Superannuation and Retirement Advice for Graham and Anna Sutton

Graham and Anna Sutton seek advice for managing their wealth for their post-retirement period. The Statement of Advice includes their personal and financial details, future objectives, financial plan, investment options, and risk management. The couple desires to retain their current lifestyle and living standard even after retirement and invest in good market-oriented funds to achieve a minimum of 6% income during their post-retirement period.

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SUPERANNUATION AND RETIREMENT ADVICE
Letter to Client
18 September 2018
Mr Graham Sutton and Ms Anna Sutton
1, White Ave, Wollongong NSW 2550
Dear Graham and Anna,
I, Jess Craig, Senior Financial Planner associated with All Out Financial Planning
welcome you to the boutique financial planning and advising company in NSW. I thank
you on behalf of All Out Financial Planning for giving us this opportunity to resolve
your financial situation and to offer our most professional and sincere advice for your
post-retirement financial needs. A copy of our valuable Financial Service Guide was
presented to you on your first visit to our office, I am sure you must have taken out
some of your time for studying it.
I assure you that our final Statement of Advice (SoA), which will be based on facts and
financial data provided by you, will meet your required future goals. We will make this
SoA appropriate for your post-retirement needs and will advise you sincerely about your
objectives, as specifically desired by you. I would like to reiterate that the SoA should
be considered as a personal financial advice which has been prepared to meet your
financial objectives. All information about our fees, commission and other interests or
associations helpful to your objectives has also been included in the SoA.
We are also providing you our Product Disclosure Statement (PDS) containing various
financial products which you may find purposeful. We can also arrange for you any
specific financial product that you would like to recommend. We are confident that
information provided in the PDS will not only guide you in making the right choice, it
will also help you in taking the right decision about the most suitable product.

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Please note that since this SoA has been prepared on the basis of the data and facts
given by you, the outcome and impact of the SoA will depend largely on the
authenticity and correctness of that information. Hence, we request you to ensure that
the data and facts given by you are complete and accurate. We also request you to
assess this SoA’s appropriateness in relation to your personal circumstances, before you
decide to act upon the advice given in it.
I also have noted the latest development in your and Anna’s careers. This, along with
the fact that you are planning to make estate planning arrangements when you move to
Perth, is an important financial aspect worth considering and which is discussed in this
SoA. I also noted that you do not feel comfortable in discussing details of social security
entitlements, hence I have tried to explain them in easy terms. The most important
aspect which is of concern for you at this stage is about your and Anna’s income
prospects post-retirement. I have paid special attention to this issue by providing most
relevant advice in the SoA.
Since the financial assumptions, benefits and gains which I have discussed in the SoA
have a short life, the validity of my advice is limited to a three month period. To further
discuss your long term future financial position, my advice will be to arrange another
meeting once you have thoroughly studied the attached SoA. Please feel free in
contacting if any further clarification is required of me.
Looking forward towards a long association in the coming years,
Yours Sincerely,
Jess Craig

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STATEMENT OF ADVISE
Executive Summary
Graham Sutton, a Mining Engineer by profession and his wife Anna
Sutton are seeking advice from an expert planning advisor about
managing their wealth for their post-retirement period which will be
nine years from now. Graham has plans start his own self-
managed super fund (SMSF) so that he can keep all their investments in
a composite investment plan earning them 6% net of taxes, fees and
charges. My advice to Graham and Anna is not to dispose off any of their
properties, which are giving them good income. With their current
investments in their own self-managed Super fund, giving them net of
6%. Their annual earning can be of $125,000 in the post-retirement
period and along with their super savings will add up to $2 million,
which at 6% net would give them $125,000 pa, which is more than they
plan to spend on post retirement living expenses.
Superannuati on and
Reti rement Advise

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Table of Contents
Personal Details...............................................................................................................6
Financial Details..............................................................................................................7
Client’s Future Objectives..............................................................................................8
Client’s Financial Plan....................................................................................................9
Dividend Income..........................................................................................................9
01. Dividends Earned on Stock..........................................................................9
02. Dividends Earned on Funds.......................................................................10
03. Closed End Funds.......................................................................................10
Client’s Current Situation............................................................................................10
Graham’s Redundancy..............................................................................................10
Graham’s Superannuation........................................................................................10
Anna’s Superannuation.............................................................................................11
Investment Properties................................................................................................11
Graham’s & Anna’s Insurances...............................................................................11
Client’s Investment Planning.......................................................................................11
Interest income...........................................................................................................11
Other Safe Investment Options................................................................................12
01. Savings Bank Accounts...............................................................................12
02. Money Market Funds.................................................................................13
03. Government Securities................................................................................13
04. Real Estate Investment Trusts (REITs)....................................................13
05. Preferred Stocks..........................................................................................13
06. Retirement Income Funds..........................................................................14
High Yield Investments.............................................................................................14

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Variable Investment Income.....................................................................................14
Guaranteed Investment Income...............................................................................16
Client’s Risk Profile......................................................................................................16
01. Conservative................................................................................................17
02. Cautious.......................................................................................................17
03. Moderate......................................................................................................17
04. Moderately Aggressive................................................................................17
05. Aggressive....................................................................................................17
Recommendation.......................................................................................................17
Client’s Strategy for Asset Allocation..........................................................................17
Client’s Estate Planning and Risk Management........................................................18
Conservative...............................................................................................................19
Moderate.....................................................................................................................19
Aggressive...................................................................................................................19
Client’s Cash Flow Projections....................................................................................20
Graham’s & Anna’s Retirement Plans........................................................................20
Anna’s mother Marie – Aged Care Considerations...................................................21
Advice on Goals and Strategies....................................................................................21
Goals to be achieved..................................................................................................21
Strategies Required....................................................................................................22
LIST OF REFERENCES..............................................................................................25

