Financial Planning Fundamentals (DFP1) Assignment: Riley Case Study

This document presents a completed assignment for the Financial Planning Fundamentals (DFP1) course, focusing on a case study involving Steve and Crystal Riley. The assignment requires students to analyze the couple's financial situation, including their assets, liabilities, income, and expenses. It involves interpreting a fact find, which details their personal information, professional relationships, assets, liabilities, superannuation, income, and estimated annual expenditures. Students are expected to address questions related to financial planning, debt management, and making informed decisions based on the case study. The assignment aims to assess the student's ability to apply financial planning principles, conduct analysis and research, and determine client financial requirements. The case study provides a realistic scenario for students to demonstrate their understanding of financial planning concepts and apply them to a practical context.

Assignment
Financial Planning Fundamentals
(DFP1_AS_v1A2)
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)
Question 1 Not yet demonstrated Not yet demonstrated
Question 2 Not yet demonstrated Not yet demonstrated
Question 3 Not yet demonstrated Not yet demonstrated
Question 4 Not yet demonstrated Not yet demonstrated
Question 5 Not yet demonstrated Not yet demonstrated
Question 6 Not yet demonstrated Not yet demonstrated
Question 7 Not yet demonstrated Not yet demonstrated
Feedback (assessor to complete)
[insert assessor feedback]
DFP1_AS_v1A2

Before you begin
Read everything in this document before you start your assignment for Financial Planning Fundamentals
(DFP1v1).
About this document
This document includes the following parts:
• Part 1: Instructions for completing and submitting this assignment
• Part 2: Case study
• Part 3: Assignment questions
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 Financial Planning
Fundamentals (DFP1v1) subject room.
Part 1: Instructions for completing and submitting this
assignment
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
You will be required to complete additional research to answer the assignment questions.
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 this assignment.
• Name your file as follows: Studentnumber_SubjectCode_Submissionnumber
(e.g. 12345678_DFP1_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 2 of 26

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. Incomplete assignments
will be returned to you unmarked.
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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 Financial Planning Fundamentals
(DFP1v1) 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
submissiondeadline 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.
Page 3 of 26

‘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:
FNSFPL502 Conduct financial planning analysis and research
FNSFPL501 Comply with financial planning practice ethical and operational guidelines and regulations
FNSFPL506 Determine client financial requirements and expectations
FNSINC401 Apply principles of professional practice to work in the financial services industry
BSBITU402 Develop and use complex spreadsheets
FNSASIC301 Establish client relationship and analyse needs
FNSASIC302 Develop, present and negotiate client solutions
FNSIAD301 Provide general advice on financial products and services
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 4 of 26

Part 2: The case study
Steve and Crystal Riley
You met Steve Riley when he came into your office last week. He had been mowing the grass in the park
over the road and saw your business sign and came for a chat to see if you could help him and his wife.
He and Crystal live in a small rural community outside town and have been married for three years. Steve is
aged 26 and is a horticulturalist with the local council. Crystal is aged 24 and a librarianhowevershe is not
working at present as she looks after their twins. Until the twins arrived their focus had been on working
hard and saving for a deposit to buy a house. They rent a nice home on the edge of town and enjoy the
scenic views over the hills.
Their landlord has approached them saying she wants to sell the house and will give them first refusal to
purchase it. Steve’s parents have offered to help them with a loan.
They want some help in making a decision and understanding how it will all work.
You give Steve your Financial Services Guide (FSG) and a fact find form and you agree to meet next week.
First meeting
After introductions and pleasantries you ask Steve if he has read the FSG and briefly go through the
contents for Crystal. They are comfortable to have an initial consultation to see where it takes them.
They have completed the fact find and as you discuss the contents you make additional notes on their file.
The fact find looks as follows:
Steve and Crystal Riley Fact Find
Table 1 Personal details
Name Steve Riley Crystal Riley
Salutation Mr Riley Mrs Riley
Age 26 24
Marital status Married Married – we just celebrated our third anniversary
Home address Hillview Cottage Burgenfield
Health Good Good
Smoker No No
Occupation Horticulturalist Librarian
Employer Burgenfield Rural Council Burgenfield Library
Projected retirement age Probably 67 Not thought about it
Dependents/family relationships Name Age/date of birth
Son Bobby 26/6/2015 Both in good health and developing normally
Daughter Celeste 26/6/2015
Page 5 of 26

