Financial Advisory Report: Retirement Plan for Sam and Kim Smith

This report provides a comprehensive financial advisory analysis for clients Sam and Kim Smith, focusing on their retirement plan and investment strategies. It begins with an introduction to advisory services and the importance of a compliant Statement of Advice (SOA). The report explores various inv...Read More

Financial Advisory Practice

Contents
INTRODUCTION.....................................................................................................................................3
COMPLIANCE:........................................................................................................................................3
RECOMMENDATIONS........................................................................................................................18
REFERENCES........................................................................................................................................20

INTRODUCTION
Advisory service is the offering, typically for a fee, of competent, personalized investment
advice. Advisory management may be conducted by individuals, separate groups, or a team of
practitioners within a private fund, corporate finance company, or expert advisory company
(Dolata, Agotai, Schubiger and Schwabe, 2019). The report is based on scenario that is related to
offering suggestion to client regarded to their retirement plan. For better understanding or better
service to client, compliant Statement of Advice (SOA) is also offered. This can be known as a
form of document that lays out the recommendations that their certified financial advisor or
consultant provides to a customer. It may provide the grounds on which the guidance is offered,
the particulars of the delivering agency and any fees or benefits earned by the advisor or
licensee.
COMPLIANCE:
Advice to client: Though, above client has plan to use such property as rent but apart from this
they can use it different kinds of plans such as national senior term deposit and bank fixed
deposit. In both scheme above client will be able to generate higher amount of financial return.
Before going to this concept, this will be useful to know about both schemes:
National senior term deposit- In such scheme, investors can secure their future for long time
period. This is so because under this a fixed amount is deposited during the age of retirement and
after the retirement clients can gain higher amount of return on each month (Santacruz, 2018).
Term Deposits of National Seniors are a safe deposit account underneath the Monetary Claims
System of the Australia. Under such an arrangement, for each issuing bank at any registered
deposit-taking institution (ADI) established in Australia and authorized by the Bank of Australia
(RBA, such investments are covered up to a maximum of $250,000. (APRA). In the case of the
Monetary Claims System, APRA will seek to pay the bulk of clients within seven days from the
date for their covered deposits underneath the Scheme. Any transfer of part or more of the funds
until exhaustion will be subjected to a notification of 31 days. Conversely, they can contact them
2 business minutes before the release of the period if they wish to change the saving account.

Bank fixed deposit- Term deposits, generally referred to as fixed deposits, are a savings method
where a lump-sum balance is invested for a specified period, varying from 1 month to 5 years, at
a negotiated inflation rate (Gurne and Grossi, 2019). Major banks, Non-Banking Finance Firms
(NBFC), community banks, bank branches and investment funds may benefit from savings
accounts. Though, in the case of above clients they are planning to use their property for long
time period and this will be beneficial for them to gain higher amount of return in upcoming time
period.
Scope of advice- The scope of advice to support Sam and Kim SMITH for future so that they can
gain higher amount of return from their investment property. As the amount of investment
property is of $700,000 which has mortgage loan is of $200,000. The property has been acquired
in year 2010 and they want to use this property for future whether as rental purpose or by any
other option. The scope of advice to help couple in upcoming time period as they are going to
retire in 5 years so that they can gain higher amount of return from their property or investment.
Goal and objectives-
Clear goals: In accordance of above case study, both clients need an advice so that they can
survive in upcoming time period after retirement. Below some clear goals are mentioned in such
manner which are as follows:
 One of the key goal of advice is to offer a guideline to both couples so that they can
generate higher return from their investment (Tharp, 2019).
 Making their investment property more secure and effective which can sustain for long
time period.
 They can generate higher amount of return from both options including bank fixed
deposit, and National senior term deposit.
Measurable goals: The measurable goal is the amount which will be received as a rental income
on their investment property if they will give such property for rent.
Time specific goals: The time specific goal is period of year on which their property will be
given on rent by above mentioned client. In this time period they might be able to recover total
cost of investment which is of $700,000 including amount of interest.

