668,000
Superannuation
Employer superannuation Arthur $590,000 n.a. $590,000Balanced option
Employer superannuation Gwen $65,000 n.a. $65,000Conservative option
Total superannuation $655,000 $655,000
Other investments
Savings account Joint $290,000 Nil $290,000Includes net proceeds from downsizing
Total other investments $290,000 Nil $290,000
Total investments $945,000 $945,000
Net worth $1,613,000 $0 $1,613,000
Investment objectives
• Neither Arthur nor Gwen has had any experience with investing (apart from term deposits). They were
both surprised to hear that they had the ability to decide how their superannuation was invested.
• They are definitely worried about losing money through their investments, and when first asked they
indicated that they want to eliminate the risk of any capital losses. However, after some discussion,
you uncover that they would be comfortable with some volatility, including short-term losses, but
wanted to limit losses in any one year to –10% of the starting investment value.
• Arthur feels that a return of about 10–15% p.a. would be good. He saw the value of his old home
increase fivefold since they initially purchased it and understands that investments can earn a lot more
than term deposits. Gwen commented that she has a friend ‘who does some sort of FX trading and she
makes a lot of money through investing’.
• They would like their investments to cover their spending through retirement, and will leave their only
child whatever assets they have left when they have passed away.
• Gwen does not want her money invested in companies that she believes are harming society,
including tobacco companies, alcohol suppliers and coal miners.
• Arthur is interested in investing more in emerging technologies and developing countries as he feels this
is a common-sense way to make money faster.
• They do not want to invest in hedge funds as they have heard negative reports over the years about the
way they operate.
• They want their investments to be managed all together (i.e. combined risk profile).
Page 8 of 52

Case study 1: Question 1
(a) Determine the clients’ ability to take on investment risk (low, average, high) and provide two key
reasons for this assessment. (100 words)
(b) Determine the clients’ willingness to take on investment risk (low, average, high) and provide
two key reasons for this assessment. (100 words)
(a). Arthur and Gwen has surplus for investment of $250000 and they wants to invest it. Various
investment options are available to them. their risk taking ability is average because:
Arthur and Gwen have limited sources of income. Arthur is going to be retired in two years and
after that they have to use their saving for daily expense.
They only allow up to 10% short term loss and 10 to 15% profit is sufficient for them. An
investment of $ 945000 is also hold by them so they can bear short losses. This situation indicates
their average risk assessment liability.
(b). risk tolerance is defined as the emotional willingness of client to take risk. After considering all
aspects of client’s profile it is concluded that willingness to take risk is Low because:
They do not allow capital losses and wants to leave something for their child. Only 10 to 15 %
return on investment is sufficient for them and the same can be achieved in low level of risk.
They have limited sources of income. After two years when Arthur gets retired only their invested
capital is available to cover their daily expenses. All these reasons affects the risk tolerance of
Arthur and Gwen
Assessor feedback: Resubmission required?
No
Page 9 of 52

Case study 1: Question 2
Is the clients’ return objective appropriate? Why or why not? What further actions should be taken prior to
establishing an investment strategy? (200 words)
Client’s objective is appropriate as per his financial situation. Client is going to be retired in next
two years. Client’s partner Gwen does not work so there is no regular income source to cover
routine expenses. After considering all these factors, a defensive investment strategy is advised for
this client. Following steps should be taken before establishing investment planning:
Financial position: it is necessary to examine own financial position and possible financial needs
before making investment strategy.
Financial objectives: after identifying financial situation it is necessary to determinate financial
aims of client. In this step investment goals are prepared after considering accepted level of risk
and desired return.
Investment allocation: by considering risk and return analysis client can develop a proper
investment allocation strategy.
Identify investment options: with the help of investment allocation plan an appropriate asset mix
can be decided.
Execution, monitor and improvement; after deciding appropriate mix, client can invest in pre-decide
options and monitor the actual return with desired standards. If there is any adverse result he can re-
balance his planning.
Assessor feedback: Resubmission required?
No
Page 10 of 52

Case study 1: Question 3
Refer to the risk profiles in Appendix 1. Which of these would be most appropriate to meet the clients’
investment needs? (100 words)
According to the need and ability of client moderate investment approach is appropriate. It is 72%
defensive approach. This approach is used when client desires better then basic returns but risk level
must be low. This approach is appropriate for client in following manner:
Client is going to be retired in two years and after this, they do not have any income source so they
want to protect their wealth for future expenses.
In this approach up to 23% return is possible. Client desires only for 10 to 15 percentage return so it
is suitable for client.
In this approach 75% amount is invested in fix interest provider options and the same will solve the
liquidity problem of client after retirement.
Assessor feedback: Resubmission required?
No
Page 11 of 52

Case study 1: Question 4
List and describe four (4) different investment constraints the clients exhibit. (200 words)
Investment decisions are affected by various constraints. Every investment adviser needs to
consider these constraints during decision making. Constraints which affects the investment
decisions are as follows:
Liquidity: As future is uncertain, every person wants to reserve some money for unexpected future
needs and the same will constraints the investment amount. It is necessary for advisor to focus on
liquidity constraints when he is taking decisions about investment portfolio.
Tax rules: this factor rely upon how, when and if investment returns are taxed. In the case of sole
person all profits and incomes created by his portfolio are taxable. It is necessary for an advisor to
analyse the tax policy when he decides investment options.
Time period: various short term and long term investment options are available to the investor.
Smart investment analysis is required to earn the expected returns. Time is also an important factor
in this analysis. For example, client may require funds to pay the higher education fees in future. So
it is very important for client to maintain appropriate balance of short term and long term
investments while making investments.
Internal issues: internal issues are related with the client’s special concerns like culture and
traditions. Some investors do not want to invest in tobacco and alcohol companies. These internal
constraints should be considered at the time of investment decision-making.
Assessor feedback: Resubmission required?
No
Page 12 of 52