Table 2 Professional relationships
Solicitor None
Time span of relationship N/A
Quality of relationship
Accountant None
Time span of relationship N/A
Quality of relationship
Table 3 Assets and investments
Assets and investments (personally owned)
Assets Value Ownership status Other information Purchase price
Everyday bank
account
$500 Joint We try to keep at least this amount in the account.
We’d like to have more cash on hand for the
unexpected because with the twins something is
always happening
Steve’s ute $4000 Steve It’s 12 years old and still running well. It’s a great little
workhorse
$15,000
Crystal’s sedan $12,000 Crystal It’s only three years old and I love it. The four doors
and hatchback make it great to take the kids out and
for shopping
$18,000
Home contents $7000 Joint Includes gardening equipment that Steve uses for part-
time gardening jobs
Bonus saving account $22,500 Joint We were saving quite well and enjoying a carefree
lifestyle until the twins came along but for the last year
we have often had to resist the temptation to dip into
it. We get extra interest if we don’t make withdrawals
Table 4 Liabilities
Debts Value Payment Ownership status Other information Interest rate
Credit card $2500 Minimum Joint We would prefer to pay it off each month but we
spent a lot rearranging the house for the twins
when they arrived
22.5%
Car loan $5400 $61pw Crystal There are two years until it’s paid out 13.5%
HECS debt $12,000 None Crystal From Crystal’s librarian course CPI
Table 5 Superannuation
Fund Value Ownership Other information
SunSuper $16,300 Steve From my job with the Council. I’ve been with them since I left school and did
my apprenticeship
Council Super $11,800 Crystal From my job in the library since I finished Uni
Page 6 of 26

Table 6 Income p.a.
Income type per annum Steve Crystal Notes
Salary $48,000 Super on top of this. I hope to get the supervisor’s job in a couple
of years when the current guy retires
Salary $5000 I was on $47,000 before I took time off to have the kids. I’m not
sure how long I’ll be away but I don’t want to lose the opportunity
to work locally. This is my town and I love it
I still do some work from home for the library. I hope I’ll earn
$5000 a year but we’ll see
Centrelink About $17,500 About $675 a fortnight
Interest $394 $394 From the home deposit saving fund
Total combined
gross income
$71,288
Table 7 Estimated annualexpenditures
Expense per year Joint Notes
Accountant’s fees A friend does our tax online
Charitable donations None
Children's pocket money N/A
Council and water rates Included in rent
Discretionary: restaurants, gifts, holidays,
etc.
$1000 We used to go out a lot and take short weekend breaks but we are
more likely to go for a walk than to the pub nowadays
Debt repayment $3765 Car loan and minimum payment on the credit card
Electricity $1000
Gas $600
Weekly shopping $30,000 What with things for the kids we easily spend $550 week
Health insurance We don’t have any
Holidays We now visit an aunt on the coast if we go anywhere
House insurance Landlord’s responsibility
House maintenance and repairs Landlord’s responsibility
Income protection Never thought of it
Medical bills/prescriptions $1500 We are pretty healthy
Mobile phones and internet $1500
Motor vehicle and fuel $10,000
Mortgage N/A
Pay TV Don’t get time for much TV
Private school fees N/A
Rent $15,600 $300 pw
Total expenses $64,965
Page 7 of 26

Not
applicable
Table 8 Investment objectives and attitude to risk
They did not fill out this part of the fact find. They said it did not apply to them or they did not understand
the question or possible answers. You did not push the issue as it is obvious that debt management and
short-term saving are their priorities.
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.
Which of the following best describes your current stage of life?
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.
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.
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.
Mature family. You are in your peak earning years and have 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.
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.
Retired. No longer working 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.
What return do you reasonably expect to achieve from your investments?
A return without losing any capital
3–7% p.a.
8–12% p.a.
13–15% p.a.
Over 15% p.a.
Page 8 of 26

Not
applicable
If you did not need your capital for more than ten (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 were any loss in value.
Less than 1 year.
Up to 3 years.
Up to 5 years.
Up to 7 years.
Up to 10 years.
How familiar are you with investment markets?
Very little understanding or interest.
Not very familiar.
Have had enough experience to understand the importance of diversification.
Understand that markets may fluctuate and that different market sectors offer different income,
growth and taxation characteristics.
Experienced with all investment sectors and understand the various factors that may
influenceperformance.
If you can only receive greater tax efficiency from more volatile investments, which balance would you
be most comfortable with?
Preferably guaranteed returns, before tax savings.
Stable, reliable returns, minimal tax savings.
Some variability in returns, some tax savings.
Moderate variability in returns, reasonable tax savings.
Unstable, but potentially higher returns, maximising tax savings.
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.
You would cut your losses and transfer your money into more secure investment sectors.
You would be concerned, howeverwould wait to see if the investments improve.
This was a calculated risk and you would leave the investments in place, expecting performance to
improve.
You would invest more funds to lower your average investment price, expecting future growth.
Page 9 of 26