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STATEMENT OF ADVICE
Personal Details
Graham Sutton and Anna Sutton, aged 53 and 51 respectively, were married some 25
years ago. They have two school going children, Sam, aged 15 years and Jodie, aged 13
years. Graham and Anna are keeping good health and are non-smokers. Both carry life
insurance from independent sources and also through their respective Super Funds.
Graham has been employed as a Senior Mining Engineer with BlueScope Steel for 26
years. He has been offered redundancy by BlueScope due structural changes in the
company and has already been offered employment in Pilbara Port Corporation in
Western Australia as Site Engineer on same salary. Anna, who has been devoting
herself to fulltime care of their two children, has also taken the offer of employment
from All Brains Inc. in Perth as Personal Assistant to the Development Manager of the
company and will be joining in three month time.
Presently aged 53 and 51 years respectively, Graham and Anna plan to retire when
Graham reaches 62 years of age. They are seeking professional advice about their post-
retirement life so that they lead a secure and comfortable future for themselves as well
as their children whom they wish to support till they attain age of 24 years.
Personal Details of Mr. Graham Sutton and Ms. Anna Sutton
Name Graham Sutton Anna Sutton
Date of birth 06 October 1965 18 September 1963
Family Self, Wife & Two Children Self, Husband & Two Children
Marital Status Married Married
Occupation Salaried Employee-Engineer Personal Assistant
Employer Pilbara Port Corporation All Brains Inc.
Date of Joining 01 November 2018 1 December 2018
Salary Income $195,000 per annum (Gross) $52,000 per annum (Gross)
Interest Income $2,500 (On-line Savings Account) $2,500 (On-line Savings Account)
Income from
Rental Property $53,400 (Gross) $15,600 (Gross)

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Financial Details
Assets and Liabilities of Graham and Anna Sutton as at 30 June 2017
ASSETS and LIABILITIES
Particulars Current Value in $
Owner Loan
Graham Anna Joint Liability
St. George Bank (Online Account) 150,000
St. George Bank (Savings Account) 8,000
Colonial First State Index Australian Share
Fund 31,000
BlueScope Steel Superannuation Fund 370,000
CareSuper Industry Fund 43,000
Industrial Property – Brisbane 445,000 340,000
Investment Property – Gold Coast: Unit 1 155,000 135,000
Investment Property – Gold Coast: Unit 2 245,000 205,000
Wollongong – Family Home 685,000 217,000
Car 25,000
Home Contents (At Insured Value) 65,000
TOTAL ASSETS and LIABILITIES 1,240,000 74,000 908,000 897,000
Estimated Annual Gross Income Details of Graham & Anna Sutton
Graham Anna
Amounts in $
Gross Salary Income 195,000 52,000
Gross Rental Income – From 4 Properties (including the Wollongong Home) 53,400 15,600
Interest Income – From Online & Savings Account 2,500 2,500
Managed Fund Income – 5% income (Excluding Fully Franked Credits) 1,550
TOTAL 250,900 71,650

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Annual Expenses – Joint
In $
Annual Rent 33,800 Expected Rent in Perth
Annual Living 42,000
Holidays 10,000
Deductible Outgoings (interest) 44,000 Annual Interest Only of 4 Rental Properties
Children’s Education 20,000
Life Insurance (Outside Super) 5,200
Motor Vehicle Running Costs 3,000
TOTAL 158,000
Client’s Future Objectives
During my assessment, I have concluded that Graham is having the objective to invest
all the surplus cash which the couple generates into a managed fund in order to have a
secured and regular income to meet their expenses during post-retirement life. Our
suggestions for the client’s future goals and objectives, as detailed below, has been
evaluated on the basis of the data and facts provided by the client, asserts Brunhart,
(2008).
1. Graham and Anna have the desire of retaining their current lifestyle and living
standard even after retirement. This means that they will continue with their
current major expenses, including maintenance and insurance of their car.
2. Graham and Anna are not expecting an increment in their salaries nor are they
planning of changing their jobs after this change to Perth. In my assessment,
they will like their income to keep pace with Average Weekly Ordinary Time
Earnings (AWOTE) index till they retire in another 9 years.
3. This means that they will be keeping their salary income fixed at $195,000 and
$52,000 per annum till they retire. Although, in my assessment, Graham would
like that their income from the rental properties rises at an annual rate of 5%.
4. The couple is effectively covered for life insurance and Total and Permanent
Disability (TPD) and are not interested in taking any new cover.
5. Both are maintaining fine health and they do not require medical services in near
future. Although I would suggest Graham to get his medical check-up and
submit a fresh report showing his change to non-smoker category.

