Financial Planning Report: Analysis of Financial Planning Principles

This financial planning report analyzes the significance of financial planning in individuals' lives, emphasizing its role in achieving financial objectives. The report details the process, regulatory guidelines, and the responsibilities of a financial planner, including client interactions, data collection, and the explanation of financial safety guides. It covers key aspects such as managed funds, insurance, and the roles of regulatory bodies like ASIC and APRA. The report further discusses professional organizations like FPA and AFA, privacy laws, and the corporation act. It also highlights the importance of prioritizing the client's best interests, especially under the new Future of Financial Advice (FOFA) rules, to ensure compliance with financial planning principles. The report concludes by underscoring the necessity of financial planning for individuals to navigate financial complexities and secure a comfortable retirement.

Running head: FINANCIAL PLANNING
FINANCIAL PLANNING
Name of the Student
Name of the University
Author Note

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Executive summary
The aim of this report is to analyse the need of financial planning in the life of an individual
and how financial planning can help an individual in achieving his or her financial objectives.
This report also highlight the various process and the regulatory guidelines that a financial
planner should maintain while framing the financial plan of an individual.

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Table of Contents
Introduction................................................................................................................................2
Question (a)................................................................................................................................2
Question (b)................................................................................................................................3
Question c).................................................................................................................................3
Question (d)................................................................................................................................5
Question (e)................................................................................................................................6
Question (f)................................................................................................................................7
Question (g)................................................................................................................................7
Conclusion..................................................................................................................................7
Reference....................................................................................................................................8

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Introduction
The financial planning is an important technique that guides an individual to fulfil his
or her personal financial objective. In the modern days with the increase of complexities in
personal life and work pressure it is difficult for individuals to look after their financial
matters and that often leads to the situation of the occurrence of financial crisis. Financial
advisors play a crucial role in solving this problem by giving suggestions to the common
people and bring awareness among them so that they can live a comfortable life after their
retirement.
Question (a)
During the start of the interview it is essential to explain billy about the contents of
the financial safety guide (FSG), which contains the following details
 Selecting the Australian financial services (AFS) license provider and determining the
responsibility of the advisor who will provide the financial services.
 The nature of service that the advisor is authorised to render to the client
 The personal details that are required to be collected from the clients and how the
privacy of such confidential information will be maintained.
 The fees that will charged by the advisor with the details of every services and the
rates of such services should be segregated properly.
 The type of services that are to be reviewed which includes the occurrence of formal
reviews and the other mode of communications like newsletter, remuneration charged
and arrangements for extra reviews.
 Arrangements for referral

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 What measures the clients can take against the advisor if they desire to raise a
complaint (Anderson Baker and Robinson 2017).
Question (b)
The Open ended questions that has been asked to bill to collect his personal details
income expenses, assets and liabilities and personal objectives
What he feel about his current investment portfolio?
If he want to retire in 25 years what financial action they want to take so that he can arrange
sufficient fund during his retirement and can spend a comfortable retired life?
Question c)
Managed funds are such kind of funds where fund is pooled from various investors in
a single fund which is invested and monitored by a professional fund manager. The funds are
of different class of assets and the investor can select any fund which is suitable for his or her
own convenience. The investor can either select an equity linked fund which is highly risky
or a fixed interest linked fund which is less risky and will not provide high return (Craft et al
2018).
A number of units will be provided to the investors when he or she invest in a
managed funds. The value of each unit is measured on the basis of the price of the units
which is evaluated on a regular basis which will reflect the value of the fund. The unit price is
directly related with the value of the fund, for instance if the value of the fund increases the
unit price will also increases, while if the value of the fund decreases the unit price will also
decreases (Taylora et al 2017).
Managed funds can be listed or unlisted the listed funds are traded in the stock
exchange while the unlisted funds can be purchased and sold from the fund manager. In case

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of a listed fund the value of the fund is measured on the basis of the demand and supply of
the funds. In contrary to that if the fund is unlisted the new units which are still available for
investment are raised with demand with a product disclosure statement (PDS). The valuation
process of the unlisted funds are made on weekly basis by the fund manager by dividing the
net value of the assets on the particular day by the total number of units issued (Bourova et al
2018).
In case of managed funds no advice is rendered by the advisers although they charge a
transaction cost or a trailing commission from the clients if they want to have a managed
fund. The fees or charge is fixed after negotiations are made between the advisers and the
clients. In the case of the product disclosure statements it is essential to disclose all the
relevant as per the corporation act, in a transparent and easy format so that no confusion arise
between the client and the advisor (Seymour 2019).
The disclosures must be made for the following
Fees
Any type of fees either upfront or ongoing remuneration that are related with the
advisory services or any kind of products. This may consists the upfront remuneration or
trailing charges on the managed funds.
Charges
All the charges related to the portfolio fees or financial planning related services are
to be clearly disclosed.
Interest
The interest of the advisor related to the extra commission received from an
accountant or a bonus from any fund manager.