Not applicable
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.
You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-
term wealth from a balanced fund.
You have a lump sum (e.g. an inheritance or a lump sum payment from your employer) and you are
uncertain about what secure investment alternatives are available.
You are nearing retirement and you are investing to ensure that you have sufficient funds available to
enjoy retirement.
You have some specific objectives within the next five years for which you want to save enough money.
You want a regular income and/or totally protect the value of your savings.
Investor profile total points
Investor risk profile summary
70 –140 Conservative
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.
140–210 Moderate
You are a cautious investor seeking better than basic returns, howeverrisk 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.
210–280 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.
280–315 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.
315–350 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.
Page 10 of 26

Table 9 Estate planning
They have not bothered about wills because if one of them died everything would go to the other.
They haven’t got around to doing anything now they have the kids.
Insurance and risk management
Policy Life insured Owner Cover Premium per
annum
Notes
Death and TPD Steve SunSuper $125,000 Death
$175,000 TPD
$3.92pw Standard cover
Death and TPD Crystal Council Super $87,000 Death $2.00 pw TPD cancelled as she is not
working
Income protection
Home and contents
Private health insurance
Steve’s ute insurance
Crystal’s sedan insurance Crystal Fully comprehensive $420 pa Premium included in
motor vehicle costs
You ask them about the offer from their landlord.
Question Answer
Tell me about this offer
from your landlord?
We’ve always got on well with her. We pay our rent on time and she always responded promptly if
we had any problems. She likes to come and collect the rent if she can so she can see our kids.
So we’re friends really.
She says she’s selling up and moving to the coast and can’t manage a rental property from far away.
She knows we were saving to buy a house and it would make life easy for her if we bought it and she
didn’t have to pay real estate agent fees. Of course it would make life easy for us too as we wouldn’t
have to move.
How much is she asking? Well she wants $280,000. Sounds a bargain compared to the prices they pay in the cities nowadays
but it’s only a two bedroom weatherboard cottage and it suits us just fine. We looked at the asking
prices for other homes in the window of the real estate office and it seemed a fair price.
Have you asked about a
mortgage?
Yes we spoke to the bank and they told us if we could make a 20% deposit they would fund the rest.
So that means we would borrow $224,000 and we need $56,000 deposit — well a bit more than that
to cover legal costs.
And you’ve had an offer
from Steve’s parents?
Yes we told them we have saved $22,500 but they could see we were short about $40,000 and they
said they’d lend us the money to help us out. It’s too big an opportunity to pass by.
But it’s a loan not a gift? That’s right. They are in their mid- fifties and plan to retire in 10 years and will want the money back
by then. Steve has two brothers and neither of them is married yet so he’s the apple of their eye
having presented them with two grandkids at once. They haven’t said anything about paying interest
but it’s sort of understood that once we get on top of the mortgage payments and I’m back at work
we can pay them back in instalments.
Page 11 of 26

Part 3: Assignment questions
Question 1a
The first four steps of the safe harbour are repeated below. They all form part of this stage in the financial
planning process and you need to address all four steps in this first question.
• Step 1: Identify the objectives, financial situation and needs of the client that were made known
through the client’s instructions.
• Step 2: Identify the subject of the advice the client is looking for (whether explicitly or implicitly).
• Step 3: Identify the objectives, financial situation and needs of the client that would reasonably be
considered relevant to the advice sought on that subject (the client’s relevant circumstances).
• Step 4: If it is reasonably clear that information relating to the client’s circumstances is incomplete or
inaccurate, make reasonable enquiries to get complete and accurate information.
Briefly describe the clients’ financial situation, their objectives and needs as initially explained by them?
(100 words)
The client Steve and Riley are couple who are residing in a rented house within a small community. The financial
condition of Steve is not strong as he does not have sufficient wealth. Steve works as a horticulturist and his wife on
the other hand works as a librarian. They have a lifestyle of a lower middle class and their income is just meeting the
requirements that are essential to meet the daily livelihood expenses. On the other hand, they have been able to save
a small amount each month so that they can create a savings for them. The aim of this savings has been to purchase a
house for them so that they can have a permanent house of their own.
Assessor feedback: Resubmission required?
No
Question 1b
(i) What is the subject of the advice the clients are seeking? What advice have they asked for?
(ii) What additional advice do you think they need from what you know about their circumstances?
(100 words)
Question 1 (b) (i)
The couple have an interest to invest in a property so that they can purchase a house. Currently, the couple are living
in a house that is rented for which they have to pay a monthly rent. However, the couple are in the intention of
purchasing a house of their own where they can live with their whole family. The content of the recommendation
required by the couple is the arrangement of the money in order to purchase a house in the most effective manner.
Question 1 (b) (ii)
The coupe, are presently living in a house that is rented and therefore has to pay a rent for the house. Now, they are
in the intention of purchasing a house by taking a loan from the financial institutions and a small amount of loan from
their parents. In this situation, the couple may take help of the analyst to look for a bank loan that has an EMI
equivalent to their monthly rent.
Page 12 of 26