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6. My advice to Graham would be to pay-off their Wollongong home loan balance
of $217,000 before the couple retires as this decision will make their post-retired
living more comfortable.
7. The couple’s decision of buying a home in Perth as their main residence, after
converting their Wollongong residence into a rental property, is a good move.
8. I have also assessed, after talking to Graham, that he has the desire to fix his
income at a minimum of 6% during his post-retirement period.
9. I suggest that the couple should achieve this by investing in good market
oriented funds. This will allow the couple not only in having secured earning in
their post-retirement life but will also help to adjust their expenses with
inflation.
Client’s Financial Plan
After making an assessment of the couple’s requirements and also keeping in mind the
couple’s balanced and stable approach towards growth for their investments, I suggest
the following investment options for the growth of the couple’s investments and for
providing them a steady income in their post-retirement life, as per Ashhurst, (2009).
Dividend Income
Although it is not considered mandatory, listed companies still prefer to pay dividends
to their shareholders. Below are some of the best options in the prevalent system which
can earn good income through these managed funds and dividend paying stocks, as per
Ezra, Collie & Smith, (2009).
01. Dividends Earned on Stock
An investor calculates the ‘Dividend Yield’ as the income from a stock and from my
experience I know that this income will depend on market price of the stock. All
investors chose stocks for their investments which offer a high dividend yield. Since the
yield depends on the share’s market price, in case the price falls, the dividend payment
also falls, assert Hallman & Rosenbloom, (2003). An increase in the dividend yield will
show that more investors have started investing in that particular stock and hence there
is an increase in its market price. Keeping this theory in mind, many companies have
started paying fixed dividends but still, the fluctuation in the share price in market
dictates the dividend yield of the share, as explained by Lange & King, (2009).

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02. Dividends Earned on Funds
Payment of dividends by listed companies has always depended on their share’s market
value. On the other hand, dividends payments of Managed Fund are always calculated
on the market value of ‘A Basket of Stocks’. On these basis, the Managed Funds are
paying their dividends either on a ‘Variable’ or a ‘Fixed’ rates to the investors who
invest in their portfolios of ‘Basket of Stocks’, explain Hallman & Rosenbloom, (2003).
On these basis, the Managed Funds are in a position to pay steady and regular dividends
to the investors and have been seldom found in failing on the payment system, as the
payment is based on distribution of an ‘Average Yield System’ income earned by them.
However, I still advise all my clients to carefully read the terms and conditions before
making any investment in Managed Funds, since the investor is required to authorize
the management of the Managed Funds for selling any stock or bond, which is owned
by the Managed Fund on behalf of the investor, to fulfil their minimum payment
guarantee condition, as detailed by Gitman, Joehnk & Billingsley, (2010).
03. Closed End Funds
Those Managed Funds which have the strategy to actively trade only in stocks and
bonds which pay dividend are called Closed End Funds. A Listed Companies pays
dividend on a quarterly basis, but a Closed End Fund pays dividend on annual basis,
asserts O’Shea (ed.), (2004). In this way, a Closed End Fund earns quarterly but pays at
the end of the year. The fund earns four dividends in one financial year but pays only
one to the investor. My advice to my clients is not to invest in these type of funds as
they have a high risk factor, as per Vice, (2010).
Client’s Current Situation
Graham’s Redundancy
It has been stated by Graham that his redundancy payment, after tax, from BlueScope
Steel will be $175,000. He would seek a suitable investment strategy for this money, so
that his money is safe and secure and yields him good returns post-retirement, as per
Alexander & Fogarty, (2009).
Graham’s Superannuation
After his retirement from BlueScope Steel, Graham is also expecting release of about
$370,000 from the BlueScope Steel Employer Fund. According to Graham, this current

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value amount from the Super Fund carries a Tax Free Component of $22,000 and a
Taxed Component of $348,000. He is also seeking advice on how to securely invest this
amount for a secure and better yield in his post-retirement life, assert Nethercott, Devos
& Richardson, (2010).
Anna’s Superannuation
Till the time Anna was in service, she had accumulated a Super Fund balance of
$43,000 in CareSuper Industry Fund. Now, since she has decided to undertake
employment again when the couple shift to Perth, Graham and Anna are interested in
safe investment of this amount with a high-yield source during their post-retirement
period.
Investment Properties
In the income year 2011-12, Graham and Anna had invested in three rental income
properties, over an 18 month period. Two of these are residential properties, located in
Gold Coast and the third is an industrial property in Brisbane. Now that they are shifting
to Perth, the couple is interested in letting-out their residence in Wollongong, thus
creating their fourth rental property. The couple has declared the following as the
purchase price of these four properties.
1. Gold Coast: Unit-1 $159,000
2. Gold Coast: Unit-2 $268,000
3. Brisbane Industrial Property $385,000
4. Wollongong Residence $310,000
Graham’s & Anna’s Insurances
Graham and Anna have life insurance cover through their respective Super Funds. They
have also got cover of life and Permanent Disability Cover (TPD) through private
insurance companies. The couple is assured that their insurance coverage is adequate
and they do not wish to have any further guidance on this subject. However, they would
welcome advice on how the insurance policies perform.
Client’s Investment Planning
Interest income
I suggest to my client’s that compared to the dividend paying bonds or stocks, certain
managed funds also pay interest on the funds invested by the investors. In certain cases,

