Financial Planning Report: Case Studies and Analysis - University

This report presents a financial planning analysis based on several case studies. The first case study compares three MySuper options (Aon, AMP, and Colonial First State), evaluating their investment options, costs, and alignment with Royal Commission findings, ultimately recommending Aon MySuper. The second case study calculates and compares arithmetic mean and compounded returns for various investment assets, including Australian and international equities and bonds, and residential investment property, highlighting the difference between the two methods and explaining the informational value of residential property returns. The third case study provides financial advice to Bob Miller, considering his emotional attachment to oil and gas stocks, recommending a balanced portfolio strategy to mitigate volatility and maintain investment focus. The report includes references, bibliography, and appendices with supporting data.

Running head: FINANCIAL PLANNING
Financial Planning
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Case Study 1:..............................................................................................................................2
Indicating the preferred My Super Product, comparing the dashboards and indicating the
information that is needed prior to the final advice:..................................................................2
Case Study 2:..............................................................................................................................3
a. Presenting the table with adequate arithmetic mean for 10-year, 20-year and whole with the
standard deviation of whole year:..............................................................................................3
b. Comparing the obtained results and depicting why there is a difference in value:................3
c. Comparing the data in exhibit B Australian listed property and Residential Investment
Property, while explaining the reason behind Residential Investment Property return being
informative:................................................................................................................................4
Case Study 3:..............................................................................................................................5
Indicating the advice that can be provided to Bob Miller considering the emotional stage,
while indicating whether he should be away from volatile measurement:................................5
Indicating the suitable strategy or advising him to stay in course, while depicting the way to
convince him:.............................................................................................................................5
Reference and Bibliography:......................................................................................................6
Appendices:................................................................................................................................7

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Case Study 1:
Indicating the preferred My Super Product, comparing the dashboards and indicating
the information that is needed prior to the final advice:
From the overall valuation of appendix 1, 2 and 3, the overall difference between the
three potential MySuper options, this can eventually help in making an adequate decision.
The analysis relevant revealed that the selection of Aon MySuper option will be beneficial for
both Bill and Agatha, as it illustrates on the investment options that will be conducted. In
addition, the detailing and cost of investment is adequately depicted in the dashboard, which
is relevantly helpful in making informed decisions. Moreover, in accordance with details of
Royal Commission the overall investment option such as AMP Flexible Lifetime Super and
Colonial First State (A subsidiary of CBA) FirstChoice Lifestage is considered to be
problematic. However, there were allegations against Aon MySuper, which was not
supported by adequate evidence and has been challenged by AHFA. Therefore, investment in
Aon MySuper can be considered by Bill and Agatha
(Financialservices.royalcommission.gov.au 2018).
The dashboard portrayed adequate information, while some of the information is
missing, which can be considered to be minor details regarding the previous progress of the
designed investment plan. This detailed information about the past performance can
eventually help in detecting the significant returns, which can be generated from the growth
stocks. This would eventually help in understanding the level of risk and return attributes of
the investment options and helps in making the appropriate decision regarding the
investment. Aon MySuper is considered to be the best options available to Bill and Agatha.

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Case Study 2:
a. Presenting the table with adequate arithmetic mean for 10-year, 20-year and whole
with the standard deviation of whole year:
Mean Annual Returns Std. Dev of Annual Returns
Australian
Equity
10-Year 7.8%
Whole period 21.5%
20-year 10.2%
Whole period 13.3%
Australian
Bonds
10-Year 6.3%
Whole period 6.8%
20-year 6.9%
Whole period 10.0%
International
Equity
10-Year 4.5%
Whole period 4.4%
20-year 5.1%
Whole period 7.8%
International
Equity
(Hedged)
10-Year 6.8%
Whole period 20.9%
20-year 8.3%
Whole period 13.1%
International
Bonds
(Hedged)
10-Year 9.2%
Whole period 17.6%
20-year 9.9%
Whole period 12.6%
A-Reits
10-Year 7.4%
Whole period 6.3%
20-year 7.9%
Whole period 11.1%
Cash
10-Year 5.9%
Whole period 17.7%
20-year 10.3%
Whole period 12.0%
b. Comparing the obtained results and depicting why there is a difference in value:
There is difference in the overall calculation made in the above table and the values
listed in Exhibit B, which is due to the calculations used for deriving the returns. The above
table has used arithmetic method for deriving the overall returns, which unfairly weights the
percentage of gains equalling the percentage of losses. Hence, the measure does not consider
that losses of 50% in one year cannot be compensated by gains of 50%. This is the main
reason why the overall returns of the table is higher than the listed returns in Exhibit B. The