Assessor feedback: Resubmission required?
No
Question 1c
Assume you have asked more questions of the clients and have explained the areas where you think they
need advice.
Read the fact find thoroughly and identify all the issues they are concerned about. Identify what you
consider would be reasonable objectives for the clients.In your answer describe between six (6) and
ten (10) objectives.
(150 words)
The main concern that is associated with any investment is the risk and the return. The investor are always in the
intention of gaining a higher return by the keeping the level of risk low. Conversely, the return and the risk are always
running parallel and therefore if the return increases the risk associated with it even gets higher and vice versa. In the
present scenario, the investment in the property is under the assessment and the vital issues with respect to the case
study are as follows:
 The profession of the couple are not adequate and therefore may pose threats in paying back the loan to
the financial institutions as well to their parents.
 The couple have newly born twins. The expenditure of the couple would raise further in the coming years as
their children starts growing.
 The overall current net worth of the couple is $54,200. The house that is under the intention of being
purchased has a value of $280,000. This has revealed that the couple does not possess adequate financial
back up assets.
 The average annual earnings of the couple is $71,288 and they have a savings of $6,323 after paying for the
annual expenditure of $64,965.
 The significant point that requires to be considered is the amount of rent is $15,600 and this amount will
get deducted from the expenditure of the couple once they purchase the house.
With respect to the issues that have been described above, there are six objectives of the couple that have been
recognised which will be explained as follows:
1. Arranging finance to purchase a house.
2. Gaining a permanent and high income occupation
3. Arranging money for meeting the expenses of their twins
4. Requirement of insurance
5. Requirement of estate planning
6. Gaining increased returns from the property during the long run.
Assessor feedback: Resubmission required?
No
Page 13 of 26

Question 1d
List five (5) other clarifying questions you would ask them.This task requires you to identify what gaps there
are in your understanding of the client’s situation.
(150 words)
The five questions have been discussed as follows:
 If the intention of the couple is investment, do you have any substitute other than making investments in the
property like investment in binds, shares and mutual funds for the long term?
 It has been observed that lease is even an alternative for the loan. So would you like to take the house on
lease from the landlord or opt for a loan from the financial institutions?
 The financial institutions need securities against any loan they grant, so if you are taking a loan, do you have
sufficient security to back up for the loan amount?
 Do you have the intention of purchasing the property in the locality where you live or can opt for a house in
some other locality if the price in that area is lower compared to the chosen property?
 Looking at the present financial condition, what is the amount will the couple be able to pay off monthly for
the repayment of the loan? Have you consulted any bank in this respect?
Assessor feedback: Resubmission required?
No
Page 14 of 26

Question 2a
Determine how much Crystal will receive from Centrelink in family benefits, listing in your answer the type
of benefit and calculatedamount. You will need this information forQuestion2b.
Tips: Reread Topic 8 on payments to support families. Refer to the latest Guide to Commonwealth
Government Payments booklet available at<https://www.humanservices.gov.au> Corporate  Publications
and resources  ‘A guide to Australian Government payments’.
Alternatively go to the Human Resources website at <https://www.humanservices.gov.au> and click on
families. Identify at ‘Payment Finder’ which benefits are available for someone in Crystal’s position and
which she is eligible to receive. Use the ‘Calculate’ function to determine how much she will get.
(200 words)
The Centrelink payments that Riley would receive have been revealed in the table given below:
By looking at the calculations as above, it can be explained that Crystal will gain an amount of $677.46 on every fortnight with
the assistance from Centrelink. They are entitled to Family Tax Benefit A, Family Tax benefit B, Rent Assistance and FTB
supplement. On the other hand, with respect to the regulations and the policies that have been laid down by the Australian
Government with respect to the payment of Centrelink, Crystal is not eligible for pension as the given facility is applicable for
individuals who are more than 60 years. Hence, the annual benefit of the couple comes to $17.613.96.
Assessor feedback: Resubmission required?
No
Page 15 of 26