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some companies and government agencies also promise fixed interest amounts on the
investments made through bonds issued by them. Provisions of Australian Securities
and Investment Corporation (ASIC) also put certain restrictions on such
companies/agencies under which they are obliged to pay amount of interest before they
declare dividend on their stocks. Hence, the investments of our clients is more secure
under this interest paying option, both from view point of income earning and secure
investment, as per Barkoczy, (2011).
A ‘Certificates of Deposit’ (CD) is also issued by some companies and financial
institutions. This is an instrument which, when placed for a fixed period of time, gives
the investor a guaranteed interest income, which is higher than any other rate of interest.
If my clients wish to play safely (such as conservative investors), then in my opinion,
with this type of investment they can have a regular income, although it may be a low
one, as per Barkoczy, (2013). But I would surely recommend these securities for their
peace of mind. This type of investment is also good for the moderately aggressive
investor, who has the desire of investing their funds for a longer period and also re-
invest the interest they earn, with the aim that their investments grow steadily over a
period of time, say ten years, and their money also remains safe, asserts Barkoczy,
(2013).
Other Safe Investment Options
In my opinion, dividends and interests are not the only two options available for safe
returns in stock market. In my log career as an investment advisor, I have come across
the many options which are available to investors, and I am discussing them below for
your perusal, as detailed by Barkoczy, (2015). I have seen that these investment options
give a clear advantage to investors over other regular investment options in the stock
market as the investor can withdraw their investment at a comparatively short notice,
and without foregoing any part of their investment as loss for making a preponed
withdrawals, as per Barkoczy et al, (2010). I am of the opinion that these options are
most suitable for conservative as well as moderate investors, as these investors keep
their aims focussed on not:
 losing a part of the principal investment;
 Entering for shorter periods in the stock markets; and
 linking their investments with the inflation effect.

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01. Savings Bank Accounts
This is the most practised mode of investment, especially by the conservative investors,
as they find that although the growth and income is moderate but their investment is
safe. It is also good for those investors who have the desire of having ready access to
cash and most importantly they are not looking for fast growth and high yields, explains
CCH, (2015).
02. Money Market Funds
The operations of these funds works on the guidelines framed for mutual funds,
although they focus their investment strategy on Currency Trading. Their mode of
earning is from fluctuations in different currencies and although they pay good returns,
they do not guarantee fixed returns. Hence, I always advise my Aggressive investors to
go for such type of funds, since the yields come with high risk elements, the growth
period is long, and can prove good for the investor if they keep reinvesting their
monthly dividends, as per Smith & Koken, (2011).
03. Government Securities
Across the globe, all government’s issue financial instruments, such as bonds and
sureties. These are guaranteed by the authorities, for repayment, and also offer a fixed
return over the fixed period of the instruments. The advantage of investing in such
instruments is their small initial investment amount and also the safety of guarantee by
the respective governments, although I find that they are not suitable for aggressive
investors, as compared to the moderately aggressive investors, asserts Deutsch et al,
(2011).
04. Real Estate Investment Trusts (REITs)
On the lines of certain mutual funds, these type of Trusts invest in real estate projects
only. The dividends earned by them are dependent on the rental income which are
generated by the investment properties, as per Marsden, (2010). This is considered a
safe investment option by the investors and the fund managers, although the value of the
investment properties seldom shows an increase and their income levels are low, at
these are of cyclic nature, as per Renton, (2012). REITs are usually traded on stock
exchange but may also have client base of private investors, who do not go through the
rigours of stock exchange and hence participate directly.
05. Preferred Stocks
Investor trade mostly in common stocks when trading on the stock exchange. These
stocks are issued by the companies for the general subscribers. Companies also issue

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‘Preferred Shares’ and these are classified shares, having preference over the ordinary
shares, for the purpose of dividend and interest payment, or for buy-back options, says
Hanks, (2007). In case the company declares bankruptcy, it has the obligation of settling
the Preferred Shares first and also when paying dividend or interest, the preferred
shareholders are to be paid prior to paying the ordinary shareholders, although the
interest payments to investors have to be settled before making any other payments, as
per Gitman, Joehnk & Billingsley, (2010).
06. Retirement Income Funds
Nowadays, the Mutual funds are acting focus-oriented. Focus is on issue-based
investments, and the investors/fund managers are concentrating mainly on specific
fields, where they can use their expertise which relates to the specific field, as detailed
by Lange & King, (2009). Retirement Income Funds are also dealing in such specialised
fields, and their focus is to cater to the needs of retired employees and businessman.
Since their focus is only on retired persons, these funds work with specialists who
understand the income and safety needs of the retirees and on these basis they invest
only in stocks which guarantee a consistent payment and are safe for the investment
made, explains Ashhurst, (2009).
High Yield Investments
The risky but high-yield giving funds are mostly sought after by those investors who
plan a long range investment strategy with high volumes on investments in the markets.
These investors focus on earning high interest rates and look for high dividend
payments. To achieve such targets, they make high-yield investments for long periods,
keeping an eye on high growth potential for their investments, as per Ezra, Collie &
Smith, (2009). I strictly recommend such investments for investors who are highly
aggressive in the market. To cover their loss making investments, these investors have
the tendency of availing the ‘Selling Covered Calls’ options for the loss making stocks.
This facility is available from those stock brokers who are booking purchases of stocks
at pre-determined prices for a fixed holding period, details Vice, (2010). It is a highly
speculative buying process, as the buyer is buying on the hope that the stock will turn
around from its recessionary period and can be expected to go beyond the buying price.
Such deals are undertaken by the highly aggressive investors, who have the tendency of
high speculative trading and are always on the lookout for a long term investment which
can give a high growth to their investments, assert Smith & Koken, (2011).

