Course Name: BACHELOR OF BUSINESS (ACCOUNT ING) Course Code: BACC07 Unit Name: Personal Financial Planning Unit Code: BAC303 Assess ment: Group...

Course Name: BACHELOR OF BUSINESS (ACCOUNT ING)

Course Code: BACC07

Unit Name: Personal Financial Planning

Unit Code: BAC303

General Instructions

Background

You are a financial planner and are approached by a client, Charles Casey.

Charles is 43 years old. He is married to Jenni who is also 43. They have two daughters, Romi and

Nicole, aged 17 and 22.

Charles works as an accountant earning $ 140,000 per year before tax and Jenni is a teacher’s aide earning $ 25,000 per year before tax. Both Jenni and Charles are only expected to get inflation-linked increases in their salaries throughout their working lives.

They are both planning on retiring on 1 April 2040 and want to be able to cover their expenses until 1 April 2065. They have also advised that they would like to leave as large an inheritance as possible to their children.

Both Charles and Jenni have clarified that, after hearing the Storm Financial story, they want to limit their investments to online savings accounts and residential property.

Their personal balance sheet as at 1 March 16 is as follows:

Further information:

 Jenni and Charles currently have expenses of $ 7,000 per month, excluding mortgage payments. This amount also includes an amount based on an estimate of the cost of Personal Risk Insurance (see Section B)

 Their expenses are expected to stay at their current level for the next 10 years, after which they will reduce to $ 5,000 per month and remain at this level until Charles reaches retirement age.

 Charles estimates that they will need $ 6,000 per month, including the cost of a comfortable retirement.

They plan to rent a unit in a retirement village on retirement.

 All figures are stated at today’s values.

 An investment strategy that involves the purchase of a residential property can utilise a Mortgage Loan for up to 80% of the value of the property. Costs normally incurred in acquiring a property (Stamp Duty, Legal Fees etc.) should be calculated as 5 % of the purchase price.

Requirements

Section A: Group Members and T asks

 Students are to form groups of 2 (two) members.

 Students will only be allowed to do the assignment alone if special circumstances exist and only following prior written approval from their tutor following an emailed request from the student.

 Under no circumstances will groups of more than 2 members be allowed

 Groups may only consist of members from their own tutorial class.

 Group are to meet and submit to their tutor by email, minutes of the meeting by no later than

5pm 23 March stating the following:

 Names and Student ID of group members.

 The responsibilities of each group member.

 A plan and timeline for the completion of the assignment.

Section B: Cash Flow Projections

The person responsible for this section of the assignment is required to project Charles and

Jenni’s Cash Flows from 1 April 2016 to 1 April 2065. Projections should include, but is not limited to, the following:

 Salaries.

 Expenses.

 Mortgage Payments.

 Investment Income outside of the Superannuation Funds

 Proceeds from sale, if any, of Non-Superannuation Assets.

 Any lump sum payment from Superannuation following a condition of release

Section C: Investment Alternatives

Investments outside of their Superannuation Funds are limited to direct ownership of residential property and online savings accounts.

You are not required to make recommendations for investments within their Superannuation

Funds as Charles and Jenni will continue to use their employers’ Superannuation Funds.

Section D: Personal Risk Insurance

Charles and Jenni currently have no Life, TPD, Income Protection nor Trauma Insurance other than what is standard in their Superannuation Funds. The cover that they have via their Super is minimal and can be ignored.

You are required to determine the types of Personal Risk Insurance they require for themselves and their dependents but not the payout amount of the policies.

Once this has been determined, you are required to source the appropriate policies online.

Premiums do not have to be provided as they have been accounted for in the expenses provided.

The Casey family have adequate Private Health Insurance.

Section E: T axation Planning

Students are required develop strategies that will make the most benefit of Taxation and Superannuation legislation that applied to the 2014 Financial Year. It is important that these strategies are developed and finalised before Section B is complete as they will have an impact on the Cash Flow Projections made for the client. Strategies should be limited to income splitting (when deciding on ownership of new investments) and additional Superannuation contributions. Any new investments must be owned by either Jenni or Charles.

Section F: Statement of Advice

Groups are required to prepare a Statement of Advice that will include the following:

 Restatement of risk profile based on Charles’ comments

 Investment strategies that, as a minimum, meet their projected cash flow requirements as well as maximise their asset growth.

 Tax Strategies.

 Risk Insurance.

 Estate Planning (only one paragraph limited to 100 words required)

 Standard information normally included in an SOA, including disclaimers.

Note: Students will earn marks for the way the SOA is presented. Use should be made of tables, graphs and diagrams to enhance the impact of the SOA as well as increased its clarity.

Assumptions

 The cost of replacing personal assets is built into the projection for expenses .

 All Tax, Superannuation and other relevant legislation and rates on which strategies and advice are based will be as existed at 30 June 2014 (i.e. as applies to the 2014 Financial Year).

Basis for making projections

Note: Cash Flows are to be projected annually.

Additional Requirements

The Statement of Advice is not to exceed 2,000 words excluding tables and graphs .

Groups are to state, separate from the SOA, the source of their information, including web links and any other relevant information.