Case study 2 (Mario and Corsette)
Background information
Mario (32) is a systems engineer in the local arm of a large multinational software company. He is married
to Corsette (28). They have two young children and they live in an apartment in the inner city. He has
recently inherited his grandfather’s Australian share portfolio, a property located in a different city and
some cash, and he is looking for investment advice. Following a lengthy fact-find meeting with only Mario,
you have collated the following information.
Employment
Mario has been working for his current employer for 18 months and earns $135,000 plus 9.5% SGC.
Corsette has never been gainfully employed, but is currently studying part-time. Mario has no plans to
retire in the foreseeable future.
Savings and spending
Mario and Corsette spend most of their income, with any surplus funds usually used to fund new gadgets,
cars or holidays.
Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home Joint $700,000 $400,000 $300,000Purchased 5 years ago. 25 years left on
mortgage
Home contents Joint $100,000 $0 $100,000Replacement value
Car Joint $38,000 $24,000 $14,000Toyota Kluge
Car Joint $18,000 $0 $18,000Mini Cooper
Boat Mario $25,000 $0 $25,000His father’s old boat
Transaction account Joint $2,000 $0 $2,000Usually have at least $2,000
Total personal assets $883,000 $424,000 $459,000
Superannuation
Personal superannuation Mario $95,000 n.a. $95,000High growth option
Total superannuation $95,000 $95,000
Other investments
Cash management account Mario $50,000 $0 $50,000Inheritance cash. Receives income from
property and share account (approx.
$40k p.a.)
Investment property Mario $480,000 $0 $480,000Inherited with a cost base of $480,000
Australian share account Mario $650,000 $0 $650,000Inherited with an aggregate cost base of
$240,000
Total other investments $1,180,000 $0 $1,180,000
Total investments $1,275,000 $0 $1,275,000
Net worth $2,158,000$424,000 $1,734,000
Page 13 of 52

Investment objectives
• Mario doesn’t want to sell the inherited property as he has fond memories of spending time with his
grandparents in the house. He plans to rent it out indefinitely.
• Mario’s grandfather had generated a lot of wealth through investing in ASX-listed blue-chip companies
and he wishes to retain at least half of this inherited portfolio.
• Mario is not averse to borrowing funds to invest.
• Mario wants their investments to be managed all together (i.e. combined risk profile).
Risk profile
Mario has determined that his investments should be managed in line with that of a ‘growth’ investor.
He understands the risks that come with such a strategy, but is willing to accept these risks due to the long
timeframe he has until his potential retirement.
Page 14 of 52

Case study 2: Question 1
(a) Determine the client’s ability to take on investment risk (low, average, high) and provide two key
reasons for this assessment. (100 words)
(b) Determine the client’s willingness to take on investment risk (low, average, high) and provide
two key reasons for this assessment. (100 words)
(c) Even though the investments are all in Mario’s name, why would it be appropriate to also ascertain
Corsette’s attitude towards investment risk? (100 words)
(a). clients risk ability is determinate after considering the financial situation. Risk taking ability
depends on various factors. In present case risking taking ability of Mario is high because:
Client has no plan to retire. This situation represent that macro has a continuous income resource.
So he can take high risk to avail high growth.
Macro receives assets from his grandfather like a home, cash amount and shares. Property and
shares generates annually $ 40000 for him also. All these things show that macro has a sound
financial position. So he can take high risk to earn high return.
(b) Risk tolerance or risk willingness depends on various factors like financial position of client,
previous experience of investing and cultural believes. In present case, risk willingness of client is
high because
Macro is ready to borrow funds to invest. It shows that macro has a target of high return with
appropriate strategy planning. Also macro wants to invest in ASX-listed blue-chip companies
which are subject to market. It shows the high risk willingness of client.
Macro has no plan to retire so there is no risk of liquidity for him in near future and the same reason
inspires macro to take high risk to earn high returns. Property received from his grandfather also
gives him an opportunity to avail monthly rental income. Due to all these reasons risk willingness
of macro is high.
(c) Macro is married to corsette. Both lives together and has two children also. Some studies
concludes that women’s are more risk averse than man. Family is a team and if macro takes some
wrong investing decision it will affect both. By considering corsette’s attitude towards risk adviser
can understand the financial needs of family more appropriately. Additionally, corsette is depended
on macro and they spend most of their income for their routine expenses. By considering the
attitude of corsette advisor can interoperate the risk-willingness and the need to take risk. So he can
take more efficient decision about investments.
Assessor feedback: Resubmission required?
No
Page 15 of 52

Case study 2: Question 2
(a) Identify the client’s main investment constraints. Are these objectives rational from an investment
point of view? (200 words)
(b) How might these constraints affect the client’s asset allocation? What are some appropriate ways of
dealing with this? (200 words)
(a): Investor constraints are those limitations which affects investment decision of investor. Investor
constraints are very important and need to be considered in investment decision-making for growth.
some constraints are discussed below:
 Liquidity needs: due to uncertainty of future it is necessary to maintain some cash in reserve
and the same affects the decision of investment. Client is planning to Purchase electronic
gadgets. If client maintain some cash reserve he can avail the benefit of sudden opportunities.
All above factors is liable for liquidity constraints. Additionally, liquidity is rational from an
investment point of view because it is related with lifestyle.
 Time of investment: various options are available to client with different investing time
options. Appropriate balance of short-term and long term investments is required to meet the
future needs. For example if macro invests all amounts in long term options it will affect the
availability of funds.
 Legal and tax rules: tax rules directly affect decision making process. If a person falls in high
tax bracket he wants to invest in long term fix assets to save the tax on income. In other head,
common tax rules are also affects investment decisions like if interest income is charged with
high rate in the comparison with dividend investor wants to invest in equity to save tax. In this
way study of tax rules is required while taking investment decisions.
 Individual reasons: individual reason involves ethical and cultural believes of investors. Macro
does not want to sell his grandfather’s house due to emotional attachment otherwise he can
invest in other high return options.
(b): various constraints and asset allocation is directly connected. If mario has insufficient funds he
will invest in short term funds so he can maintain proper liquidity. But if mario has sufficient and
excess funds he will invest in fix and long-term assets. Tax structure also affects assets allocation. if
short term gains taxed with high rate client will prefer to invest in long term fix assets. Personal
reasons also have direct effect on asset allocation. If client follows aggressive approach to invest he
will invest in market securities or wise versa.
Following three approaches can be followed to deal with these constraints:
 Bench mark approach: in bench mark approach investor needs are compared with bench
marks. With the help of this analysis investor can identify the appropriate investment
portfolio.
 Strategic allocation method: in this method appropriate asset mix is generated to ensure
the proper balance between risk and returns.
 Dynamic asset allocation method: dynamic approach also similar to the strategic approach
but after generating proper asset mix dynamic method includes regular monitoring to
maximise the return.
 Tactical approach: it is a highly active method includes investment in those sectors which
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provides high returns with low risks.
Assessor feedback: Resubmission required?
No
Page 17 of 52