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Variable Investment Income
This investment option offers something for all types of investors. The investor has the
choice of selecting from the many variants available and any one can be chosen by the
investor to build-up a portfolio that suits their needs and is suitable for their investment
style, as explained by Brunhart, (2008). A conservative investor can build a portfolio
consisting of a high percentage of low-yield-steady-growth-low-risk stocks and a low
percentage of high-yield-high-growth-high risk stocks. On the other hand, a moderate
investor can build-up a portfolio which contains an equal percentage of both the above
noted options, explains Hinden, (2000). Although from my experience, I can say that a
moderate investor will always keep changing the percentage of the two factions while
keeping pace with the changing trends of the market. A moderately aggressive investor
will always build a portfolio which has an element of caution and which suits his
tendency of playing aggressively. Hence, says O’Shea (ed.), (2004), such an investor
will keep a lower percentage of the low-yield-steady-growth-low-risk stocks and a
higher percentage of high-yield-high-growth-high-risk stocks. In the end one can find
the aggressive investor, who always holds a fantasy for high-growth investments. He
will keep his options clear and precise, as he is not looking for any immediate returns
and can easily wait for a plus-10 year investment period. So he will build a portfolio
which will comprise 100 percent of high-growth-high-risk stocks, as per Hallman &
Rosenbloom, (2003).
I always suggest all my clients and I am making this suggestion to you, Graham and
Anna that always consider taking professional advice, irrespective of your category, as
the expert will be able to save you from the sudden pitfalls of the market, as these are
hard to foresee for an outsider, layman investor who is not deeply involved in active
trading of stock in the market. Such experts can also help you with tips regarding
changes to be incorporated in your strategy, from time to time and depending on the
prevailing market conditions. All funds do not perform steadily, but with expert advice
they can be made to give a steady income and avoid risk factors of the stock market,
according to Barkoczy et al, (2010).
This is the main reason why specialised field funds are making an entry into the stock
market, although they also cannot guarantee the safety of the investments made by the
investors nor can they guarantee a steady income, as per Barkoczy et al, (2010).

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Therefore, in my opinion the variable income funds are only suitable for investors who
–
 Have the tendency of investing for long periods;
 Have the desire of leaving an inheritance for their dependents; and
 Are not emotionally attached to the investments.
Guaranteed Investment Income
This, in my opinion, is one of the safest ways to plan for a secure retired life by any type
of investor. As the name suggests, all kinds of investments made into this type of
investment fund, are guaranteed and for any investor such a guarantee can only come
from the governments, details Barkoczy, (2015). Hence, I suggest that you invest in
government securities and bonds or in insurance companies, as these are the safest
options. I also find other equally secured investment options, such as Treasury
Securities, Certificates of Deposit and Annuity Plans, as per Barkoczy, (2013). I have
also found, in my long career that equally effective are Super Funds and Social Security
Schemes, provided the investor starts contributing to them at a young age and keeps on
consistently contributing to them during whole of his working life. Then only can such
an investor reap their full benefits after his retirement, according to Barkoczy, (2011).
Client’s Risk Profile
I have studied and understood your current situation. On the basis of that, our discussion
about your future goals and objectives was held with you. After this discussion I find
myself in a better position to conclude your risk profile, which I have based on the
information and facts provided by you. In my long career as a Financial Advisor, I have
been able to conclude that the risk profile of every investor is actually dependent on the
person’s tolerance capacity towards the impending risks which, the individual, has to
inadvertently face while taking decisions related to investments. These depend on the
sector chosen and the period or genre of the chosen investments, assert Deutsch et al,
(2011).
I can conclude with confidence that your controlled and calculative attitude towards
your finances defines you as a natural investor. It is also evident to me that you are
prepared to take risks, albeit only the controllable ones, in relation to choosing your

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investment portfolio, as per CCH, (2015). I can also note that whatever previous
experience you have attained while making investments in the market, be it in the
properties market, is surely going to help you in your future course of action that you
plan. On the basis of the discussions held with you, I can say with confidence that you
already possess a fair and basic knowledge about investments, explain Smith & Koken,
(2011).
Based on all the above observations, it is my conclusion that you have an above average
risk tolerance. I can also say that this quality lets you not to indulge in any knee-jerk
actions while confronting a profit or a loss. As an experienced Financial Planning
Advisor, I have, as per Barkoczy et al, (2010), come across many investors who have a
weak disposition towards risk. They make abrupt decisions and these eventually results
in a mess of their investment portfolio. These assessments are the basis on which, as per
Renton, (2012), we, as responsible Financial Planning Advisors, allocate an investor in
either one of the following 5 categories -
01. Conservative
Investors requiring high levels of income combined with stable growth of their
investments.
02. Cautious
Investors who remain content with their moderate levels of income, although they want
stable growth rate of their investments.
03. Moderate
Investors who keep an eye on the growth and stability of their investment capital and
look for a steady income while choosing an investment of 2 to 5 years. Such investors
do o not mind small losses and also do not aim for quick, short time returns.
04. Moderately Aggressive
This class of investors are also looking for growth of their investment capital. They are
also willing to take moderate risks and usually make investments with span of above 5
years.
05. Aggressive
This type of investor is a totally long term investor. This type of investor has the target
of making long-term capital growth and is willing to undertake large risks provided they
have large growth potential. Such investors never aim for short term gains.