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compounding returns used for the calculation purpose in Exhibit B directly indicates the use
of a compounded average technique, which compensates the condition of losses and gains
and derives the adequate returns made during the investment period. This can be considered
as the major condition where the arithmetic return calculated in the above table is higher than
the compounded return. Hence, investor needs to calculate the returns of an investment on the
basis of compounded average method for detecting the accurate level of return generated
from the investment opportunity (Wang, Koo and O'Hare 2016).
c. Comparing the data in exhibit B Australian listed property and Residential
Investment Property, while explaining the reason behind Residential Investment
Property return being informative:
The information provided in Exhibit B relevantly depicts the difference in returns
between the residential investment property and Australian listed property. From the
evaluation it can be detected that The Australian listed property measure is based on the
returns that is generated from S&P/ASX 200 Property Trust (Accumulation) Index. The other
factors have been accounted for such as tax-deferred income, brokerage, stamp duty and tax
treatment. These measures have been taken into consideration while evaluating the Australian
listed property returns. On the other hand, the residential investment property returns is based
on the population-weighted average return calculated across major capital cities. The value
increase in housing prices is relevantly calculated with all returns net of costs, where cost
such as net rental income allows for vacancy rates, maintenance expenses, management fees,
governance charges, land tax, insurance, acquisition, disposal costs, conveyancing, stamp
duty and agent’s fees are considered. This is the main reason behind the staggering difference
in returns between the residential investment property and Australian listed property.

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Case Study 3:
Indicating the advice that can be provided to Bob Miller considering the emotional
stage, while indicating whether he should be away from volatile measurement:
The emotional attachment with the oil and gas stocks has led to the dreadful stage,
which is directly affecting the decision making capability of Miller. On his request the
investment was heavily conducted on Oil and Gas industries as he was fully aware of the
current situations. However, seeing the decline in equity stocks the overall investment can be
segregated and adequately managed with growth and defensive stocks. This might help in
reducing the negative impact on the portfolio and minimising the effect of high volatility.
Therefore, it is not advisable for moving away from the volatile stocks, as some of the
investment options can yield high returns in future (Pakpahan and Butler 2018).
Indicating the suitable strategy or advising him to stay in course, while depicting the
way to convince him:
The suitable strategy for Miller is to adequately align his portfolio with the current
trends, where both defensive and growth stocks can be used for maximising the returns from
investment. Therefore, highlighting the new portfolio with both defensive and aggressive
stock would balance the investment adequately, which might help in minimising the negative
impact of volatility. This could eventually calm Miller and convince hi\m to stay invested.

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Reference and Bibliography:
Amp.com.au. 2018. MySuper dashboard - AMP. [online] Amp.com.au. Available at:
https://www.amp.com.au/personal/super-and-retirement/services/mysuper-dashboard/
investment-option.html/U2/FL/AMY3 [Accessed 11 Oct. 2018].
Aonhewitt.com.au. 2018. Aon MySuper dashboard | Aon Hewitt Australia . [online]
Available at: https://www.aonhewitt.com.au/Home/For-Employers/Employee-
superannuation/Aon-MySuper-dashboard [Accessed 11 Oct. 2018].
Colonialfirststate.com.au. 2018. FirstChoice Lifestage :: Colonial First State. [online]
Available at: http://www.colonialfirststate.com.au/firstchoice-lifestage-tool.html [Accessed
11 Oct. 2018].
Financialservices.royalcommission.gov.au. 2018. [online] Available at:
https://financialservices.royalcommission.gov.au/public-hearings/Documents/Round-5-
written-submissions/aon-hewitt-financial-advice-limited.pdf [Accessed 11 Oct. 2018].
Ingles, D. and Stewart, M., 2017. Reforming Australia's Superannuation Tax System and the
Age Pension to Improve Work and Savings Incentives. Asia & the Pacific Policy
Studies, 4(3), pp.417-436.
Pakpahan, C. and Butler, D., 2018. Superannuation: How will the FHSS scheme work for
SMSFs?. Taxation in Australia, 52(7), p.386.
Purves, D., 2016. Aligning the pillars of post-retirement. Investment Magazine, (133), p.10.
Wang, H., Koo, B. and O'Hare, C., 2016. Retirement planning in the light of changing
demographics. Economic Modelling, 52, pp.749-763.

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Appendices:
Appendix 1: Colonial First State (A subsidiary of CBA) FirstChoice Lifestage
Appendix 2: AMP Flexible Lifetime Super

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Appendix 3: Aon MySuper

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