Case study 2: Question 3
What concerns might you have in regards to recommending gearing for this client? (100 words)
This client has a sound financial condition and he also received monetary benefits from his
grandfather. This client is taking high risk to avail high returns. It is advice to mairo that he has to
follow dynamic strategic approach to manage the investment portfolio. Gearing refers comparison
of debt with equity. For an individual client gearing is s process to borrowing funds for investing
purpose in shares and property.
During borrowing funds from market following concern has to be kept in mind:
Income from geared amount may be less than its cost.
Value of geared investment may decrease.
If amount is borrowed in floating interest rate scheme, may interest rate will increase.
In the case of Mario, he wants to rent out the property it possible that tenant damage the property.
Assessor feedback: Resubmission required?
No
Page 18 of 52

Case study 2: Question 4
What are some other considerations that might be important for the clients to take into account?
(200 words)
Identify your risk needs: before investing every client should have to identify the need of risk and
investment. Object may different for every client for example someone wants to invest for
retirement or another person wants to invest for high profits without thinking about risk factor.
Once client identify the object of investment he can choose appropriate investing options.
Invest as per goals: as earlier discussed, every person invests with different goals. Time of
investing period depends on these objectives. A person who wants to invest for retirement will
invest in long term investments or property. In other hand, a person wants to invest for holiday
expenses will invest in short term goals. It is necessary for every client to invest as per needs.
Understand cost: if someone wants to invest in shares and securities he has to pay charge to unit
trust provider. Client can ask his unit trust provider to give a cost break down so he can save this
cost if he incurs loss.
Maintain emergency funds: it is necessary for every client to maintain an emergency fund for
sudden needs like unemployment.
Tax applicability: every client has to identify the tax bracket applicable for his income. With the
help of this identification he can easily choose appropriate investment as per his financial position
and risk taking ability.
Assessor feedback: Resubmission required?
No
Page 19 of 52

Case study 3 (Sam and Rosie)
Background information
Sam (46) and Rosie (43) are the trustees and members of the Gam G Family Super Fund and are seeking
investment advice in regards to the fund’s assets. If possible, they want their investments to be invested
directly (e.g. listed shares, direct holdings), and not through managed funds.
Super fund portfolio — current
Asset $ % Notes
AUSTRALIAN EQUITIES
BHP Billiton (BHP) 55,000 4.2
Commonwealth Bank (CBA) 70,000 5.3
National Australia Bank (NAB) 60,000 4.6
Rio Tinto (RIO) 60,000 4.6
Westpac Bank (WBC) 70,000 5.3
Wesfarmers (WES) 60,000 4.6
INTERNATIONAL EQUITIES
ExxonMobil (XOM) 80,000 6.1 US-listed shares
PROPERTY and INFRASTRUCTURE
46 Factory Lane 350,000 26.6 Commercial warehouse
Transurban (TCL) 25,000 1.9
Westfield Group (WDC) 30,000 2.3
ALTERNATIVE ASSETS
Gold bullion 40,000 3.0
FIXED INTEREST
ANZ Capital Notes 3 (ANZPF) 90,000 6.8
CASH
CBA cash management account 45,000 3.4
Bankwest term deposits 280,000 21.3 < 1 year maturity
Total investments $1,315,000 100.0%
Investment objectives
• Sam and Rosie want to diversify their super further into international assets.
• They are skeptical about debt securities as they cannot see how they can provide adequate returns in
the current environment of ultra-low interest rates.
Page 20 of 52

Super fund investment strategy — asset allocation
Asset Target % Range % Notes
AUSTRALIAN EQUITIES 25 20–30
INTERNATIONAL EQUITIES 20 10–30
PROPERTY and INFRASTRUCTURE 25 20–30
ALTERNATIVE ASSETS 0 0–20
FIXED INTEREST 15 10–25
CASH 15 10–50 Includes short-term deposits
Page 21 of 52

Case study 3: Question 1
(a) Discuss the main costs and benefits of investing directly as opposed to investing through managed
funds. (200 words)
(b) Describe the main types of equity and debt securities available to an Australian retail investor.
(200 words)
(a) following are some cost and benefits of investing directly:
Benefits:
Control: direct investment enable an investor to control his portfolio directly. Investor can choose
his investing option by analysing his risk taking ability and return expectations.
Transparency: if Sam and Rosie invest directly they can see their portfolio at any time via broker
websites. Also direct investment provides real-time transaction facility. In this way direct investing
provides transparency and liquidity.
Tax savings: direct investing saves capital gain tax for investors. Fund managers make many
transactions on the behalf of investors. This activity generates capital gain tax. Direct investing
saves this tax for investor.
Cost saving: in the case of direct investment, only brokerage is paid by investor which is low in the
comparison of fees charged by fund managers. Fund manager charges various internal transaction
fees, advice fees and other annual subscription fees. Investor can save these expenses by choosing
direct investment options.
Limitations:
Time consuming: if client wants to invest directly he has to pay time to analyse and decide the
investment mix.
Lack of expert advice: direct control comes with some threats. If a person invests directly, he can
not avail the benefit of expert advice which is available in managed funds.
Risk level: direct investing ignores the expert advice which can be provided by fund managers. It
causes the risk of wrong investment decisions. Wrong selection of investment may generate loss for
client.
(b) Various types of equity and debt options are available to an Australian retail advisor:
Equity:
Ordinary shares: these are most common types of shares available for Australian investor and also
known as fully paid ordinary shares.
Preference shares: these shares are superior from normal shares because a right of dividend is hold
by preference shares.
Contributing shares: these shares are also known as partly paid up shares. In the case of
contributing shares some part of price is payable immediately and the balance in instalments.
Company options: company options provide a right to holder to take certain number of shares at
Page 22 of 52

pre-decided price after a fix time period.
international equity
Debt options:
Corporate bonds like AUD 175(issued by SCA property) , AUD 288 (issued by lendlease real
estate)
Australian government bonds
Kangaroo bonds
 Managed funds
 Gold bonds
 Hybrid securities.
 Self-manage bonds
Assessor feedback: Resubmission required?
No
Case study 3: Question 2
(a) Refer to the current portfolio and investment strategy. What investor risk profile best describes these
clients and why? (100 words)
(b) In what ways does the current portfolio breach the super fund’s stated investment strategy?
(100 words)
(a) After considering current portfolio and investment strategy growth risk profile is best for this
Sam and Rosie. This profile includes high risk and volatility with higher investment returns. Sam
and Rosie both are trustees of Gem G Family super funds and have sufficient income to invest.
They want to hold their 72% of portfolio in high growth providing securities and equities. They are
ready to accept balanced risk level to increase the capital growth. Under Growth risk profile 75%
portion of portfolio is invested in aggressive investment options. Sam and rosier are also ready to
accept negative returns to earn high returns. In this way growth risk profile is suitable for them.
(b) Current portfolio hold by Sam & Rosie and their super fund strategy is different from each
other. They want to earn huge returns and for the same they are ready to accept negative results
also. Additionally, Current portfolio of Sam and Rosie follows balance risk and asset allocations
approach because ratio of growth and defensive investment is 1:1. Super fund investment strategy
includes more investment in equity and international securities. Same and Rosie are ready to take
high risk to achieve the high return targets so they want to invest 75 % of their amount in shares and
securities.
Assessor feedback: Resubmission required?
No
Page 23 of 52

