Monarch Institute: ADFP Module 4 Advanced Strategy Advice

This assignment solution addresses the key concepts of financial planning, particularly focusing on superannuation strategies, estate planning, and the implications of the Transfer Balance Account (TBA). The scenario involves Damien and Maxine, a couple seeking advice on maximizing their superannuation benefits and estate planning in light of changes effective from July 1, 2017. The solution explores how Damien can leverage the TBA rules and existing superannuation balances to optimize their financial position, especially in the event of Maxine's death. The response provides detailed explanations and figures, addressing strategies to keep as much money as possible inside the superannuation environment and take full advantage of pension benefit caps. It covers the creation of a death benefit income stream, consolidating superannuation interests, and utilizing the remaining capacity within the TBA to maximize tax benefits. The solution demonstrates an understanding of the new superannuation policies, including the $1.6 million cap, and provides practical steps for Damien to manage his and Maxine's superannuation accounts effectively.

ADFP Module 4 Advanced Strategy Advice assignment
1707
ADFP Module 4
Advanced Strategy Advice
Submission Instructions:
Key steps that must be followed:
 Please complete the Declaration of Authenticity at the
bottom of this page.
 Once you have completed all parts of the assessment and saved
it (e.g. to your desktop computer), login to the Monarch
Learning Management System (LMS) to submit your
assessment.
 In the LMS, click on the file ”Submit ADFP Module 4 Advanced
Strategy Advice” in the Module 4 section of your course and
upload your assessment file/s by following the prompts.
 Please be sure to click “Continue” after clicking
“submit”. This ensures your assessor receives notification –
very important!
Declaration of Understanding and Authenticity *
I have read and understood the assessment instructions provided to me in the Learning
Management System.
I certify that the attached material is my original work. No other person’s work has been
used without due acknowledgement. I understand that the work submitted may be
reproduced and/or communicated for the purpose of detecting plagiarism.
Student Name*: Date: 26/2/18Dan Raja

ADFP Module 4 Advanced Strategy Advice assignment
1707
* I understand that by typing my name or inserting a digital signature into this box that I
agree and am bound by the above student declaration.

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
Important assessment information
Aims of this assessment
This assessment activity is conducted to the standard expected in the
workplace in order to demonstrate consistent performance of typical
activities experienced in the financial services industry.
You are expected to have a good working knowledge of superannuation
from having completed your Diploma of Financial Planning, although
superannuation notes are included as part of this module.
This assessment focuses primarily on strategic recommendations in a
financial planning context. It encompasses your knowledge base acquired
across previous modules within the Diploma of Financial Planning and the
Advanced Diploma of Financial Planning.
The assessment brings together the interaction of key financial areas
such as Centrelink, superannuation and estate planning
Marking and feedback
This assignment contains 3 assessment activities each containing specific
instructions.
This particular assessment forms part of your overall assessment for the
following units of competency:
 FNSFPL603
 FNSFPL606
 FNSPRM601
Grading for this assessment will be deemed “competent” or “not-yet-
competent” in line with specified educational standards under the
Australian Qualifications Framework.
What does “competent” mean?
These answers contain relevant and accurate information in response to
the question/s with limited serious errors in fact or application. If incorrect
information is contained in an answer, it must be fundamentally
outweighed by the accurate information provided. This will be assessed
against a marking guide provided to assessors for their determination.

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide
standards provided to assessors. These answers either do not address
the question specifically, or are wrong from a legislative perspective, or
are incorrectly applied. Answers that omit to provide a response to any
significant issue (where multiple issues must be addressed in a question)
may also be deemed not-yet-competent. Answers that have faulty
reasoning, a poor standard of expression or include plagiarism may also
be deemed not-yet-competent.
Please note, additional information regarding Monarch’s plagiarism policy
is contained in the Student Information Guide which can be found here:
http://www.monarch.edu.au/student-info/
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this
assessment, you will be given one more opportunity to re-submit the
assessment after consultation with your Trainer/ Assessor. You will know
your assessment is deemed ‘not-yet-competent’ if your grade book in the
Monarch LMS says “NYC” after you have received an email from your
assessor advising your assessment has been graded.
Important: It is your responsibility to ensure your assessment
resubmission addresses all areas deemed unsatisfactory by your
assessor. Please note, if you are still unsuccessful in meeting competency
after resubmitting your assessment, you will be required to repeat those
units.
In the event that you have concerns about the assessment decision then
you can refer to our Complaints & Appeals process also contained within
the Student Information Guide.
Expectations from your assessor when answering different types
of assessment questions
Knowledge based questions:

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
A knowledge based question requires you to clearly identify and cover
the key subject matter areas raised in the question in full as part of the
response.
Skill based questions:
Where you are asked to write as though you are speaking to a client,
your answers must show your ability to:
 understand your client’s concerns/perspective/views
 show empathy
 display a professional response
 explain ideas clearly and simply so your client can understand the
issues
Good luck
Finally, good luck with your learning and assessments and remember
your trainers are here to assist you 

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
IMPORTANT INFORMATION
Please note: All relevant social security rates and threshold limits have
been provided with the questions so you are not required to look these
up.
You will need to draw upon your previous knowledge gained from the Diploma of
Financial Planning in Superannuation and the Advanced Diploma of Financial
Planning in Social Security.
The relevant Superannuation course notes have also been included in Module 4,
including the updates effective from 1 July 2017.
The Superannuation workbook from the Diploma of Financial Planning is also
included on the LMS for you to revise this topic.
Superannuation and Social Security are two of the biggest areas of knowledge
required in retirement planning.

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 6 questions that
follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the
front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours
Assessment Activity 1
Knowledge Base: Reversionary & Non-reversionary
Beneficiaries
Strategies: Transfer Balance Account & Centrelink

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
PART A: TRANSFER BALANCE ACCOUNT
Your clients, Damien, age 72 and Maxine, age 70 have made an appointment to see
you to discuss the superannuation changes effective from 1 July 2017. They each
have an existing income stream in the form of an account-based pension which is in
the retirement phase. They are particularly concerned with the new rules around
the Transfer Balance Account being maintained by the ATO. As they, in their words,
'are not getting any younger', they would like you to address strategies around
estate planning and the transfer balance account.
Damien and Maxine have elected each other to receive a reversionary pension in
the event that either one of them dies.
As at 30 June 2017 the balance of their account-based pensions is $1.4 million for
Damien and $950,000 for Maxine.
Damien withdraws a lump sum commutation of $100,000 from his pension account
on 31 July 2017 and Maxine withdraws a lump sum commutation of $50,000 from
her pension account on 1 August 2017 so they can travel around the world in
comfort.
Damien and Maxine also have substantial investments outside the superannuation
environment so it would be beneficial to leave as much money as possible inside
super to take advantage of the generous tax concessions.
Scenario 1:
If Maxine passed away on 20th December 2017, what action could Damien take to
ensure that:
a) as much money as possible remains inside the superannuation
environment, and
b) he takes full advantage of the pension benefit caps
Required:

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
1.1 Provide a detailed explanation of the actions that Damien could
take, including figures.
Scenario 2:
(a) The changes that have taken place in the superannuation policies have
been incorporated in order to enhance the flexibility, sustainability and
integrity of the super system in Australia. The changes have been effective
from 1st July 2017 and the changes in accordance to the transfer balance
account has been that there has been a new limitation on the amount of
super one can transfer and in the tax free retirement accounts. The cap that
is given is initially set at $1.6 million. According to the case study, it is seen
that Maxine and Damien have balance in their account based pension with a
value of $1.4 million for Damien and $950,000 for Maxine. In case Maxine
passes away on 20th December 2017, then Damien can transfer the
additional investment income that is outside the superannuation
environment within the superannuation balance as the cap that is
constructed is $1.6 million and in the Maxine’s account a total balance of
$950,000 is available. Therefore, Damien can create a new income stream
which is a death benefit income stream. This can take place when the two
income streams of the couple are rolled over from two different funds to a
new portfolio in order to permit Damien to consolidate their interests of the
superannuation. This is an effective process with the help of which the
additional income that is outside the super can be brought in and tax free
components can be increased according to the new cap that is determined.
The overall death benefit of Maxine is directly rolled in to another account
and the new fund requires to have a death benefit income stream and the
amount is paid out of the super as a lump sum amount. The death benefits
that are rolled out will not lose their tax treatment related to the death
benefit.
(b) Damien can even take advantage of the pension benefit caps as it is stated
that a cap of $1.6 million has been incorporated. The case study shows that
the amount in the super for Damien is $1.4 million and for Maxine is
$950,000. Hence, Damien can take their superannuation value up to $1.6

