ACBUS107A Financial Planning Fundamentals Report: Client Case Study

This report presents a comprehensive financial plan for a client, addressing various aspects of their financial life. The analysis begins with an assessment of the client's current financial standing, including income, expenses, assets, and liabilities. The report then delves into the client's financial goals, which include reducing debt, saving for a home, retirement planning, and insurance coverage. The analysis involves calculating cash flow, net worth, and identifying potential risks. The recommendations include suggestions for managing debt, increasing savings, and optimizing insurance coverage. The report provides a statement of advice, outlining the scope of the advice, the client's current position, and recommended strategies. The report emphasizes the importance of reviewing the budget, increasing superannuation contributions, and obtaining adequate insurance coverage. The report also incorporates a detailed analysis of the client's after-tax income, cash flow, and net worth, demonstrating the impact of various financial decisions. The overall goal of the report is to provide the client with a roadmap to achieve their financial objectives and secure their financial future.

Financial Planning Fundamentals
A. From the first meeting with the client, all the required information which financial planners
need is not provided. A quick glance of the financial needs analysis fact sheet shows the absence
of information about the client’s state of health and lifestyle. Knowing the state of health paves
way for the estimation of the longevity of life. To estimate the life span is important because it
helps in calculating the amount of money the client will need to save and for how long. Although
most financial planners calculate longevity using various parameters that exclude health in
general and the medical history of a client, this factor should not be ignored.
B. Some people are not very comfortable to discuss matters concerning their health, Forbes
(2014). To collect the information the use of a questionnaire would be appropriate. The
questionnaire would ask the clients to indicate their weight and if they have a history of heart
disease, diabetes and to specify whether they drink or smoke.
C. The additional information collected from the client would be copied to Client File Note and
the questionnaire attached to it.
2. When dealing with a client there are matters which are a must for discussion, The Motley Fool
(2018). This is a financial planning meeting and money is at the center-stage. The financial
planner and the client will discuss:
 Habits of spending and saving. The advisor would like not only to know how much
you earn but also how you use what you receive and how much you can manage to save.
 Saving for an emergency. Your advisor will bring to your attention the importance
of saving for unforeseen situations. The importance of an emergency fund is given more
emphasis by other advisors than even saving for retirement.
 Education. Even if there is no child yet, they will be there one day. It is very helpful
to discuss the college education for the kids at this earliest opportunity and place it firmly
in the financial plan
 Retirement. Although it is not in the cards yet retirement should feature in the
discussions. Some people rate saving for retirement more highly than saving for college
with the argument that it is possible to get a loan to fund college education but not to pay
for your retirement.
 Insurance. Discussion life insurance would also feature. No financial advisor skips
this feature because of necessity. Discussions would focus on the value of the coverage.
· Risk. I would discuss the issue of risk so as to find out how the client handles risk.
People vary; some have very strong tolerance to risk while others have not. People with
little risk tolerance are advised not to invest in highly volatile businesses like the stock
market.

 Fees. The client and I would also discuss my fees as a Financial Planning Advisor. It
costs money to be advised to improve your capabilities to achieve your dream financial
goals.
3. Most of this client’s aims are noble and are strategically structured to ensure the achievement
of set goals. The goals have been prioritized based on the importance to the client, and they are
as follows: the budget to be subjected to a review with a view to cutting down expenditure, to
reduce debt, strategize how to save and keep a surplus of over $9,000, ensure an incoming cash
flow of over $55,000 per year, keep his holiday allowance and increase his contributions to the
retirement schemes. Other goals include getting adequate insurance policy coverage, a marriage
proposal to his fiancée, and make savings to enable the purchase of a home in a few years, and
buy a new car.
The client’s objectives and goals are classified as follows:
Goals to be achieved in the immediate future:
 Reduce expenditure
 Reduce debt
 Keep a surplus of over $9,000
 Increase contributions to retirement schemes
Goals to be achieved in the near future:
 Make a marriage proposal to his fiancée
 Ensure cash in low of more than $ 55,000 yearly
 Retain his rest days payments
Goals targeted for distant future achievement:
 Buy a car
 Make savings for purchasing a home
 Save for college education for kids
 Save for retirement
4. It would be my suggestion to my client to postpone his intended proposal to his girlfriend until
a later stage to give way for other goals which are urgent to be achieved. He should also suspend
his holidays and save $3,000. In addition, I would ask him to put on hold his plans to start saving
for a house deposit until such a time when his finances are streamlined.
5. Should Andrew fail to achieve his goals he faces some risks. One of his goals is to make a
marriage proposal to his fiancée in a few months. Should he fail to do so he would disappoint his
fiancée and probably lose her. He will also not be happy not to enjoy his $3,000 worth holiday.
6. The clients’ after-tax income:

Total Annual Income:95,000+200+150= 96,150.00
Tax: $ 20,997+2275,50+1923= 24,995.50
After tax income $ 71,154.50
7. (a) Cash Flow:
Total Earnings: $96,150.00
Less total expenses 55,000.00
Less Taxes 24,995.50
Surplus $16,144.50
Net worth:
Total Assets-total liabilities: $87,144.50
35,000.00
Net worth $ 52,144.50
(b) Net worth when the client sticks to the expenditure of $700 a month on credit cards
The effect of this would reduce expenditure on credit cards from $ 15,000 to $ 8,400 thus
increasing cash flow by $6,600 and the assets by the same amount. The new net worth will now
be $ 52,144,50+6,600= $58,744.50
8. The client currently has life insurance and TPD coverage of $125,000 within the
superannuation scheme. The premium is very cheap when obtained under superannuation but the
coverage is grossly insufficient. For the client to get adequate coverage he needs stand-alone life
insurance coverage of $640,000, TPD coverage of $380,000 and income protection costing
$2,200 per month.
9. After implementing the recommendations of reviewing the budget and reducing debt there will
be a surplus. The immediate application of the surplus is first to set aside over $9,000 as savings
and to increase his contributions to the retirement plan schemes. The surplus will also go towards
saving for house deposits and to other long term goals like saving for college fees and retirement.

10. I would advise my client to take advantage of the tax incentives which the government gives
people to contribute to their superannuation funds. The employer contributes 9.5% of your salary
and if you add your own contribution the amount available for investment at superannuation will
grow, Virgin Money (2019). You could also be lucky to fall into the bracket of those whom the
government contributes with you to the fund. The beauty of superannuation is its orientation. All
the money received is invested, and you have the liberty either to let the fund exercise their
discretion to invest for you or you can choose where it can be invested. I would advise my client
to exercise the latter option so that he may choose an investment destination with super returns.
Part B
STATEMENT OF ADVICE
30th September 2019
Mr. Andrew Ferrell
35/190 – 196 Jubilee Ave,
Carlton, NSW, 2217
We have attached Statement of Advice whose contents are pieces of our advice to help you attain
your goals.
The basis of the advice which we have given is the data and the information you shared with us
during the discussions which we had with you recently.
Should you need any clarification on any matter presented here please get in touch with us before
you take the next course of action.
The step we have taken is the first one in our journey towards assisting you to realize your
financial dreams. There will be a review of the recommended strategies to ensure relevance and
implementation.
Please feel free to contact our office in case you need help to clarify the matters stated in this
document.
Sincerely yours,
St George Financial Planning Pty Ltd
Table of contents

Reasons for looking for advice………………………………………………………..6
Your goals and needs………………………………………………………………….6
Scope of the advice……………………………………………………………………6
Our advice……………………………………………………………………………..7
Our advice summary…………………………………………………………………..7
Your current position………………………………………………………….………8
Our recommended strategy……………………………………………………………8
Risk profile…………………………………………………………………………….9
Authority to proceed………………………………………………………………….10
Reference……………………………………………………………………………...11
Why advice was sought for:
These are the goals you have:

Keep an income whose net is $59,000
Ensure a cash surplus of not less than $ 9,000
Do away with debt
Save for buying a house
Buy a new car in the near future
Keep allowances for holidays at just above $2,900
Make a marriage proposal to fiancée and in the near future
Increase contributions to retirement schemes
Get insurance protection
Scope of our advice
Our agreement specified that the areas which our advice would cover and they are:
Superannuation
Insurance cover
Planning for the estate
Our advice will only address the above-listed issues only. Should you need advice on other
financial matters which are excluded above please do not hesitate to get in touch with us. We
shall be grateful to be of help to you.
Our advice
1. Excludes:
Planning for the estate because you have opted for this to be handled by
your lawyer.
2. is limited:
Our advice on life insurance is limited by the information you gave. You did not provide us with
the state of your health and your lifestyle thus limiting us from assessing your situation in
entirety.
Any recommendation which would involve taxation will require a tax expert for competent
advice because our agent is not a professional adviser on tax matters
Our advice summary

Recommendations on strategy:
1. The repayment of the loan amount or frequency needs to be increased
2. Put in place a plan to save regularly
3. Superannuation contribution to be rolled over
4. Enhance your insurance coverage
Step Strategy
Your current position
The basis of the advice we have given you is the data and information you volunteered to us and
our interpretation of them:
.Date of birth 03/03/1987
Marital Status In a relationship
Occupation Civil Engineer
Employment Status Full-time
Health Not given
Smoker Not given
Power of Attorney No
Dependants None
Assets and liabilities
Michael Ashley Joint
Own assets $71,000
Own liabilities $ 46,000
Our recommended strategy
During the preparation of our recommendations, we paid diligent attention to your financial
situation at the moment against the backdrop of what you aim to achieve.
.
To do away with your debt
You will achieve the above goal sooner if you increase the amount of repayment by at least $200
for the car loan and $ 140 for the finance loan. Apart from enabling a shorter loan repayment
period, there will the benefit of reduced interest payment
To implement the strategy re-look at the terms and conditions of the loans and then arrange for
the additional monthly payments with your financier
Surplus
Your short term goal of wishing to preserve surplus cash will be possible through the
establishment of a plan in which surplus cash will be consistently placed.

Boost your insurance coverage
With personal insurance your family and yourself get protection by being provided with money
should disability, illness or death take place.
The following to be implemented for Andrew:
Life Insurance- $ 640,000
Owner of the policy Andrew
TPD Insurance-$ 380,000
Income Protection insurance-$ 2,200 per month
How it benefits:
When you die or get afflicted by terminal illness the life insurance pay either lump sum or by
installment.
TPD Insurance pays in the same way as life insurance if an injury or illness disables you
permanently from working
Trauma Insurance compensates by paying in installments or a lump sum for conditions such as
stroke, cancer or heart attack.
Income protection compensates about 78% of monthly income should you get sick or an injury
that disables you from working.
It is our recommendation that you purchase your insurance policy cover out of superannuation
because of the competitiveness of the premiums. The insurance policy premiums under
superannuation are cheaper but the coverage is it offers is not sufficient.
Insurance Products: Our recommendation
We recommend to you AIA Australia limited for your insurance needs. The product it offers is
wide and affords you the opportunity to choose the best. U company it is possible to get your
coverage within or without super.
Your responsibility of disclosure