Case study 3: Question 3
(a) Explain the concept of systematic risk and how it relates to diversification. (200 words)
(b) Determine whether there is adequate diversification in the equities portion of the clients’ portfolio,
and provide two (2) recommendations that might help to improve the portfolio’s diversification.
(200 words)
(a) Systematic risk: systematic risk is incudes variation of investment returns arise due to change
in market conditions. It is a risk which is associated with market returns. It includes the risk of
negative returns due to change in macro market factors like change in government policy,
international market changes or nature acts. It is also known as market brisk or volatility risk. Two
types of systematic risk is funded in market
Interest risk: arise due to variation in interest rates
Market risk: arise due to variation in share prices
Systematic risk is directly related with diversification and can be manage by appropriate
diversification. If an investor follows appropriate asset allocation method and diversify his portfolio
in various categories of investment options he can manage the fluctuation of returns. For example if
interest rate increases value of stock will increase. If investor has appropriate mix of shares and fix
interest bonds he can avail the benefit of stock increase But if investor holds only one type of
investments variation in market will increase systematic risk for him. Liquidity is most important
factor to manage the systematic risk.
(b) Yes, Sam and Rosie have adequate diversification in equity portion. They have various types
of equity investment in their portfolio like BHP billiton and rio tinto. They follow growth risk
profile approach and also invest in international equities. 35% of their portfolio is equity
investments. To improve the diversification following recommendations can be followed:
They hold 21.3% term deposits. Out of this portion they can purchase up to 10% government bonds
to decrease the risk level of portfolio.
Assessor feedback: Resubmission required?
No
Page 24 of 52

Case study 3: Question 4
(a) Discuss the role of fixed interest assets in a portfolio. (200 words)
(b) Describe the benefits of including an exposure to government bonds in the clients’ portfolio and how
this might be accomplished (given the clients’ preference for investing in direct securities).
(200 words)
Fix interest assets are very important for an investor’s portfolio. It provides diversification to reduce
the level of risk. High investment in these assets shows low risk taking willingness. Fix interest
assets are more secured than equity shares and securities. It is necessary for every investor to make
an appropriate investment mix by including fix interest asset to manage the potential risk. Fix
interest assets may provide less return but they have some special advantages like:
Secure principal: invest in fix interest assets provide balanced diversify portfolio and capital
security. Fix interest assets like bonds, government securities or bank deposits are secured in nature
and the principal amount is paid at the time of maturity. By investing in these options investor can
preserve his capital.
Regular income: fix interest asset generates regular income for investor. By investing in these
options investor can plan his retirement with regular income and secured principal.
Right on assets: fixed interest assets are secure with company’s assets. If company goes in
liquidation they will payed on priority basis. In this way investment in fix interest asset provides
prevent from negative results.
Liquidity: fix interest assets increase liquidity of investor. Investor can avail an option of interest
withdrawal periodically. In this way it increases the liquidity.
(b) Government bond plays very important role in investor’s portfolio. Government bonds are those
securities which are issued by government of Australia. It plays critical but defensive role for
investor. various advantages of government bonds are:
Diversification and risk management: diversification is related with balance mix of appropriate
investments which provide targeted returns in controlled risk. Effective diversification saves
investor from systematic and unsystematic risks.
Principal security: one most and attractive advantage of government bond is principal security.
Government bonds contains repay guarantee from government. With the help of government bonds
investor can minimise the risk of capital loss.
Long term saving: government bonds provides a facility of saving for future. These are
guaranteed by Australian government and can be used to invest in long term.
Sam and Rosie want to invest directly in shares and securities. They have a target to invest in
Austrian equities up to 25%. And in international securities up to 20%. Both they are ready to take
huge risks to avail huge capital returns. They also have planning to invest in alternative and fix
interest assets up to 25%. To avail the benefit of government bonds they can add government bonds
in this section. It is necessary for Sam and Rosie to manage their investment mix appropriately so
they can earn high returns.
Page 25 of 52

Assessor feedback: Resubmission required?
No
Page 26 of 52

Case study 4 (John and Lily)
Background information
John (21) and Lily (21) have put together a trust to help pay for their newborn son Harry’s board and tuition
at a prestigious college (to begin in 11 years time). As a result of the liquidation of various assets, they have
contributed $500,000 into the trust.
Harry’s education trust
Asset $ % Notes
AUSTRALIAN EQUITIES
–
INTERNATIONAL EQUITIES
–
PROPERTY
–
ALTERNATIVE ASSETS
–
FIXED INTEREST
–
CASH
–
Bank account $500,000 100.0
Total investments $500,000 100.0%
Risk profile questionnaire
Investment attitude details
Please answer the following questions regarding your attitude to financial issues.
Are you concerned about the amount of tax that you are paying? Why? Yes/No
We do not wish to borrow for investment purposes.
How important is liquidity (i.e. funds available) to you? Why? Very/Moderately/Not
We do not need the funds now but would not want them locked up until Harry turns 11.
If you had funds available for investing, how would you choose to invest them? Why?
We want to invest across different areas of investments.
Are there certain sorts of investment that you wish to avoid? Which ones? Yes/No
We do not want to invest in companies that are likely to cause harm to society.
Page 27 of 52

Determining your investor risk profile Points
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.
Q1. Which of the following best describes your current stage of life? Client 1
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
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
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
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
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
Retired. You are no longer working, so 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
Q2. What return do you reasonably expect to achieve from your investments? Client 1
A return without losing any capital 10
1–3% p.a. 20
3–6% p.a. 30
6–9% p.a. 40
Over 9% p.a. 50
Q3. If you did not 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 was any loss in value 10
Less than 1 year 20
Up to 3 years 30
Up to 5 years 40
Up to 7 years 45
Up to 10 years 50
Q4. How familiar are you with investment markets?
Very little understanding or interest 10
Not very familiar 20
Have had enough experience to understand the importance of diversification 30
Understand that markets may fluctuate and that different market sectors offer different income, growth and taxation
characteristics 40
Experienced with all investment sectors and understand the various factors that may influence performance 50
Page 28 of 52