Question 2b
Analyse their current position when they are renting the cottage.
(i) Compile tax and cash flow statements and a statement of net worth.
Note: Please review the Kaplan resource on how to complete cash flow tables.
(ii) Describe the conclusionsyouhaveformedon the outcome of this analysis.
(100 words)
Statement of Tax
Tax calculation Steve
Riley
Crystal
Riley
Notes
Income from employment
Salary $48,000 5000
Salary sacrifice $0 0
Salary after
salary sacrifice
$48,000 $5,000
Other income
Bank account
interest
$394 0
Interest from
other
investments
$0 0
Other income
liable for tax
(e.g. rental
income)
$0 0
Assessable
capital gains
$0 0
Total
assessable
income
$48,394 $5,000
Deductable
expenses (e.g.
MEDICAL
BILLS)
$1,500 0
Donations $0 0
Taxable
income
$46,894 $5,000
Page 16 of 26

Income tax on
taxable income
$6,787 0 FY 2015/16,
income $37001-$80000,
tax $3572+$0.325*($80000-
37001)
up to $18000 tax nil
less tax offsets
(e.g.
LITO/SAPTO)
$0 0
plus Medicare
levy
$0 0
plus Medicare
levy surcharge
$0 0
less Imputation
credits
$0 0
less refundable
tax offsets
$0 0
Net tax
payable
$6,787 $0
Statement of Cash Flows
Family cash flow Steve Riley Crystal Riley Combined Comment
Cash flow calculation:
Salary less any salary
sacrificed amount
$48,000 $5,000 $53,000
Non-taxable income (e.g.
income from a
superannuation pension for
a person aged over 60,
Family Tax Benefits, etc.)
$0 0 $0
Interest income $394 $394
Dividends received
(excluding franking credits)
$0 $0
Assistance from Centrelink
(Crystal) 0
$17,420.40 $17,420.40
Other income $0 $0
Total income received $48,394 $22,420.40 $70,814.40
Page 17 of 26

before tax
Investment expenses $0 $0
Debt Repayment $3,765 $3,765
Living expenses $43,100 $43,100
Rent $15,600 $15,600 $300 weekly
Car insurance $0 $0
Home contents Insurance $0 $0
Health insurance $0 $0
Other expenses $2,500 $2,500 Gift, holidays, and mobile
phone
Total expenses $64,965 0 $64,965
Total income received
before tax less expenses
($16,571) $22,420.40 $5,849.40
Net tax payable from tax
table above
$6,787 $0 $6,787
Total net cash flow ($23,358) $22,420.40 ($858)
Statement of Net Worth
Particulars Steve
Riley
Crystal
Riley
Combined Comment
Assets
Everyday bank
account
250.
00
250.0
0 500.00
Steve’s ute 4,000.0
0 - 4,000.00
Crystal’s sedan
-
12,000.0
0
12
,000.00
Home contents 3,500.0
0
3,500.0
0 7,000.00
Bonus saving account 11,250.00 11,250.00 22,500.00
Superannuation-
SunSuper
16,300.0
0
16
,300.00
Superannuation-
Council Super 11,800.00 11,800.00
Page 18 of 26

Total (A) 35,300.0
0
38,800.0
0
74
,100.00
Liabilities
Credit card 1,250.0
0
1,250.0
0 2,500.00
Car loan
-
5,400.0
0 5,400.00
HECS debt 6,000.0
0
6,000.0
0
12
,000.00
Total (B) 7,250.0
0
12,650.0
0
19
,900.00
Net Worth (A-B) 28,050.0
0
26,150.0
0
54
,200.00
2 b (ii) The statement of taxes has shown that the net tax payments are $6,787. The tax amount consists of
the tax on the salary of Steve as the income of Riley is above the table limit of $18,000. The statement of
cash flow has revealed that the net cash condition of the family. It is seen for the statement that the family
is presently having a cash shortage of $858 annually. This has implied that that the annual expenditure are
more than the receipts of the family. The cash position that has been found to be negative shows that the
family requires financial help so that the cash receipts can be raised. Conversely, the net worth condition as
shown in the net worth statement is positive. The total net worth of the family as shown in the statement is
$54,200.
Assessor feedback: Resubmission required?
No
Page 19 of 26