Risk Profile assessment: A risk profile is an estimation of the readiness and capacity to take
hazards of a person (Vulpoiu, 2018). The risks to which an entity is vulnerable may also be
alluded to. For determining an appropriate investment strategy for an investment, a risk profile is
essential. A risk profile is used by organizations as a means to minimize future hazards and
challenges. The appropriate level of risk a person is willing and ready to tolerate is defined by a
risk profile. The risk profile of an organization seeks to assess how an internal judgment process
can be influenced by a desire to take on threat (or an indifference to risk). In the context of above
case of Sam and Kim SMITH, this is essential for them to analyze overall risk which may be
faced by them in upcoming time period from the investment which they made of $700,000 and
there might be risk of not getting right lender for their property for rental purpose. As well as to
this, another risk is related to more time consumption in order to recover total investment value
of project which is of $700000. Basically if project consumes too much amount of time than this
may lead to higher risk for both people. Below some risks can occurred in such manner in the
context of above mentioned both plans:
Risks in fixed deposits-
Liquidity risk-It is possible to quickly liquidate bank current accounts (FDs). A tax may be
levied, nevertheless. Until expiration of the 5-year term, tax saver FDs should not be deleted.
Default risk- Bank defaults are uncommon but conceivable. Even so, the DICGC guarantees the
balance of the deposit, including interest of up to Dollar 5 lakh per individual per account, and
any amount above that is liable to risk premium (Maume, 2019).
No deposits additional. When you activate your term deposit, you will need to create a single
payment deposit, because there's no way to apply to your savings while you go (Cruciani,
Gardenal, and Rigoni, 2018). For daily savers, this may be a challenge, but one way to fight it is
by having additional deposit accounts with phased longer maturities.
Less mobility. Low risk is a term deposit - however the downside is that this is not a very
versatile choice for investments. In terms of versatile features and choices, most plans with
similar costs, such as fixed interest bank deposits, offer a lot more.

Insurance needs analysis- The life insurance preparation method to requirements is used to
calculate the duration of healthcare insurance and specific needs. The solution to needs takes into
account the amount of money necessary to pay funeral costs, as well as loans and commitments
including such mortgages or college expenses (Nettle, Crawford and Brightling, 2018). The life
insurance preparation approach to requirements is used to estimate the quantity of health
coverage and specific needs. The solution to needs takes into account the amount of funds
required to pay funeral costs, as well as loans and commitments such as mortgages or education
costs. In the context of below mentioned client Sam and Kim this can be inferred that there is
need of insurance on their property as they are going to use this for their retirement plan and
there can be risk of losing such property. In this case, they need to make insurance plan so that
they can make secure this from all risks which may occur in upcoming time period.
Existing Risk Insurance Cover – Client One Sam
TYPE OF
COVER
Lif
e
TP
D
Income
Protectio
n
Traum
a
Name of
Company
AAC
Insurance
AAC Insurance
Sum Insured 100,000 100,000 Nil Nil
Commenceme
nt Date
Annual Premium 600 900
Renewal Premium
Surrender Value
Maturity Date
Maturity Value
Policy Owner Sam Sam

Life Insured
Substandar
d Loadings
Last Review Date
Adviser Name
As in the aspect of above client Sam, this can be inferred that they have an insurance policy
which has annual premium of 600 of life and 900 of TPD. In such case, it can be inferred that
their life has been secured from all kinds of risk and this may be helpful for them in upcoming
time period.
Existing Risk Insurance Cover – Client Two Kim
TYPE OF
COVER
Term TP
D
Income
Protectio
n
Traum
a
Name of
Company
CGS
Insurance
CGS Insurance
Sum Insured 100,000 100,000 Nil Nil
Commenceme
nt Date
Annual Premium 200 300
Renewal Premium
Surrender Value
Maturity Date
Maturity Value