Q5. 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
Stable, reliable returns, minimal tax savings 20
Some variability in returns, some tax savings 30
Moderate variability in returns, reasonable tax savings 40
Unstable, but potentially higher returns, maximising tax savings 50
Q6. 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
You would cut your losses and transfer your money into more secure investment sectors 20
You would be concerned, but would wait to see if the investments improve 30
This was a calculated risk and you would leave the investments in place, expecting performance to improve 40
You would invest more funds to lower your average investment price, expecting future growth 50
Q7. Which of the following best describes your purpose for investing?
You want to invest for longer than five years, probably to the age of 55–60. You are mainly investing for growth to
accumulate long-term wealth 50
You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-term wealth 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
You are nearing retirement and you are investing to ensure that you have sufficient funds available to enjoy retirement 20
You have some specific objectives within the next five years for which you want to save enough money 20
You want a regular income and/or totally protect the value of your savings 10
Investor profile total points ?
Page 29 of 52

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
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.
Other investment objectives
• John and Lily want a well-diversified portfolio in line with their risk profile.
• They have heard that using index managers is most appropriate for retail investors and would like some
advice in this regards.
• They are skeptical about debt securities as they cannot see how they can provide adequate returns in
the current environment of ultra-low interest rates.
• John would like to see a reasonable exposure to China and other emerging markets.
• Lily has a preference for socially responsible companies and investments.
Page 30 of 52

Case study 4: Question 1
(a) The ongoing review of portfolios is an important component of the investment advice process.
Comparing this case study (John and Lily) to the previous case study (Sam and Rosie), determine and
explain an appropriate frequency of review for the respective portfolios. (200 words)
(b) Explain the different fee arrangements that are commonly used by fund managers. (200 words)
a) Through ongoing reviews of both portfolios related to investment advises there is far differences
between both case studies of “John and Lily” & “Sam and Rosie”. In the portfolio of Sam and
Rosie, both are seeking investment advice in the subject of raising their funds to the assets and
properties where as Sam and Rosie needs investment advice in regards of liquidation of valuable
assets in order to get profitable responses from the advisor. In the John and Lily case, the
consideration would be made in relation of index manager which not be appropriate for them. They
had preferred social responsible company to invest whereas in the case of Sam and Rosie, they
wanted to invest directly in shares and direct share holdings. They preferred to diversify their assets
and super properties into international assets in order to achieve and get expected returns from such
investment into international assets and direct share holding (Barton, 2017)
b) The fee arrangements could be made through funds managers for switching from funds
manager series to investment options as per various investment options availed before
investors.
These fee arrangements are:
1. Establishment fee: These fee arrangements could be made at the time of opening investment
amount with hr help of funds manager.
2. Contribution fee: this component is changed by fund manager in order to make initiate
investments into various funds and different places as a contribution there after.
3. Withdrawal fee: These fee arrangements are made by fund manager while with drawling the
funds from investing amount it is known as redemption fee out of premium.
4. Switching fee: this fee arrangement is done by finds manager basically at the time of switching
from one funds manager series to another.
5. Termination fee: this fee can be arranged by fund manager when investor wants to terminate their
whole accounts and would not be able to continue with all investment policies.
6. Advisor service fee: majorly many advisor charges fee in the name of consultancy. It is done
basically when investor are going to switch from one funds option to another such as switching
from growth to balanced options. Funds manager provide advice about which options could be
better and effective for investor, for this he charges as a consultancy fee (Hada, et. al., 2016).)
Assessor feedback: Resubmission required?
No
Page 31 of 52

Case study 4: Question 2
(a) Give three (3) reasons why an investor might consider using active fund managers. (100 words)
(b) Which asset classes or strategies might be suitable for the passive approach to investing, and why?
(100 words)
(c) Describe two (2) different investment styles an equity fund manager might use. (100 words)
a) reasons of using active fund manager at the time investment:
1. Active fund managers are attentive towards latest moves related to passive investing usage of low
cost premiums.
2. They have an effective knowledge of market trends and nobody could argue consistently beating
overall market behaviour.
3. They have quite better knowledge of interests of investors related to investment in passive
products. They could better advice by using benchmark index and by setting KPIs’ for providing
expected returns to the investors (Cornell & Nanigian, 2017).
b) Passive investment and is the method that provide maximum returns and profit over the long
term basis. So the investment in shares, debentures and long run securities would be beneficial for
the investor as passive investment to get long term returns and for potential frequent trading.
Reason: it is so because; investment in long run process would be helpful in providing long run
benefit. Sometimes investors do not attempt the profit from short run investment and price
fluctuations that is why market generally posts positive returns on the basis of passive investment
strategy (Cornell & Nanigian, 2017).
c) a fund manager could use two major investment style such as:
1. Growth investing: fund manager could be using such investment strategy as style to invest in
facts growing firm and in underpriced industry. This investment tool is taken as growth style with
high earning and yielding rates and with high profit margins. It takes low dividend yielding while
investment.
2. Value style: value investment style is used in the management via funds manager to focus on
buying a strong firm by investing in their equity more than 50%. This investment is made by fund
manager for that investor who needs to make a lot of money. This style analyses at low price to
yielding ratio, low prices to selling ration and create higher dividend yielding objectives (Barton,
2017)
Assessor feedback: Resubmission required?
No
Page 32 of 52