Question 2c
Calculate the costs of a 25 year mortgage if they borrow $224,000. You should determine an illustrative
interest rate from searching amongst mortgage providers. Whilst a honeymoon interest rate may give
short-term benefits you should also illustrate repayments if rates were higher than today. Use an online
mortgage calculator or develop your own using Excel. Set out your assumptions and workings.
(150 words)
Loan Option-1:
Unsecured
Loan Option-2: HSBC
Secured
Loan Option-3: IMB
secured
Loan Amount 224,000 Loan Amount 224,000 Loan Amount 224,000
Interest rate
p.a. 5.00% Interest rate p.a. 3.55% Interest rate p.a. 3.87%
Terms years 25 Terms years 25 Terms years 25
EMI EMI EMI
Monthly 1309.48 Monthly 1127.41 Monthly 1166.34
Weekly 301.95 Weekly 259.99 Weekly 268.96
In the present scenario, the couple wants to purchase a house by taking a mortgage loan. The overall cost
of the house is anticipated to be $280,000 from which the couple has to deposit $56,000 and the rest of the
amount of $224,000 can be taken for loan. For this purpose, an evaluation has been conducted in the table
that has been shown above, which has shown a comparison of the best available options for loan. The first
option provides loan at 5% without any extra security from the couple. In this offer, the couple will have to
pay $1309.48 every month and $301.95 weekly. There exists another offer from HSBC at an interest rate of
3.55%, which offers a payment monthly of $1127.41 and weekly $259.99. The last offer that is given by IBM
is available at 3.87% with a monthly payment of $1166.34 and $268.96 weekly. By looking at the cash
condition of the couple, the second loan providing a weekly payment of $259.99 is advisable.
Assessor feedback: Resubmission required?
No
Page 20 of 26

Question 2d
(i) Compile a cash flow statement if they go ahead and buy the house. Consider every item in the
statement. How will their income change? Some costs in their budget (like rent) will not apply and be
replaced by mortgage repayments. Some cost items are likely to increase and some may decrease.
Some new cost items will apply. In answering this question use your judgement to create a cash flow
statement that you can show to Steve and Crystal to illustrate the possible outcome if they buy the
house.
Note: You may search for average council rates to use them in your answer. Only a reasonable
assumption is required for this question, students are not assessed on their ability to assume a
correct figure for council rates.
(ii) Write some notes explaining the differences you have identified such as changes in
Centrelinkbenefits.
(100 words)
Statement of Cash Flows
Family cash flow Steve Riley Crystal Riley Combined Comment
Cash flow calculation:
Salary less any salary sacrificed
amount
$48,000 $5000 $53,000
Non-taxable income (e.g.
income from a superannuation
pension for a person aged over
60, Family Tax Benefits, etc.)
$0 0 $0
Interest income $394 0 $394
Dividends received (excluding
franking credits)
$0 $0
Assistance from Centrelink
(Crystal)
$17,614
Private assistance from parents $56000 $56000
Other income $0 $0
Total income received before
tax
$104,394 $ $22,614 $127,008
Investment expenses $0 $0
Down payment $56,000 $56,000
Debt Repayment $17,284 $17,284
Living expenses $43,100 $43,100
Rent 15,600 $15,600 $300 weekly
Loan sanction expenses (10% of $2,400 $2,400
Page 21 of 26

loan amount)
Other expenses $2,500 $2,500 Gift, holidays, and
mobile phone
Total expenses $121,284 $15,600 $136,884
Total income received before
tax less expenses
($16.890) $ 7,014 ($9,876)
Net tax payable from tax table
above
$0 $0 $0
Total net cash flow ($16,890) $ 7,014 ($9,876)
Loss of Rent Assistance: The loss of rent assistance has been shown as follows:
Annual Rent Assistance: $4062.24
Total Rent: $15,600
Loss of Rent Assistance: $15,600-$4062.24
Deficit position: = $11,537.76- $17,613.96
Deficit Position= -$6076.20
From the above cash flow statement shown above, it can be observed that the net cash position of the
couple turns to be a deficit, if Steve and his family decide to purchase a house. The decision of purchasing
the house will terminate the rental payments which has a value of $15,600 yearly. Furthermore, Steve’s
parents are willing to provide a cash assistance of $56,000 in order to pay the down payment in order to
purchase the house. Although, it would not have an effect on the net cash condition, but the outflows and
the inflows of cash will get raised. Furthermore, new Centrelink payment will be 17,613.96 annually. As the
new house will be purchased with the help of a loan and therefore $13,520 will be added to the debt
payment. Additionally a cost of $2,400 will even be incurred in getting the loan granted, which involves the
processing fee, the fees for the paper and the miscellaneous charges. The couple will have a deficit position
of ($6076.20).
Assessor feedback: Resubmission required?
No
Page 22 of 26