Policy Owner Kim Kim
Life Insured
Loadings
Last Review Date
Adviser Name
As in the aspect of above client Kim, this can be inferred that they have an insurance policy
which has annual premium of 200 of life and 300 of TPD. In such case, it can be inferred that
their life has been secured from all kinds of risk and this may be helpful for them in upcoming
time period.
Benefits of advice:
Advantages of using property of $700000 as rental: -
By far, rental revenue is one of the main advantages of buying investment estate. If the rental
expenditure raises the holding costs of the house (such as property taxes, depreciation,
renovations, and maintenance) as well as the cost of borrowing, the owner collects a payment per
quarter for as much as the land is leased and the occupant pays on time, providing a stable stream
of income. As the above clients can get higher amount of income in each year which may reduce
burden of expenses (Dolata, Kilic and Schwabe, 2019).
Although not necessarily the case, real estate understands, or rises in value, over time in most
cases. Based on where the new property is purchased, in relation to the extra revenue it creates
from being leased, there is a risk that the owner will benefit from the possible value of the
property (Seshanna and Seshanna, 2018). If the capital gains increase the costs and borrowing
cost of the house, the interest is charged from the resident's rental charge, reducing the principal
balance every month it is leased. Which ensures that the landlord creates equity in the property
without paying a mortgage or interest on his own.
The tax advantages are another major bonus of buying a rental home. A number of tax
deductions are possible for financial securities, including:

 Deductions for Industry (if the property is owned by a company or LLC).
 Land charges, including property premiums, property taxes, and any expenditures or
renovations for maintenance.
Benefits of using property as Fixed deposit-
The guaranteed return on investment is the main reason why individuals favor saving their assets
in a fixed deposit. They will be confident of obtaining the claimed rate of return if the invest the
funds in a fixed deposit (Dimmock, Gerken and Graham, 2018). Stocks post the fixed interest
borrowing costs on their website and in bank stores, making it easier for a borrower to decide
how often returns he will get. Banks also offer a fixed lending rate calculation on their website
that for a certain amount of time a customer will measure the return he can gain on spending a
certain amount of money. Such as in the aspect of above clients this will be beneficial for them
to gain higher return in upcoming time period.
For just a fixed deposit, the term is variable and relies on the owners of the deposit. Through
banking has its own mandatory tenure guidelines, but the investment holder may take the
ultimate decision. It is therefore possible to determine if the fixed deposit can be redeemed or
renewed for the same duration.
Benefits of using property as National senior term deposit: -This is also an important and key
approach which can be used by above clients because under it there can be more opportunity to
gain higher return in upcoming time period (Jung, Erdfelder and Glaser, 2018). As well as they
can generate more revenue in upcoming time period.
Risks associated with advice: -
Fixed deposit- One of the best savings around is manage risks. Unlike other portfolios, such as
bonds or cash, there is practically no chance that the money the deposit will be wasted. There are
no costs added to term deposits for creation or continuing operation (unless they remove the
assets soon), meaning they don't have to think about hidden penalties and expenses chewing
away at the investment account (Mutiga, Mushongi and Kangéthe, 2019). This accounts help

they to receive a reasonable interest rate on your account balance, and they don't have to think
about dropping interest rates undermining your saving power because the interest rate is set. It
also ensures that you can determine precisely how much return on the deposit account they can
receive, helping it to prepare long in advance for future spending and savings.
In short, savings accounts provide a perfect way to safely place the cash anywhere and let it
expand. There is no necessary ongoing account maintenance and practically no risk involved
with the portfolio. In the aspect of above case, client has to bear risk of depositing amount in
fixed deposit.
Using investment as rental property: -
The sources of resources allow a fixed deposit convenient. Not all investment costs can,
nevertheless, be readily divested. An income FD, for instance, whose period is 5 years, cannot be
forced to liquidate before its duration. It will have to visit the bank to fill out the papers if they
already have an FD at a company that does not accept online bankruptcy, so it might be a couple
of days until they get the cash. In the context of above clients, this can become cause of riskier
task for them as there can be fluctuation in economy or any factor may lead to less amount of
return in upcoming time period.
Using investment as national senior term deposit: - Under this approach there is no any risk but
future is uncertain and there can be possibility of lower amount of return (Norman and
Bagranoff, 2019). It is so because in upcoming time period government of Australia might
change their policies and regulations related to future pension schemes and this may become
cause of lesser return on amount which have been invested in any form of plan for old age.
Similarly,above clients can also face such risk in future time period.
SOA (Statement of Advice): -
Executive summary: This report summarizes about detailed analysis of statement of advice to
the given clients Sam and Kim. The purpose of the report to give advice about their financial
property which is of $700000.