Case study 4: Question 3
(a) What are some of the key things an investor might focus on when evaluating fund managers?
(200 words)
(b) Research one of the Australian share funds listed on the approved products list (refer to Appendix 2):
(i) Describe the fund’s objectives and strategy. (100 words)
(ii) Determine the fund’s benchmark and analyse its relative performance over the past five years.
(100 words)
(iii) Determine whether the fund should be included in the client’s portfolio. (100 words)
(a)For evaluating fund managers following key things should keep in mind:
Performance: to evaluate fund manager investor has to analyse recent performance of fund
manager and then take decisions accordingly.
Experience of fund managers: accuracy of investment decisions is dependent on experience also.
Experienced fund managers can determinate Variations of market more appropriately (Schmidt,
2018).
Risk quotient: risk exposer level of fund manager should be identified when evaluating fund
managers (Sharma, 2017).
Turn over: during the evaluation of fund manager, it is necessary to analyse the past turn over
record of manager because unusual turn over may generate extra cost for investor like extra tax
liability (Schmidt, 2018).
Volatility: while evaluating fund managers, it is necessary to see the record of variation because
huge changes in investment prices show that manager takes unusual risk which is not beneficial all
time and it is possible that investment decision of manager may harm investor’s capital (Sharma,
2017).
Consistency: everyone wants regular returns from investments. When evaluating a fund manager,
consistency of return is must because regular return increases liquidity.
(b) Abacus property is choosing for this question.
(i) Abacus is a stipulated company. The object of fund is:
Growth funds: most common objective of fund is to provide growth to investors. The primary
object of any fund is increase in capital.
Income funds: other object of fund is to provide income to investors. Investment object of abacus
property group is providing high returns to its customer.
Strategy: abacus following the strategy to invest capital in core properties. By doing this abacus
property group avails the benefit of high long term capital returns and profitability.
(ii) Abacus property group provides high return regularly. Performance of fund is good and price
change percentage of fund for last month is 4.10%.
Page 33 of 52

Above table shows the performance of abacus property group. Table shows that abacus group fund
provides continuous increase in earning per security. Proposed and paid dividends of company is
also increase regularly. Company is regularly adding assets in account. It shows that overall
performance of fund is good.
(iii) Concerned fund provides regular growth in long-term period. Jon and Lilly wants to invest for
their son harry. Both they do not wants to take high risk and willing to follow balance approach. As
liquidity is moderate issue for them this fund is suitable for their portfolio and they can add it.
Assessor feedback: Resubmission required?
No
Page 34 of 52

Case study 4: Question 4
Assume you put the entire trust funds into the Netwealth Investment Wrap platform (refer to Appendix 2).
Provide the following to John and Lily (400 words):
(a) recommended client portfolio (a reasonable basis for advice for each investment chosen is
not required)
(b) recommended asset allocation
(c) fees.
(a) If entire trust fund will invested in net wealth investment warp platform following portfolio is
recommend.
Perennial Value Microcap Opportunities trust
A-CAP RESOURCES LIMITED
ABUNDANT PRODUCE LIMITED
ACCENT RESOURCES NL
ADMEDUS LTD
AUSTRALIAN UNITED INVESTMENT COMPANY LIMITED
AUSTRALIS OIL & GAS LIMITED
ASPERMONT LIMITED.
All above investment options can be avail by john and Lilly. They can invest in these companies
because all options are listed in ASX. They wants to invest for their children and do not ready to
accept loss of capital. By availing all above options they will follow growth risk profile. In this
profile investor prefers investment in high return provider options with balanced risk level.
(b)
Defensive St
rategic asset
allocation
For $ 500000
Australian equities 20% 50%
Growth
100000
International
equities
20% 100000
Property* 7% 35000
Alternatives 13% 65000
Fixed Interest 35% 50%
Defensive
175000
Cash** 5% 25000
Total 100% 500000
After considering the risk willing ness and risk ability of john and Lilly a balanced risk profile is
advised. In this profile. They are careful investor and want a balanced investment mix to achieve
medium to long- term financial goals. Above asset allocation is provided after considering all needs
Page 35 of 52

of them. With the help of above asset allocation they can avail tax benefit also. Above asset
allocation shows that 50% amount will invested in growth oriented securities and balance 50%
amount will invest in secure options. As they have limited funds to invest and their expectations for
return is up to 9%, above asset allocation is perfectly suitable for them.
(c)
Fees type automated DIY ETFs Mutual
funds
Traditional
manager
Minimum
investment
Nil Nil Nil $200,000+
Trading fees
annual
Nil $500 Nil Fluctuates
Fund
expense ratio
average
0.20% 0.65% 1.20% 1.20%
Fund trading
cost
0.01% fluctuates 1.50% Fluctuates
Management
fees
0.50% Nil Nil 0.98%
Cost/ year $1500 $3,800 $6000 $11000
As an investment manager one would charge various kinds of charges on annual basis from the customer.
For example in the above example if one wants to invest $500,000 one needs to pay fund expense tratio of
about 0.20% of total amount and trading cost 0.01% of the total amount and the management fees that is
0.50 % of the total amount which are the percentage ratio for automated investment that comes to be
approx. $1500 that is to be paid to the investment manager.
Assessor feedback: Resubmission required?
No
Page 36 of 52

Appendix 1
Investor risk profiles
Defensive
Risk profile characteristics
Investment objective
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.
Suitability With your investment style it is important you understand the likelihood of and are prepared to
accept negative returns approximately one year in every 30 years.
Benchmark 100% defensive
Minimum investment term Not applicable
Long-term objective CPI + 1–2% p.a.
Asset allocation
Defensive Strategic asset allocation
Australian equities International equities Property
Alternatives Fixed Interest Cash
Australian equities 0%
0% GrowthInternational equities 0%
Property* 0%
Alternatives 0%
Fixed Interest 20%
100% Defensive
Cash** 80%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Page 37 of 52

Moderate
Risk profile characteristics
Investment objective
You are a cautious investor seeking better than basic returns, but risk must be low. Typically an
older investor seeking to protect the wealth that you have accumulated, you may be prepared
to consider less aggressive growth investments.
Suitability With your investment style it is important you understand the likelihood of and are prepared to
accept negative returns during the minimum investment term.
Benchmark 23% Growth, 72% Defensive, 5% Alternatives (mainly defensive)
Minimum investment term 3 years
Long-term objective CPI + 2.5%
Asset allocation
Defensive Strategic asset allocation 8% 8%
7%
4%
45%
28%
Australian equities International equities
Property Alternatives
Fixed Interest Cash
Australian equities 8%
25% GrowthInternational equities 8%
Property* 7%
Alternatives 4%
Fixed Interest 45%
75% Defensive
Cash** 28%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Page 38 of 52

Balanced
Risk profile characteristics
Investment objective
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.
Suitability With your investment style it is important you understand the likelihood of and are prepared to
accept negative returns during the minimum investment term.
Benchmark 47.0% Growth, 40.0% Defensive, 13% Alternatives (mainly defensive)
Minimum investment term 5 years
Long-term objective CPI + 3.5%
Asset allocation
Defensive Strategic asset allocation 20%
20%
7%13%
35%
5%
Australian equities International equities Property
Alternatives Fixed Interest Cash
Australian equities 20%
50% GrowthInternational equities 20%
Property* 7%
Alternatives 13%
Fixed Interest 35%
50% Defensive
Cash** 5%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Page 39 of 52

