1202AFE Financial Planning 1 Trimester 1: Wealth Creation Plan

This assignment solution for 1202AFE Financial Planning 1 addresses wealth creation and lifestyle recommendations based on a client interview. The solution provides strategies for two financial goals: a holiday and a dental practice. For the holiday goal, a short-term deposit in an AMP loan with...Read More

1202AFE Financial Planning 1
Trimester 1, 2020
Wealth creation & lifestyle recommendations – outside superannuation
1. Goal [holiday]
Recommended strategy:
As per the information provided you have a savings of $ 50,000 in your bank account which
can be used for making investments in a short term deposit for a year. I would be suggesting
that you invest in AMP short term loan option for which a minimum investment of $ 25,000
would be required. The funds would be locked for a period of 1 years and it would be
providing an interest rate of 1.85% pa. I believe this strategy would ensure that you have
proper funds for the holiday expenses by the time you are getting ready for the holiday.
Advantages of strategy [reasons why]
 The investment in a term deposit is suggested is because it has an attractive interest
rate considering short term investments and interest payable every one, three or six
months. It is to be noted that further rates and offers are applicable which I would be
setting up for you.
Disadvantages of strategy
 The disadvantage for this strategy is that it would lock in your funds for 1 year Jenna
and there is no flexibility in such an option. However, as the same is short term
investment, it can be managed.
Alternatives considered
 Another alternative which I can suggest is proper budgeting and the same can be
done by opening a holiday purpose savings account where you can contribute $
2,000 of your monthly savings after meeting the mortgage for the loan you have
taken. Appropriate depositing in the holiday savings account would build up your
funds by the time you are ready for the holiday.
2. Goal [Dental Practice]
Recommended strategy:
 I would be suggesting a Managed investment fund option where contributions can be
made in small proportions which would then be pooled together for the purpose of
making investments by a responsible organization. I would be suggesting a listed
managed fund option and would suggest that you make investments in Listed
investment companies (LICs) and trusts (LITs). This would accumulate proper
savings within a period of five years and help you accumulate $ 200,000 in future.
Advantages of strategy [reasons why]
 Investing in a managed fund can give you access to a diversified portfolio in one
trade and the same are also handled by professionals so the investments decisions
which are taken with your funds are competent and would generate proper returns.
There is also a ease in diversifying the risks so as to ensure returns are generated.
Disadvantages of strategy
 The disadvantage of the strategy is that the fees which is charged is high and there is
also inefficiencies when it comes to tax compliance.
Alternatives considered
 An alternative strategy which you can consider is making investments in term
deposits which would be a long term purpose and the same would also have a

1202AFE Financial Planning 1
Trimester 1, 2020
attractive interest rate associated with the same. In addition to this, this is a less risky
approach for accumulating your savings.

1202AFE Financial Planning 1
Trimester 1, 2020
Appendix 1 - Future value (FV) calculations
Holiday Expenses
Sum to be deposited is $ 15,000
Period 1 year
Interest generated = $ 15,000* 1.85/100
= $ 277.5
Dental Practice
Monthly Payments to be done = $ 2,000
Time period = 5 years
Rate of interest = 6%
FV = PV(1+r)^n
$ 200,000= PV (1.06)^5
= $ 150,000 approx needs to be invested