Balance sheet before recommendation:
ASSETS ($) LIABILITIES ($)$
Principal
Residence $6,00,000 $200,000
Cash and Bank
Deposits $50,000
Motor Vehicles $50,000
Motor Vehicles $15,000
Investment
Property $700,000 $200,000
Investment
Property

Home Contents $50,000 .
Business
Interests $15000
Managed
Funds
Shares $100,000
Shares and
Debentures
Surrender
value of
traditional life
insurance
Collectables
Superannuatio
n
Client (Sun
Super) $300,000

Client (AAI
Super) $100,000
Superannuatio
n
Partner (Future
Super) $150,000
Partner (SSC
Super) $50,000
Caravan/Boat
Holiday Home
Recreational
Property
Other Assets
Other Assets
Personal
Loans/
Overdrafts etc
(Business)
Credit Cards,
etc $20,000

Credit Cards,
etc $1230000
Other
Liabilities $500000
Other
Liabilities
TOTALS 2165000 2165000
Balance sheet after recommendation:
Balance sheet after
recommendation
Fixed
deposit
National senior term
deposit
Rental
property Total
Assets
Rent receiving 0 0 1000000
Interest on FD 500000
Interest on NSTD 600000
21000
00
Liabilities
Installment 800000 300000
Insurance 700000 300000 21000

0
Cash flow:
Cash flow statement
Fixed
deposit
National senior term
deposit
Rental
property
Tota
l
Cash expenses
Amount paid for
documentation 100 200 120 420
Service cost 120 200 140 460
Interest on loan 100 150 130 380
Other expenses 120 250 300 670
193
0
Cash receipts
Revenue received 680 500 400
158
0
Rent received 900 900
248
0
Net cash flow 550
Recommendation: On the basis of above done analysis of financial perspective this can be
suggested to Sam and Kim that they should go with National senior term deposit scheme. It is so
because by help of this they might generate higher return. Below key three recommendations are
mentioned in such manner:
 Both clients need to focus on property to give on rent so that they can generate higher
more.
 They should analyze the need of valuation of their property on regular basis.

 In addition to this, they must evaluate each function on separate basis.
Anticipated outcomes – How it places the client in a better position
Many financial firms provide special investment programs and strategies for elderly persons.
Predictably, retirees are not open to financial risks. That is why it is critical to find a retirement
package that promises a safe return. A bank deposit is another successful savings choice for
pensioners. This guarantees a steady supply of profits and helps to avoid the possibility of
reinvestment. If above client wish to their tax, Sam and Kim should start investing in a five-year
bank FD portfolio that is eligible for tax gain under different sections. If they will do investment
in Fixed deposit than this will be helpful for them to secure their older age as well as to keep
them in an effective position.
Appropriate disclosures and disclaimers, including details of your remuneration: Remuneration
is the salary or other financial benefit given in return for the services rendered by the worker. In
terms of wages, a variety of additional incentives are extremely common compensation
strategies. Remuneration is a part of reward administration. In terms of wages, a variety of
additional incentives are increasingly common remuneration strategies. Remuneration is a part of
reward administration. In Australia, it may also apply to the compulsory allocation of earnings
attributed to representatives of the Limited Liability Partnership (LLP). In addition to
compensation, a variety of additional incentives are extremely common remuneration structures.
Remuneration is a part of reward administration. In Australia, it may also apply to the
compulsory allocation of earnings attributed to representatives of the Joint Liability Company
(LLP).
SUPERANNUATION DETAILS
YOURSELF
PARTNER (IF
APPLICABLE)