Growth
Risk profile characteristics
Investment objective
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.
Suitability With your investment style it is important you understand the likelihood of and are prepared to
accept negative returns during the minimum investment term.
Benchmark 72% Growth, 13% Defensive, 15% Alternatives (mainly non-defensive)
Minimum investment term 7 years
Long-term objective CPI + 4.5%
Asset allocation
Defensive Strategic asset allocation
32%
32%
8%
15%
11% 2%
Australian equities International equities Property
Alternatives Fixed Interest Cash
Australian equities 32%
75% GrowthInternational equities 32%
Property* 8%
Alternatives 15%
Fixed Interest 11%
25% Defensive
Cash** 2%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Page 40 of 52

High growth
Risk profile characteristics
Investment objective
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.
Suitability With your investment style it is important you understand the likelihood of and are prepared to
accept negative returns during the minimum investment term.
Benchmark 84% Growth, 1% Defensive, 15% Alternatives (all non-defensive)
Minimum investment term 9 years
Long-term objective CPI + 5.5%
Asset allocation
Defensive Strategic asset allocation
37%
37%
10%
15% 1%
Australian equities International equities
Property Alternatives
Fixed Interest Cash
Australian equities 37%
99% GrowthInternational equities 37%
Property* 10%
Alternatives 15%
Fixed Interest 0%
1% Defensive
Cash** 1%
Total 100%
* Includes infrastructure assets
** Includes term deposits with maturity less than one year.
Page 41 of 52

Appendix 2
Approved products list (investments and platforms)
Platforms
• netwealth® (‘Netwealth’) investment and superannuation platforms
Investments
• Australian bank deposit accounts and term deposits
• all ASX-listed securities
• managed funds offered through Netwealth.
Refer to the below link to access the list of approved managed funds on the Netwealth platform
(viewed 16 July 2016): <https://www.netwealth.com.au/nw/Fund/CompareFundsAndModels>.
Page 42 of 52

Section 2 Present appropriate strategies and solutions to
client and negotiate a financial plan, policy or
transaction
Section 2: Part A
The SOA has been completed and a meeting has been organized with John and Lily (Case Study 4)
to present the recommendations and, if they agree, to implement them.
During the meeting, you must ensure that John and Lily understand the advice you provide.
Answer the following as if you were talking to John and Lily, in a language they would understand:
(a) Identify (1) piece of supplementary information to help explain your recommendation.
(b) Explain one (1) risk associated with the recommendations you have prepared.
(c) Provide an answer to one (1) question John or Lily might ask you in relation to your advice regarding
their share portfolio.
(d) Provide an answer to one (1) question John or Lily might ask you in relation to your advice regarding
managed investments.
(a) Since John and Lily are aggressive investors, it is advisable for them to invest in Netwealth
investment platform as it is likely possibility for them to earn higher profits. As higher risk indicates
higher profits. This will provide a greater cash flow to both of them (Lowry, 2015). Other
investment avenues are providing fewer returns in comparison to Netwealth investment platform.
(b) There is a greater possibility that the amount invested in Netwealth will not provide the returns
at the current market rate of return. This may happen since future is uncertain and business can take
any direction and it may affect adversely the business operations of Netwealth (Grable, 2016). This
will reduce the returns and it may even bring disclosure to the business operations.
(c) John and Lily may inquire regarding the proportion of share portfolio since a situation may arise
in the future where both need to dilute their investments. For this purpose, it is advisable for them to
consider other investment avenues as well.
(d) Managing investments is a crucial task which needs to be carefully considered. Both John and
Lily should prepare themselves to invest in other investment avenues. For this purpose, they should
concern their investment advisor. A situation may arise when both of them can disinvest from
Netwealth.
Assessor feedback: Resubmission required?
No
Page 43 of 52

Section 2: Part B
Provide an analysis of two (2) managed funds, comparing key elements regarding each fund’s fund
manager, philosophy, process, people, and investments. Explain why you have chosen one over the other
for John and Lily in Case Study 4. The funds should invest in the same asset class, or if they are multi-asset
class funds, they should have the same risk profile. (250 words)
Investing in the same asset class and investing in multi-asset class have their own pros and cons.
Investing in same asset class will increase the overall returns if the company prospers and earns
higher profits (Juma’h, 2014). However, in case of decreasing losses, the investor has to face heavy
losses and ultimately may face a financial crisis.
However, the better approach is to invest in the multi-assets keeping the same risk profile. In this
manner, the concerned investor may dilute the investment. This will facilitate the investor to earn
substantial income in the loss incurring situation (Hada, et. al., 2016). This happens if profit earned
by one business organization incurs profits and on the other hand, other companies are facing
financial losses or not earning handsome amount of profits. But the investment is diluted in such a
manner that the investor gets the appropriate amount of profits and returns all the times.
Another major distinction is that sometimes investing in the same class asset will create a problem
for the investor since the seller may find it difficult to sell the investments. This happens when the
market situation in such a manner it is difficult to sell the investment for the shorter period.
However, the investment in multi-asset class is an advantage (Lowry, 2015).
As such, even it is impractical to sell some investments for a shorter duration; the other investments
can be sold. This will bring liquidity to the investor within a short span of time.
Keeping into consideration the above discussion, it is highly advisable for the investor to invest
partly in Netwealth and invest remaining in the other investment avenues.
Assessor feedback: Resubmission required?
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Section 2: Part C
Discuss how you will ensure John and Lily fully understand your proposal. In your answer, discuss the
strategies involved, alternative strategies you considered and why the ones you recommend are ultimately
the best choice for John and Lily. (400 words)
Investment involves consideration of various factors. Thus it is rightly said that investment is a
strategic action which involves continuous evaluation. Ignorance of a single factor may bring loss to
the concerned investor.
One of the best strategies is the proper timing of investment. If the investment is made at the correct
time, then it will result in higher profits otherwise it may bring higher losses to the substantial
investors (John and Lily). Not only buying, selling at the right time is also of crucial importance. It
is possible to sell the investments partly (Omotayo, 2015). For selling the investments, John and
Lily need to continuously monitor and evaluate the performance and activities pertaining to the
relevant market.
Another strategy is related to the amount to be invested in the concerned investment. It is always
advisable to partly invest in the Netwealth or another particular investment avenues even if the
concerned investee company is performing well and is giving a higher amount of return. This is
because future is uncertain and it may be possible that in the forthcoming year, that company ceases
to earn a higher profit or even cease to exist (Schmidt, 2018). Thus, investing in more than one
investment avenue is strongly recommendable for all the investors.
Another situation relates to the proper evaluation of investments made earlier. This will help to take
crucial decisions relating to managing and operating investment portfolio. This will also inform the
investor regarding the other profitable investment avenues since there can be other companies
which are performing better and accordingly giving higher profits.
Besides, another careful consideration is to take a quick decision when the market is decreasing. In
this situation, normally all the investors start selling their investors. John and Lily should take the
necessary steps as soon as possible (Hada, et. al., 2016). This will help to prevent both the investors
from incurring further losses since some situations may arise where investors might incur losses
(Rjoub, et. al., 2017). In such a situation, the investor must aim to decrease the losses to the extent
possible by taking corrective and suitable actions.
This will help or prevent from incurring a further loss that both the investors might face. All these
strategies will help the concerned investors to earn substantial income in a smooth and constant
manner.
Assessor feedback: Resubmission required?
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Page 45 of 52