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
In this scenario, let us assume that there was no reversionary nomination in place
for Damien and Maxine's pensions.
Instead, the trustees of the superannuation fund, due to the powers available to
them under the trust deed, make the decision to pay Maxine's death benefit to
Damien in the form of an income stream.
To be clear, this is classified as a non-reversionary death benefit.
Naturally, Maxine's death benefit would not be paid out on 20th December 2017 as
it can take a while to be processed. Between the date of death and the date of
payment, 5th May 2018, returns of 8% have been credited to Maxine's account, and
returns of 7% have been credited to Damien's account. Therefore, the balance of
Damien's income stream account is $1,391,000, and the balance of Maxine's
income stream account is $972,000.
Under Scenario 2, if Maxine passed away on 20th December 2017, what action
could Damien take to ensure that:
a) as much money as possible remains inside super and
b) he takes full advantage of the pension benefit caps
Required:
1.2 Provide a detailed explanation of the action that Damien could take,
including figures.
(a) In case the super is a non-revisionary death benefit income streams for
Damien and Maxine, and if Maxine passes away on 20th December 2017,
then the money that is existent within the other super accounts and the
other amounts the super provider has looked to pay as a death benefit
income stream. The lump sum amount is paid in the account of Damien
and furthermore Damien can increase their super amount up to the value
of $1.6 million cap in order to successfully make use of the cap and
increase their income.
(b) Damien can even take full advantage of the pension benefit caps by
successfully bringing the money that is received as a death benefit for
Maxine within the account and thereafter utilize the pension benefit caps.

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
PART B: CENTRELINK
In a financial planning practice it is imperative, whether you are a planner, an
assistant, or an administrator, that you never complete something on a form or
"tick" a box that you do not understand the meaning of.
The following automatic reversion nomination is taken from a form for the BT
Classic Lifetime-Flexible Pension:
Your clients are Peter, age 69 and Lynne, age 64.
Peter retired in 2010 at the age of 62 and used his super balance of $410,000 to
commence a retirement phase income stream. At that time, Lynne was age 57.
When Peter commenced his income stream he nominated Lynne as a reversionary
beneficiary.

ADFP Module 4 Advanced Strategy Advice assignment
1707
Units: FNSFPL603, FNSFPL606, FNSPRM601
Peter qualified for, and started to receive, the aged pension from Centrelink in
2013, prior to the deeming changes to superannuation pensions which took effect
from 1 January 2015.Peter has continued to receive the aged pension ever since.
The current capital value of Peter's retirement phase income stream is $300,000.
The retirement phase income stream balance plus the value of Peter and Lynne's
joint personal assets does not exceed the lower threshold of the assets test, so the
assets test does not affect Peter's age pension entitlement.
Peter and Lynne admit that they don't really understand the term "reversionary
nomination" nor do they understand how it affects their Centrelink entitlements.
Peter's 'relevant number' (RN) is 20.96 and Lynne's relevant number (RN) is 28.7.
Required:
1.3 Clarify for your client, what it means to have a reversionary
nomination.
1.4 Remember that Peter nominated Lynne as a reversionary beneficiary
when he commenced his superannuation income stream. You are required
to calculate the deductible amount of superannuation income that
Centrelink would disregard for the income test.
Please show both the formula and the calculation.
When an account based pension is initiated, a key decision one needs to make
is to understand how the existing balance of your pension and will be
distributed on the death. In this aspect, the reversionary nomination is the
individual nominated by the account holder who would automatically continue
to receive the pension even after the death of the pensioner. This provides the
pensioner with the benefit that after their death their nominee would be able to
receive the financial benefit with respect to the pension and the amount that is
saved in the pension account.
The deductible amount of superannuation income that Centrelink would
disregard for the income test is as follows:
Purchase Price/ Life expectancy
$410,000/28.7
= $14,285.