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Question (d)
The ASIC and APRA play an effective role in insuring the Australians so that they
can live a better life without thinking much about the medical expenses. The Australian
prudential regulation authority (APRA) is the governing body that regulates the Australian
general insurance industry. All the insurance companies that are licenced under the insurance
act 1972 has to comply with the rules and regulations framed by the insurance council (Muir
et al 2017).
To make sure that every Australians get the facility of the insurance act the Australian
prudential regulation authority plays an active role by coordinating all the market
participants of the insurance industries like the insurance and reinsurance companies , Lloyd
intermediaries and the agencies of both the public and private companies. The member of the
insurance council accounts for 90% of the insurance transactions in Australia. The main
objective of the regulatory body is to promote more awareness among the Australians about
the need of insurance and how effective insurance can be for an individual and also for his or
her family.
The APRA and the ASIC set various guidelines which are mandatory for the
insurance companies to follow to ensure that the insured person get all the claims and
benefits whenever they require and that the insurance companies does not fail or make any
default in settling the claims of the insured person. The insured person are also entitled to
take legal actions against the insurance company if such company make any misstatement in
their policies and does not provide any information that can mislead the insurer in

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understanding the basic coverage given under that particular insurance policy. By imposing
more transparent and clear policies it will be possible to insure Australians more effectively
and efficiently (Worthington 2016).
As financial planner it is our responsibility to collect information from the client and
make a clear understanding about his or her basic requirement and on the basis of such
requirement a proper and effective insurance policy should be suggested to the client. As
financial planner one should not give excessive priority about his individual interest but
should give emphasis on the condition of the client. For instance to earn some more
commission the financial planner should not suggest any particular insurance company’s
policy to the client that may not be effective for fulfilling the financial objective of that
particular person. The financial planner should only suggest such policy which will give
protection to the life of the insured person and his or her family (Steen McGrath and Wong
2016).
There are several researches are made regarding the issue that whether Australians are
adequately insured or not in some reports it has been said that most of the Australians are
insured but in reality it has been observed that although 92% of the working people in
Australia are insured but their insurance policies are not sufficient to mitigate all the risk
factors of life. The main reason for the underinsurance is due to the reason that many people
want to settle for the life insurance cover given by the superannuation policies, and the
insurance of the superannuation policies give lower amount of coverage to the insured
person. So in that context it can be said that the Australians are under insured (Murphy 2018).
Question (e)
FPA is the largest community of the financial planners in Australia having a member
base of 14000 who are continuously dedicated themselves in providing highly professional

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services to the clients. The AFA is Australia’s leading financial service provider the members
of this organisation help the Australians to achieve their financial objectives and live a
secured and comfortable life. Both the professional members of FPA and AFA used to frame
the financial plan for the individuals and they create awareness among the general public
about the need of financial planning so that their financial objectives can be fulfilled (Cull
and Melville 2018).
Question (f)
The privacy law is made in order to protect the personal and confidential information
of the clients which they have to share with the financial planner. While the corporation act is
required in financial planning to give legal approval on the contracts that are made between
the client and the financial advisor (Cull 2019).
Question (g)
As per the new rule of the future financial advice (FOFA) that replaces the general
rule of the section 945A of the corporation act I would refer bill to select products on the
basis of the best interest of the client and not on the basis of the features, as this will enable
me to comply with the two basic rules of financial planning which are “know your client” and
“know your product” (Preston 2020).
Conclusion
Financial planning become indispensable for every individual as with the price of
every necessary goods that are required for meeting a comfortable life is increasing on daily
basis if a proper financial planning is not made then individual will face financial crisis
during their retirement. So in that context it can be said that every individual should make a

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financial plan by taking advice from professional to live a comfortable life without the fear of
financial problems.
Reference
Anderson, A., Baker, F. and Robinson, D.T., 2017. Precautionary savings, retirement
planning and misperceptions of financial literacy. Journal of Financial Economics, 126(2),
pp.383-398.
Bourova, E., Anderson, M.E., Ramsay, I. and Ali, P., 2018. Impacts of Financial Literacy and
Confidence on the Severity of Financial Hardship in Australia. Australasian Accounting,
Business and Finance Journal, 12(4), pp.4-23.
Craft, A., Taylor, S., Gaffney, A. and Wagland, S., 2018. Retirement outcomes for female
primary carers in Australia: a literature review. Financial Planning Research Journal, pp.69-
91.
Cull, M. and Melville, B., 2018. A review of ethics education in financial planning courses in
Australia. Financial Planning Research Journal, 4(1), pp.11-32.

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Cull, M., 2019. Learning to produce a financial plan: student perceptions of integrating
knowledge and skills. Financial Planning Research Journal, pp.29-54.
Muir, K., Hamilton, M., Noone, J.H., Marjolin, A., Salignac, F., Saunders, P. and Australia,
F.L., 2017. Exploring financial wellbeing in the Australian context. Centre for Social Impact
& Social Policy Research Centre, Sydney: University of New South Wales.
Murphy, B.J., 2018. Financial Planning and Accounting in Australia: A Contest for
Jurisdiction 1980-2014.
Preston, A., 2020. Financial Literacy in Australia: Insights from HILDA Data.
Seymour, E., 2019. Taxation: strategies for financial planners. Financial Planning in
Australia, pp.383-416.
Steen, A., McGrath, D. and Wong, A., 2016. Market failure, regulation and education of
financial advisors. Australasian Accounting, Business and Finance Journal, 10(1), pp.3-17.
Taylora, S., Wagland, S., Taylor, A. and Taylor, S., 2017. THE DEMOGRAPHICS THAT
PREDICT SUCCESS IN THE AUSTRALIAN CERTIFIED FINANCIAL PLANNER
(CFP®) CERTIFICATION PROGRAM.
Worthington, A.C., 2016. Financial literacy and financial literacy programmes in Australia.
In Financial Literacy and the Limits of Financial Decision-Making (pp. 281-301). Palgrave
Macmillan, Cham.