Section 3 Agree the plan, policy or transaction and
complete documentation
Section 3: Part A
After explaining your recommendations to John and Lily (Case Study 4), you realize they have concerns that
they want to be resolved before agreeing to the plan. Provide one (1) issue or concern that they may have
with your proposal and explain how you would address it. (200 words)
There are various issues or concerns which investment advisor faces before investing on the behalf
of their clients or investee. First and foremost issue which every investment advisor faces is that the
investor thinks or are of opinion that investing would assure a specified return and it is the
responsibility of the investment advisors to provide the assured return (Schmidt, 2018).
However, this is not correct since market returns are completely based on the market position
prevailing in the market. For this purpose, the investment advisor should ensure that investor should
know all the roles and responsibilities of the investment advisors (Rjoub, et. al., 2017). The
investment should clearly indicate before the provision of service that they should clearly
understand the roles and responsibilities of the investment advisor and the services which are
outside the scope and ambit of investment advisory services.
On the other hand, it is the primary responsibility of the prospective investors to consider other
investment advisors and understand in detail the services being offered by other financial or
investment advisors. This problem can be resolved only if there is a frequent communication among
both investors and investment advisors.
Assessor feedback: Resubmission required?
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Page 46 of 52

Section 3: Part B
At Frontiers Pty Ltd, where you work, you charge a fee for providing advice. Explain how you calculated
your fee, what it covers and why it is appropriate for John and Lily. (200 words)
The fees structure should be designed in such a manner that the investors should get fees at the
regular intervals. For this purpose, fees can be fixed on the basis of a fixed interval. Such fixed
interval can be a month, fortnightly, or semi-annually.
Besides, the fees can be demanded whenever John and Lily consult or feel it important to take
advice from the investment advisor. Also, he should take fees if he also manages the investment
portfolio (Rjoub, et. al., 2017). This advisory fees should be dependent on the nature of provision of
services since there can be other auxiliary and incidental services. Thus, it can be concluded that
structure and mode of payment of fees totally depend on the nature and scope of services being
provided to the concerned investors.
Another thing to be considered while charging fees is the fees structure being followed by the other
investment advisors (Schmidt, 2018). As such, the fees proposed to be charged for providing advice
should not be excessive high otherwise any investor (including John and Lily) would not approach
such concerned investors.
Such investment related advice held both the existing as well as prospective investors to invest in
the most appropriate and suitable investment ventures. Investing without such advice may not bring
the required and desired profits.
Assessor feedback: Resubmission required?
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Page 47 of 52

Section 3: Part C
John and Lily are now happy to go ahead with your recommendations and want to implement them
immediately. What documents should be completed and by whom? (150 words)
Before investing in any company, certain formalities need to be fulfilled and accomplished. For this
purpose, there are certain intermediaries that assist in the completion of such kind of formalities.
The major documents required are addressed proof, identity card, and residential address. After
successful completion of verification of all these activities will facilitate the investor to invest in the
Netwealth and similar enterprises (Rjoub, et. al., 2017).
The most prominent document required is the demat account. This account is opened with the stock
exchange of the country of which John and Lily are natives or of which they are residents (Sharif,
et. al., 2015). This demat account is opened to the satisfaction of all the formalities. As such, this
demat account is opened by the stockbrokers or sub-brokers. A prominent feature is that all the
necessary documents should possess the holders’ signature only then it will be considered as a valid
document.
Assessor feedback: Resubmission required?
No
Page 48 of 52

Section 4 Provide ongoing service where requested by the
client
Section 4: Part A
As a financial adviser, explain how you would provide an adequate ongoing service to John and Lily
(Case Study 4). Include an outline of the services you will provide and actions you need to take to ensure
the service is delivered to the client. (200 words)
The investment advisor should be well aware of the all the documents relating to the investment
since these are the documentary evidence and acts documentary evidence. The first and foremost
document is the contract note which depicts the no. of shares, time and date of purchase and other
essential details and information (Sharif, et. al., 2015).
However, before purchasing shares the investment advisor need to ensure that the John and Lily
clearly understood about the nature and extent of services. It is very important to ensure that the
investors should possess a clear understanding of the scope and nature of services to be provided by
the investment advisor (Omotayo, 2015). The investors should know the main and ancillary services
that will be provided by the concerned advisor. Also, he or she should be well aware of the
limitations of scope and roles and responsibilities of the investment advisor.
If John and Lily desire to procure or want to avail other services, a separate bill needs to be raised
by the advisor for such additional services. This will help to clearly demarcate the services provided
by the investment advisor. Also, it will help to clearly define the awareness and knowledge that the
investors should possess.
Assessor feedback: Resubmission required?
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Page 49 of 52

Section 4: Part B
Explain why ongoing service is important for clients with direct share portfolios. (150 words)
Providing online services is of utmost importance in the current and dynamic environment. In the
current environment, the investor needs or expects more or additional services from the investment
advisor. This can be possible if financial advisor engages in the provision of various or multiple
services. Engaged in ongoing services will help to provide the customer satisfaction to all the
concerned investors (Ada, et. al., 2015).
The investment or financial advisors should take into consideration the requirements and needs of
the concerned investors. For the better result, the advisor should have a proper understanding of the
provision of services. This will help to get an idea regarding the essentials of the new as well as
prospective investors (Lowry, 2015).
Also, in the current scenario investors are always keen on managing investment portfolios rather
invest in a single company. Provision of ongoing services will resolve the problem since advisor al
the related incidental service concerned with the investment.
Assessor feedback: Resubmission required?
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Page 50 of 52

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 Schmidt, M. 2018. Choose a Fund With a Winning Manager. Investopedia. Retrieved 6 April
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