Before you transact with the insurance it is vital for you to get to know your responsibility of
disclosure. The law mandates you to reveal to the insurance company every relevant detail about
yourself to enable the insurer to make an informed decision about you.
Risk profile
Your attitude towards risk must be determined as it is crucial to developing an investment
strategy suitable for you. How do you view risk? Are you ready for any results from your
attempts to get investment out-comes? Generally ,return and risk are intertwined; when an
investment is labeled highly risk, the return expected by the investor is high in proportion to risk.
Andrew’s risk profile is Moderate Growth
In a situation where the assets you have invested in vary in classification, their growth rates will
also vary and this will gradually change you risk attitude. We recommend that in such situations
we make a review of your investment portfolio every year to ensure the relevance of your risk
attitude under the shifting returns.
Managed Investments
We recommend to Andrew to invest in netWealth’s Wealth Super Accelerator Platform which
handles fixed deposits, cash, managed funds, and others like property syndicates.
netWealth monitors your investments and collects cash and provides information for
performance and tax reporting.
Existing
Steps to take in implementation
Your decision will guide us in what would be our next course of action. If you choose to accept
the recommendations which we have given, we will assist you to fill the Statement of Advice
documentation.
While implementing the recommendations the following steps must be taken immediately:
1. At the soonest possible time make an application for the recommended insurance
with AIA
2. When your new insurance is two weeks old after confirmation, rollover your current
superannuation to netWealth as per our recommendations.
The above actions will require documentation, and it is in that respect that we will assist you
to fill the forms.
Authority to proceed

You will be required to read the following section diligently because the information it contains
is very important. Pay serious attention to the given declaration before you append your
signature.
I proclaim by my signature that:
 I acknowledge the receipt and having read, I understand this Statement of Advice
dated 30 September 2019
I affirm that the details concerning us in this Statement of Advice are accurate. I have
understood that should the information we have provided be incorrect or incomplete the
advice given might be inappropriate for me.
 I acknowledge that the profitability of certain investments recommended depend on
market movements and we have not given any guarantee of their future returns.
 I acknowledge the receipt, in totality, of Product Disclosure for those products whose
recommendation is given in this Statement of Advice.
I, therefore, wish to press ahead with the advice provided in the statement.
________________________________________________________________________________________________________
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___Signed: Andrew Ferrell_________
REFERENCES

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https://www.moneysmart.gov.au/investing/managed-funds [Accessed 7 October 2019]
Better Money Habits(2019) 8 simple ways to save money[online]. Available from:
https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/ways-to-save-money
[Accessed 6 October 2019].
Comparing Expert (2017) Top ten life insurance companies in Australia [online]. Available
from: https://www.comparingexpert.com.au/life-insurance/companies/ [Accessed 7 October
2019]
Entrepreneur (2017) know your risk profile first before investing [online]. Available from:
https://www.entrepreneur.com/article/322527 [Accessed 7 October 2019].
Finder (2019) statement of advice [online]. Available from:
https://www.finder.com.au/statement-of-advice [Accessed 30 September 2019]
.
Forbes (2014)Why you should discuss health with your financial planner [online].available from:
https://www.forbes.com/sites/carolynmcclanahan/2014/04/21/why-you-should-discuss-health-
with-your-financial-planner/#7c59224054f9 [Accessed on 25 September 2019]
Mind Tools (2019) Smart goals[online]. Available from:
https://www.mindtools.com/pages/article/smart-goals.htm [Accessed 7 October 2019].
Pocket Sense (2017) What is a disclosure in an insurance policy [online]. Available from:
https://pocketsense.com/disclosure-insurance-policy-8516672.html [Accessed 6 October 2019]
The balance (2019) How to manage debt of any size[online].Available from:
https://www.thebalance.com/how-to-manage-your-debt-960856 [Accessed 30 September 2019].
Simplicable (2017) 3 examples of a risk profile [online]. Available from:
https://simplicable.com/new/risk-profile [Accessed 30 September 2019.
Suncorp (2016) Total and permanent disability insurance [online]. Available from:
https://www.suncorp.com.au/insurance/life/perm-disablement.html [Accessed 7 October 2019]
The Motley Fool (2018) Eight things you must discuss with your financial advisor [online].
Available from: https://www.fool.com/investing/general/2015/10/24/8-things-you-must-discuss-
with-your-financial-advi.aspx [Accessed 25 September 2018).
Virgin Money (2019) How does super work[online]. Available from:
https://virginmoney.com.au/superannuation/understanding-super/how-does-super-work-in-
Australia[ Accessed 25 September 2019].
Wayne University(2017)Smart objectives [online]. Available from:
https://hr.wayne.edu/leads/phase1/smart-objectives [Accessed 25 September 2019].