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Recommendation
It is my firm opinion that you can become eligible for the ‘Moderate’ category. My
decision is based on the fact that you aim at good earnings, your span is between 2-5
years and you are also willing to take controlled risks so that your investments have a
steady growth, as stated by Nethercott, Devos & Richardson, (2010).
Client’s Strategy for Asset Allocation
The globalization of trade and industry has changed the way investors now plan their
Strategy for Asset Allocation. Investors approach towards the trends chosen and the
strategies applied have changed with times, asserts Marsden, (2010). Approach and
application of the investors, in the last few decades, has changed because of the quick
changes which happen due to faster communication and global trading of the stocks.
Nowadays, say Ezra, Collie & Smith, (2009), the Service Sector has become an
important third element in the business world. With more dependence occurring on this
third element of business, momentum of global trading is picking up, asserts Vice,
(2010).
I can say from my experience that investor’s strategy of asset allocation can no longer
be confined to the battle of ‘Stock v. Bond’ nor are the results dependent on the ‘Rate
of Withdrawal’ by investors. With the changes happening in the lifestyle of people,
explains Ashhurst, (2009), these changing times are increasing the tendency of the
investors and they are opting for early retirement. Nowadays, according to Lange &
King, (2009), an investors working age has gone down from the previous traditional age
of 60 years to a more moderate age of 50 years. Hence, the allocation criteria has also
undergone a massive change, according to Barkoczy, (2013).
Client’s Estate Planning and Risk Management
Our professional observations tell us that any element of risk is largely dependent on
investor’s retirement age and the preparations undertaken by the retiree to meet any
contingency. It is good on your part that you have taken the services of professionals for
charting the course of your estate planning, as per Deutsch et al, (2011). You are well in

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time as you still have nine more years of service and in these years you can not only
give a better shape to your planning but can also change your strategy, from time to
time, after availing the advice of professionals for your pots-retirement lifestyle, as
explained by Smith & Koken, (2011).
As I have discussed above, under the details given by Hanks, (2007), investors are
preferring fluctuating investment modes. They also want that these should be readily
accessible for making a quick withdrawal. The investors are also looking for offers
which allow the investor more options of changing the income earning capability as per
their changing demands, explains Deutsch et al, (2011). Looking at these complex
strategic alliances, I advise my investors, especially persons like you who are making
plans for their retirement, on the basis of the following three segments, into which I
have divided the investors, as explained by Alexander & Fogarty, (2009).
Conservative
Previously, such investors would keep 20% of their investments in stocks and 80% in
bonds. With the changing times, their preferences have also changed. Now we advise
this class of investors to adopt this strategy – Stocks: 20%; Bonds: 60% and a Variable
Annuity of 20%. Over the years, the variable part is becoming a favourite. It gives the
investors a wider latitude of selecting other options and they can also adjust the ratio
between stocks and bonds according to the needs of fund allocation and the investors’
immediate or medium-to-long period needs, as detailed by Hallman & Rosenbloom,
(2003).
Moderate
Previously, a moderator investor would keep 40% of the investments in Stocks and 60%
in Bonds. This has changed now as it is considered un-productive in the changed times.
Investors have changed their priorities to either going for 40% in Stocks; 45% in Bonds
and 15% in Variable Annuity OR 40% in Stocks; 25% in Bonds and 35% in Variable
Annuity, depending on their risk stamina and lifestyle needs, as explained by Gitman,
Joehnk & Billingsley, (2010).
Aggressive
Previously, this segment of aggressive investors preferred the option of 60% in Stocks
and 40% in Bonds. But presently, the investors of this segment are choosing the option

Page20
of 60% in Stocks; 30% in Bonds and 10% in Variable Annuity, according to Lange &
King, (2009).
From all this information, you can understand that investors are no longer confining
themselves to the traditional approaches. They are prepared for changes with the
changes occurring in their lifestyles, the changes coming into the business environment
and also because of the changes occurring in the economic values of nations.
In my opinion, you are not only at the right stage of your life, you are also in the right
stage of mental preparedness with regard to your future planning requirements. This is
the right time for you, as you still have nine years of active earning life for making any
corrections needed to augment your post-retirement lifestyle and needs.
Client’s Cash Flow Projections
Cash flow projections have been appended in the attached Excel Spreadsheets and form
a part of this Statement of Advice. The Spreadsheets not only cover the cash flow for
your current income year but also include the remaining years till your retirement time.
Also included are the Income and Expenditure details and Assets and Liabilities for the
periods specified above.
For concluding the accounting results pertaining to current income year, the following
basis are used for the analysis.
1. The rental income from the investment properties, currently taken as $53,400 and
$15,600 per annum, have been escalated at a uniform rate of 6% per annum till the
retirement year.
2. The amount of deposit in the online bank account has also been increased at an
annual rate of 6%, to keep an adjustment of available surplus cash.
3. The outstanding mortgage loans of $897,000, taken for the investment properties
as well as the Wollongong main residence, have been adjusted against the
available incomes and surplus cash availability during the period of nine years by
apportioning them to the available funds every year, so that all these properties
becomes fully free in your hands.
4. The Super contributions, till the retirement year of yours and Anna’s, have been
considered at current contribution rate of 9.5% and have been accumulated yearly.

