Part 1

The assignment is based on material covered in weeks 2 to 9, however will involve reviewing course materials for week 10 and 12. You will be required to complete a detailed file note as preparation for development of a client's financial plan (Statement of Advice).

Students are provided with a transcript summary from an initial meeting between a financial planner and new clients. Based on this transcript, students will be required:

 to provide an overview of the client's circumstances (including their current situation and goals, tables of financial position) and provide potential wealth creation, wealth protection (insurance) and lifestyle strategies that address these circumstances and goals,

 to provide a list of assumptions you are making; and

 prepare a list of questions for the clients where further information may be required prior to completing the SoA.

Summary of transcript

Date to use for initial contact: 1 Aug. 2022

Rebecca and Joel Cripps

Rebecca and Joel realise that they are not getting anywhere financially. They have decided it's time to bite the bullet and get their finances in order. They believe that at first glance, their finances seem good, but there are a number of issues that need to be resolved.

Rebecca earns $81,000 p.a. Her employer contributes the 10.5% Super Guarantee. She has not been contributing herself and at age 41, her balance is around $120,000 – she is aware that this is not a good outcome.

Joel, age 45, earns $125,000, and like Rebecca he has not been putting any extra into his super. His current balance is $157,000. They would like to retire when Rebecca turns 60 and believe they will need $49,000 pa in today’s dollars to live on.

They have an emergency savings account of $24,000 earning 0.5%. They also have a share portfolio currently worth $255,000 and $150,000 as a margin loan. The interest rate is 7.75% and the portfolio earns 3.0%. They are uncertain about this investment and see the interest payments eating up all of the earnings. It is also of concern how to fund university costs for their children Matilda who is 10 and James who is 8.

Several years ago, they inherited a rental property valued at $400,000. It is now worth around $580,000 but is only returning 3% pa - which after associated fees and charges ($4,680 per year) is actually lower. They are not that happy with the property but would hold onto it if it was financially suitable.

However, with the shares and the property, they are wondering if they are burdening themselves unnecessarily. They find it all confusing, time consuming and seemingly not very rewarding. On top of it all, they have to pay their accountant $1,800 a year to sort it all out. On the whole, they feel they earn a lot of money and never have an extra dollar to their name.

Rebecca and Joel feel ‘exasperated’. And the expenses!

Aside from paying the deductible expenses, they find they are spending a lot of money, and their credit card balance seems to get bigger each month.

Their mortgage balance on their on their home is $247,000, they have thought of refinancing.

When asked to itemise their expenses, they provided the following calculations: 

Food and petrol 36,000

Mortgage 32,400

Other living expenses 32,000

Home, car and property

insurance 3,500

School fees 20,000

Holidays 15,000

Credit cards 22,550

They estimate their credit card balance is around $65,000 at approximately 16.75%. As for personal insurance, neither have income protection or trauma cover. Rebecca has $34,000 in life and TPD in her super and Joel has $64,000 life and TPD. Rebecca cannot get higher cover in her fund as the cover is standard. Joel can purchase up to three (3) times his salary. They are concerned about their budget if personal insurance is needed.