Question 3a
(i) Consider their debt management position. If they had the capacity,inwhat sequence should they pay
off the debts? Explain your reasoning.
(ii) What strategies could they adopt to reduce their current debts?
(200 words)
(i) The present net worth of the couple is $54,200 and the loan required is $224,000. This shows that the
capability of debt payment of the couple is very low. Conversely, the assistance from Centrelink could
raise their level of income thereby helping them to pay the loan amount. Additionally, it is even
important to consider that the present couple is paying $300 as a rent for the house where they live. This
financial amount can be diverted to the payment of loan very easily. Thus, it is recommended that the
couple selects the option of weekly payment for 25 years with an amount of $259.99.
(ii) The present debt that is possessed by the couple amounts to $19,900, which consists of the credit card
outstanding amount of $2,500, $5400 as car loan and the HECS debt of $12,000. With respect to the debt
in the credit card it has been observed that the main spending of the couple is on the rearrangement of
the house every month. After, purchasing the house, the debt of the credit card would be terminated or
ca be decreased to a small amount. Furthermore, the HECS debt and the car loan can be paid with the
help of claiming the payments due to the superannuation account.
Assessor feedback: Resubmission required?
No
Question 4a
Describe what risks there are to the client’s financial position.
Reread the fact find and think about what risks they face. You should consider all the risks to their lifestyle
not just the traditional ones that can be insured.
(200 words)
There are two main risks that are associated to the client’s financial condition with respect to the loan payment such
as decreased net worth and have a decreased household income. Presently, the overall household income annually of
the couple is $53,000 and the yearly expenditure accounts for $64, 965, which leaves nothing for the couple to
payback for the debt that has been proposed. Thus, the assistance from Centrelink is very important in order to
toughen the financial condition of the couple. Additionally, the fact that the couple has twin babies at such a young
age even increases their level of risk. The expenditure of the couple would increase in the coming years in comparison
to the present condition due to the rising burden of taking care of the kids. It has even been observed that there lies a
risk that Joe’s ute has not been insured.
Additionally, it is even crucial to make note that the type of occupation of Steve is risky. Steve works as a horticulturist
and works as a salaried employee even though he is not a permanent employee. On the other hand, Riley is a
librarian, who is a permanent employee. There exists a risk of Riley divorcing in the future. If Riley asks for a
separation, then the risk in the fall of the household income would rise.
Assessor feedback: Resubmission required?
No
Page 23 of 26

Question 4b
Although you do not need to provide specific, tailored risk management and estate planning advice,
you can identify issues for the clients to consider and provide strategic advice that will assist them.
Briefly describe what risks Steve, Crystal and their family face if either or both of them die and what general
recommendations do you believe they should consider to mitigate these risks.
(200 words)
Currently, the couple are of the age 26 an 24 respectively. They have newly born twins in their family. They have been
dwelling in a house that is rented but now they have planned to purchase a new house. Even though purchasing a new
house would be advantageous for the couple from the financial viewpoint and it will be beneficial for the dwelling
problem. The information that the couple have twins gives rise to various risks that is in relation to the investment
property. The most highlighted risk id the death of the couple together or individually. If Steve or Riley dies at an early
age, the pressure to repay the loan would levy on their children and their nominee. Additionally the risk of taking care
of their property even increases in case the couple expires at an early age as their children are young.
In order to take care of these risks, it is suggested to the couple to purchase a life insurance cover for them. In case of
death of any one of them, the money can be received from the insurance company in order to arrange for the
repayment of the loan. Additionally, it is even advised to establish a will in because in case of death of any one of
them, the property can be given to the trust and would be maintained by the trust till the children becomes adult.
Assessor feedback: Resubmission required?
No
Question 5
In Question 1c you identified between six (6) and ten (10) objectives for Steve and Crystal.
For each objective, set out your recommendations to assist Steve and Crystal achieve that objective.
Refer to‘Step 3 Development of recommendations’ in Topic 10 for one way to present your answer.
You can provide your recommendations as dot points.
(500 words)
The recommendations for every one of the objectives have been given below:
1. Arranging money to purchase the house: The primary aim of the couple is to purchase a house. Conversely,
the financial situation of the couple is not adequate; therefore, they will have to make arrangements for
financing thebuy the house. In this respect, two options are suggested to the client, one is to take loan and
purchase the house and another is to take the house on lease from the landlord. In the leasing proposition,
the couple will have to pay annual lease to the landlord while in the loan, monthly/weekly repayment are to
be paid to the financial institution.
2. Gaining a high paid and permanent job: Presently, Steve works as a horticulturist and receives a salary of
$48,000 annually and on the other hand his wife earns $5,000 annually. It is suggested that Steve changes his
job so that the income of the couple can be increased. Additionally, as Steve’s wife cannot work for a few
months, Steve should look to increase his income beyond what they earn now.
3. Arrangement for handling the expenditure and taking care of their children: the expenditure of taking care of
the children is going to rise with respect to time and therefore the couple should try to make arrangements
from now. The couple are concerned of raising their income as the expenditure would increase due to
education and other related activities of their children as they grow up. Thus, by thinking about the future,
the couple is suggested to make deposits with the bank so that the money would adequate to take care of
their children.
Page 24 of 26