Page21
Post-Retirement, the following assumptions have been taken –
1. All the available surplus cash has been transferred to the Self-Managed Super
Fund investments, and these are evaluated to give an annual return of 6%.
2. The Wollongong Residence has been disposed and the receipts have been invested
in the Self-Managed Super Fund.
3. The amounts received from yours and Anna’s super fund after your retirement
have also been invested into the Self-Managed Super Fund.
Graham’s & Anna’s Retirement Plans
Graham and Anna have plans of remaining in active service for another nine years.
Their plan is to take retirement when Graham reaches 62 years of age (he is at present
53 years old) and Anna also wishes to retire along with Graham, although she will be
only 60 years of age (she is currently 51 years old) at the time of her retirement. The
vision the couple have of their post-retirement life is not a lavish one, rather they would
like to maintain a simple lifestyle after their retirement, as per O’Shea (ed.), (2004).
They are of the opinion that will be able to live decently on an annual budget of
$65,000. For this budget, the couple has plans to be completely free from all their loan
liabilities when they go into retirement, assert Nethercott, Devos & Richardson, (2010).
Another expense which the couple intend to incur post-retirement is a holiday, every
two years, which would cost $15,000 for every trip in today’s dollar terms. The couple
is thinking of settling down either in Wollongong or on the South Coast of New South
Wales after their retirement.
Anna’s mother Marie – Aged Care Considerations
Presently, Anna’s mother, Marie Francis, aged 78 years, is living in the couple’s Granny
Flat as a non-homeowner. But due to her health conditions, the aged care team attending
to her has advised Graham and Anna to shift them to an Old-age Dormitory. The
couple, in consultation with Marie, have decided to shift her to a local church managed
old-age care facility. The facility has asked for a refundable deposit of $240,000. Marie
has deposits and savings of $380,000 in her bank account and Graham and Anna believe

Page22
that Marie can comfortably live on an annual income of $22,000 which she will be
earning from the balance deposit amount of $140,000, after she pays-off the deposit of
$240,000 to the church from her existing deposits of $380,000.
Advice on Goals and Strategies
Goals to be achieved
1. GOAL OF MEETING EXPENSES OF $65,000 POST-RETIREMENT
Considering that Graham and Anna’s investments get them a return at 6% per annum,
the couple would require a fund corpus of $1,084,000. The combined corpus, which the
couple is holding now is worth $1,891,000 and this will become $2,000,000 at the time
of their retirement.
ADVISE:
Assuming that the couple is worth $2 million when they retire, and this fund corpus
earns them a return @6% per annum, the couple’s annual income will be $120,000.
This will be enough for them to meet their own expenses, the education expenses of
their children, the loan repayment of their Perth home and the expenses related to
Anna’s mother Marie, as per Nethercott, Devos & Richardson, (2010).
2. GOAL OF HOLIDAY EXPENSE OF $15,000 EVERY TWO YEARS
ADVISE:
As explained above, the earning of the couple in the period post-retirement will be
enough to take care of their holiday expenses.
3. GOAL OF MANAGING SUPER FUND EARNING
ADVISE:
Looking at the magnitude of the fund corpus (about $2 million) which the couple will
be having when they retire nine years from now, it is best for Graham and Anna to have
a SMSF of their own. They can manage all the funds, whether they are investments in
real estate, or in stocks or in bonds or in Certificates of Deposits. It will not only give
them a regular and steady income source, the SMSF will also safeguard the future of

Page23
their two children, who can also be included in the management of the SMSF after they
complete their education, as explained by Deutsch et al, (2011).
Strategies Required
1. SETTING UP AN SMSF
Graham has shown his intention of setting up a Self-Managed Superannuation Fund
(SMSF). He has been reading and making inquiries about such funds and he has the
opinion that such a fund can be of help in buying more investment properties through
such a fund.
ADVISE:
1. You wish to remain in business of Property Investments, if the rent is collected
by your SMSF, then your fund will be paying tax at a concessional rate on the
rental income. The SMSF can avail benefit of certain tax breaks available to
landlords, including tax deductions for the interest paid on the property loan.
2. The anti-avoidance provisions in the Bankruptcy Act permit all fund-held rental
properties to be inaccessible to trustees in case of bankruptcy.
3. SMSFs allow members to invest in their own way and this is generally not
available in company managed super funds.
4. The administration costs of SMSF generally remain fixed, no matter what the
fund balance is.
5. SMSFs can have the general policy of minimizing the sale of real estate and
shares until the fund begins paying a pension. Once an asset starts backing
pension payments, the SMSF gets exemption from paying a Capital Gains Tax
(CGT).
6. A SMSF can allow up to four family members to pool their super savings for
buying assets, such as investment properties, which may be beyond the reach of
one member. Gearing is generally available to SMSFs but not to large super
funds.
One of the biggest advantage for members aged 60 or above is that they can withdraw
the benefits tax-free before death and hence can avoid the death benefits tax, assert
Barkoczy et al, (2010).