Super Name Sun Super AAI Super Future
Super
SSC
Super
Asset
Allocation
20% 80% Growth 50%
Growth
30%
Growth
Growth
Contributions
S.G.C N/A $2,000 pa
Salary
Sacrifice
Personal
(non-
concessional)
Personal
(concessional)
$20,000 pa
Life & TPD
Cover
Balance $300,00
0
$100,00
0
$150,0
00
$5
0,000
Total Fees 1.1
0%
1.40% 1.70% 1.60%
Action to Proceed- The client are required to focus on rental property and try to payout mortgage
interest from the cash inflow from new rental property in the form of rent received from it. The
process of selling a house is the same whether the owner sells it or hires a listing agent. Some
details may vary slightly from state to state, but this checklist can be a general guideline. If the
house price is right, expect a small discount. The offer seems too low, but it cannot be ignored.

Negotiate by submitting a counter proposal. Depending on the market situation, consider a
counter offer to buying a home. If the price is competitive and supported by similar sales, don't
be afraid to use the full pricing calculator.
Authority to Proceed- Authority to proceed refers to a letter issued by the designee to the
qualifying purchaser and containing the name copied to the qualifying purchaser's solicitor and
supplier, confirming the details of an acceptable home purchase proposed by the qualifying
purchaser and the required level of capital provided there. It must be supported in the form
specified in the administrative proceedings or any other form that the Scottish Minister may
reasonably request from time to time.
RECOMMENDATIONS
The current study is based on the case study of the Sam and Kim SMITH who are
currently an owner of an investment which is valued at $700,000, which has a mortgage of
$200,000 on an interest only loan. On the basis of provided information following
recommendations can be made out for Sam and Kim SMITH as appropriate professional
guidance to meet their expectation returns after investment on proposed property:
Earning as Rental Property
Rental housing or rental property mainly refereed to a property which has been occupied
by someone other than its true owner as an accommodation service or for business or any other
purpose, for which the tenant is liable to pay a periodic mutually agreed rent to the owner. This
option of rental property is seemed appropriate for Sam and Kim SMITH as it provide and
facilitates best monthly income to meet their expenses and future expectations. The main benefits
and advantages of this recommended options comprises of the fact that it provide most passive
form of income and a recurring source of income that require a littlest effort of having earning on
a property. Further, high level of flexibility is also provided by this option to Sam and Kim
SMITH along with ensuring property value appreciation in future that can lead to better profit
and sources of income.

Fixed Deposit after sale of property
The another suitable recommendation that can be made out for Sam and Kim SMITH
comprises of income in form of interest on fixed deposit after sale of the property. The Sam and
Kim SMITH are having an option to sale out their property at higher profit and can save the
whole amount in some nationalized bank or any other financial institution in form of fixed
deposit that ensures and leads to a fixed amount of interest on the investment made. The main
advantages and benefits of saving sale money as fixed deposit comprises of the evidence that it
ensures and leads out to safest mode of investment with limited risk of loss in future. Further,
high level of liquidity is also one of the most vital benefit and advantage of fixed deposit as it
can be easily converted into cash to meet the needs of Sam and Kim SMITH in most efficient
and effective way.
National Pension scheme
The another vital and significant option that is available for Sam and Kim SMITH is
investing out in national pension scheme as this encourages people to invest in a pension account
at regular intervals during the course of their employment so that in future their needs and
expenses can be easily made. The Sam and Kim SMITH are going to retire in around 5 years
thus, it is appropriate for them to take benefit of this national pension scheme so that after
retirement, Sam and Kim SMITH can be eligible as subscribers and can take out a certain
percentage of the corpus and income on their saved money. Thus, in future after their retirement
the Sam and Kim SMITH as an NPS account holder can receive the remaining amount in the
form of a monthly pension to meet their expenses and income expectation.
Out of these recommendations, the most suitable and appropriate option for Sam and Kim
SMITH is to have Earning as Rental Property from their current investment property as it
provides most flexible form of investment for them and also ensures better profit in future in
terms of appreciation in the value of their property along with ensuring a permanent and
recurring form of income.

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