4. Increasing the net worth: the net worth is one of the significant financial parameters that the financial
institutions consider in granting the loans. Steve requires a bank loan in order to buy a house. Therefore, it is
suggested that the couple maintain a high net worth so that increased amount of loan can be taken by the
couple. Presently, Steve has a net worth of $54,200 and the loan required is for %280,000. Therefore, Steve is
suggested lower the debt liabilities and to raise the net worth.
5. The couple has to look into the debt management situation in order to maintain their income and thereby
sustain their future life.
6. The couple has to construct an effective estate planning framework and purchase necessary insurances in
order to help the couple can have a safe and prosperous future life.
Assessor feedback: Resubmission required?
No
Page 25 of 26

Question 6
Identify two issues that Steve and Crystal may wish to change in your recommendations. Refer to the
negotiations that occurred in the advice process in Topic 10. Explain how you would deal with their
objections/concerns and how you would incorporate them into your recommendations.
(200 words)
The first concern that would be raised with respect to the recommendations given to the couple is that the couple
may not grant the advice of paying of their current debt. As the cash condition of the couple is poor, thus the couple
may not agree with the suggestion of repaying the current debt. Conversely, in order to develop the net worth, it is
important to decrease the extent of debt. In this scenario, the consultant should provide a demo regarding the real
benefits of paying the debt by taking a new loan and then purchasing the property. The other issue with respect to the
suggestion could be giving out a part of the house for rent after a time period after purchase. This plan may not be
possible immediately as finding appropriate tenants would be difficult. In order to handle this issue, the consultant
may provide extra services to help the couple find a good customer.
Assessor feedback: Resubmission required?
No
Question 7
Steve and Crystal agree to join your ongoing service plan. Identify four specific issues related to their
financial circumstances that you will raise with them at a review meeting in 12 months.
(200 words)
The four distinct issues that are associated to the financial condition of Steve and Riley Crystal that would be explained
in the review meeting are detailed below:
1. Cash Position: The present cash condition of the couple is -$858, which has shown that annual expenses of
the couple are higher than the annual income. It is significant to have a cash condition that is positive in
nature so that the house can be bought. So, for this intention, the cash receipts require to be increased,
which during the current situation is possible with he help of Centrlink payment grants.
2. Income level: The degree of the household income is very low as Riley is on maternity leave. Therefore, the
gap will have to be fulfilled either by working extra hours or by asking for Centrelink payments. The
Centrelink payments which Riley will be qualified for are anticipated to be around $9462 annually.
Conversely, Centrelink receipts are not huge but are sufficient to make the arrangement for the payment of
the loan.
3. Arrangement to purchase the house: In regardsto the financial arrangement to purchase the house, it can be
stated those there two equally valid choices such lease and loan. Either they can take the house on lease
from the landlord or alternatively they can borrow from bankers to purchase the house. As per the
assessment, the bank loan from HSBC @3.55% with weekly repayment of $259.99 suits best.
4. Risk Insurance: As their children are very young, thus it will be important for the couple to secure the risk of
any casualty with the help of the insurance.
Assessor feedback: Resubmission required?
No
Page 26 of 26