Page24
The only disadvantage which I see in your case is that your SMSF will be established
specifically for buying a single-type asset, such as real estate. This will limit the fate of
the SMSF on the performance of these assets, as per Marsden, (2010).
2. BUYING MORE INVESTMENT PROPERTIES
Although Graham has been making investments in rental properties, both in residential
sector as well as in commercial/industrial sector. He is currently looking at investing in
rental properties in Perth, as the couple is soon going to be located in that area.
Graham’s knowledge about rental earning properties is based on his self-studies on the
subject and also by attending a few investment seminars on the subject.
ADVISE:
As has been discussed above in SMSF section, you can safely make investments in
properties through the SMSF and reap the benefits, as per Smith & Koken, (2011).
3. EFFECTS OF NEGATIVE GEARING
Graham has been investing in rental properties, both in the residential as well as
industrial sector, since 2011. When he purchased the units in Gold Coast, he was given
to understand that the value of the units would be doubled in about 10-15 years. But the
fact is that, even after about seven years, the value of the Gold Coast properties is well
below their purchase price. The only consolation which Graham has in his current
situation is the advantage of Negative Gearing. Although Graham is not so much aware
about the technicalities of Negative Gearing, he is seeking advice on this issue for his
future investments in rental properties, so that he can have a safe and secure earning in
their post-retirement period.
ADVISE:
I do not find any reason for Graham to worry about Gearing. As has been advised by
me, setting up of a SMSF will automatically take care of the Gearing problem as a
SMSF gets the advantage of this benefit for all income earning properties held by it, as
detailed by Alexander & Fogarty, (2009).
4. LIVING IN PERTH – OWN HOUSE v RENTED HOUSE
When the couple fully relocate to Perth in about three month’s period, both Graham and
Anna have not been able to decide whether to keep living in a rented accommodation
during their stay in Perth or they should buy their own house. Since Graham and Anna

Page25
have the intention of being employed for another 9 years (Graham is presently 53 years
of age, Anna being 51 years old and both have plans of retirement when Graham
reaches 62 years of age and Anna is 60 years of age) and since they have already
decided of letting-out their Wollongong house, the couple is seriously thinking of
buying their own house in Perth. But this is also a situation on which the couple
definitely want a good advice for a better and secure future.
ADVISE:
In this situation also, my advice would be to buy your own house, but under the SMSF.
This will allow the SMSF to avail discount on the interest paid towards the loan.
5. AVOIDING CAPITAL GAINS ON OWNED RESIDENTIAL HOUSE
So far, the couple’s Wollongong house was a self-occupied residential dwelling and
Graham was assured that he will not be liable for any Capital Gains Tax whenever he
sells it. But now that the situation has changed, Graham is seriously thinking of finding
ways of avoiding or making it the least, in a situation if the couple sell-off the property
anytime in future.
ADVISE:
Apportioning of the usage can be availed. My suggestion would be that you let-out the
house for that mush period in a year so that you collect that much amount which is
required for its maintenance and for paying the rates and taxes. That way, whenever you
sell it, CGT will be payable only for those periods when it was an income earning
property, asserts Barkoczy, (2015).
LIST OF REFERENCES

Page26
Alexander, Dr. R. and Fogarty, H. J. 2009. Australian Master Family Law Guide, 3rd ed.
CCH Australia Limited, Sydney, NSW.
Ashhurst, L. 2009. Talking about Retirement: The Secrets of Successful Retirement
Planning. Kogan Page Publishers, London.
Barkoczy, S. 2011. Core tax legislation and study guide. CCH Australia Limited, North
Ryde, NSW.
Barkoczy, S. 2013. Foundations of Taxation Law 2012, 5th ed. CCH Australia Limited,
North Ryde, NSW.
Barkoczy, S. 2015. Australian Tax Case book, 12th ed. CCH Australia Limited, North
Ryde, NSW.
Barkoczy, S., Rider, C., Baring, J. and Bellamy, N. 2010. Australian tax casebook, 10th
ed. CCH Australia, North Ryde, NSW.
Brunhart, N. 2008. Individual Financial Planning For Retirement. Springer,
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CCH. 2015. Australian Master Tax Guide 2015. CCH Australia Limited, Sydney, NSW.
Deutsch, R., Friezer, M., Fullerton, I., Gibson, M., Hanley, P. and Snape, T. (2011)
Australian tax handbook. Thomson Reuters, Pyrmont, NSW.
Ezra, D. D., Collie, B. and Smith, M. X. 2009. The Retirement Plan Solution: The
Reinvention of Defined Contribution. John Wiley & Sons, Hoboken, NJ.
Gitman, L. W., Joehnk, M. D. and Billingsley, R. S. (2010). Personal Financial
Planning. (12th ed.). Cengage Learning, Mason, OH.
Hallman, G. V. and Rosenbloom, J. S. (2003). Personal Financial Planning. (7th ed.).
McGraw-Hill Professional, New York.
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mind. Nolo, Berkeley, CA.
Hinden, S. (2000). How To Retire Happy: Everything You Need to Know about the 12
Most Important Decisions You Must Make Before You Retire. McGraw-Hill
Professional, New York.

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Lange, J. and King, L. (2009). Retire Secure!: Pay Taxes Later - The Key to Making
Your Money Last. (2nd ed.). John Wiley & Sons, Hoboken, NJ.
Marsden, S. J. 2010. Australian Master Bookkeepers Guide, 3rd ed. CCH Australia
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Nethercott, L., Devos, K. and Richardson, G. 2010. Australian taxation study manual:
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Newnham, M. (2011). Funding Your Retirement: A Survival Guide. John Wiley & Sons,
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O’Shea, B. (ed.). (2004). Retire Ready: The Definitive Financial Guide to Retiring Well.
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Smith, B. and Koken, E. 2011.The Superannuation Handbook. John Wiley & Sons,
Milton, QLD.
Vice, A. (2010). A Straightforward Guide to Financial Planning For The Future: From
45 To Retirement. (2nd ed.). Straightforward Co. Ltd., Brighton.