Financial Planning Fundamentals (DFP1_AS_v1A2) Assignment

This document presents a solution to the Financial Planning Fundamentals assignment (DFP1_AS_v1A2) for Kaplan Professional. The assignment involves a case study of Steve and Crystal Riley, a young couple seeking financial advice regarding their home purchase, debt management, and investment objectives. The assignment requires analysis of their financial situation, including income, expenses, assets, liabilities, and superannuation. The document likely provides answers to questions related to financial planning principles, debt management strategies, investment recommendations, and the application of relevant financial planning regulations. The solution demonstrates the application of financial planning concepts to a real-world scenario, offering insights into client needs and financial strategies. The assignment covers units of competency including financial planning analysis, ethical guidelines, client needs, and professional practice.

Financial Planning Fundamentals
(DFP1_AS_v1A2)
Student identification (student to complete)
Please complete the fields shaded grey.
Student number
Project 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 projectfor 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: Projectquestions
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 projectwithin 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 projectquestions.
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.
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Submitting the assignment
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parts and have prepared a quality submission.
The projectmarking process
You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
Should your projectbe deemed ‘not yet competent’ you will be give an additional four (4) weeks to
resubmit your assignment.
Your assessor will mark your projectand 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 projectwill 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 projectis graded
Projecttasks 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.
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‘Not yet competent’ and resubmissions
Should sections of your projectbe 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 projectis 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 projectyou 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.
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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 librarianhowever she 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
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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
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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
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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.
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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.
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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.
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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.
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Part 3: Projectquestions
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)
Answer here
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)
Answer here
Assessor feedback: Resubmission required?
No
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