Student identification (student to complete)
Please complete the fields shaded grey.
Assignment 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)|
Before you begin
Read everything in this document before you start your assignment for Advanced Financial Planning (DFP8v2).
About this document
This document includes the following four (4) parts:
– Statement of advice (SOA) template
– SOA Appendix 1: Cash flow tables (financial position before and after implementation of strategy)
– SOA Appendix 2: Projections and assumptions
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 assignment within your enrolment period. Your study plan is in the KapLearn Advanced Financial Planning (DFP8v2) subject room.
Part 1: Instructions for completing and submitting this assignment
Completing the assignment
For this assignment you are required to complete the following tasks:
In your assessment workbook:
– complete SOA Appendix 1 cash flow tables
– complete SOA Appendix 2 projections and assumptions
The information and resources that can assist you in answering the questions in this assignment can be primarily sourced from your topic notes. Some data will have to be externally sourced.
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.
You will be required to source additional information from other organisations in the financial services industry to find the appropriate product/s to meet your client/s requirements, and perhaps to calculate your advice fees.
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your work regularly.
Before you submit your work, please do a spell check and proofread your work to ensure that everything is clear and unambiguous.
Submitting the assignment
You must submit your completed assignment in a compatible Microsoft Word document.
You need to save and submit this entire document.
Do not remove any sections of the document.
Do not save your completed assignment as a PDF.
The assignment must be completed before submitting it to Kaplan Professional Education. Incomplete assignments will be returned to you unmarked.
The maximum file size is 5MB. Once you submit your assignment for marking you will be unable to make any further changes to it.
You are able to submit your assignment earlier than the deadline if you are confident you have completed all parts and have prepared a quality submission.
The assignment marking process
You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
Should your assignment be deemed ‘not yet competent’ you will be give an additional four (4) weeks to resubmit your assignment.
Your assessor will mark your assignment and return it to you in the Advanced Financial Planning (DFP8 v2) 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 assignment will 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 submission deadline to submit your completed assignment.
How your assignment is graded
Assignment tasks 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:
‘Not yet competent’ and resubmissions
Should sections of your assignment be 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.
Part 2: The case study
You work for KeyPlan Pty Ltd, a financial planning company which is an Australian Financial Services Licence holder and a registered life insurance broker.
Your company has planners who can provide advice in:
Your advice is limited to the areas in which you have completed appropriate accreditation.
KeyPlan does not deal in the establishment of self managed superannuation funds, provide real estate evaluations and advice, income tax preparation, superannuation fund accounting, superannuation fund administration or the preparation of legal documents such as wills or trusts. You can assume that you have gained registration from the Tax Practitioners Board (TPB) as a tax (financial) adviser.
You have organised a meeting with new clients, Ben and Sarina Masoni, who are seeking advice regarding their current situation. Sarina has just been made redundant from her current employer. This event, together with an inheritance about to be received by Sarina, has acted as a trigger for them to concentrate their efforts now to build an effective long-term wealth strategy for their eventual retirement.
Ben and Sarina have said they wish to become more active investors but admit they are time poor and would rather enjoy more family time when they are not working, rather than managing the complications of financial investments and strategies. They are looking for an effective wealth creation and estate plan and want peace of mind to know that it is structured to meet their and the family’s needs. The following pages detail the information you have obtained from them at your initial meeting.
Ben and Sarina’s current situation
Table 1 Personal details
|Name||Ben Masoni||Sarina Masoni|
|Home address||28 Rowlins Street, Indooroopilly, Brisbane QLD||28 Rowlins Street, Indooroopilly , Brisbane, QLD|
|Occupation||Consulting Engineer/Managing Director||Senior Physiotherapist|
|Employer||B & M Agricultural Consultants Pty Ltd||IMS Medical Pty Ltd|
|Projected retirement age||65||When Ben decides to retire|
|Dependents/family relationships||Name||Age/date of birth|
Alasdair and Sally currently attend a co-educational public school. They are both, academically, in the top 10% in their respective years and show strong inclinations to undertake some form of tertiary study. They are expected to remain dependent to some degree on their parents until they complete those further studies, assumed to be at around age 22.
Table 2 Professional relationships
|Time span of relationship||8 years|
|Quality of relationship||Adequate: used for wills, some company matters and conveyancing.|
|Time span of relationship||12 years|
|Quality of relationship||Very good. Mark has played an important role as an adviser to the consultancy business.|
Assets and investments
Sarina and Ben have a number of assets held in different structures or derived from different sources. Each of these is described in separate sections below:
Personally held assets and investments
Provided below are details of Sarina and Ben’s current investments and assets.
|Assets||Value||Liability||Ownership status||Other information||Purchase price|
|Principal residence: Indooroopilly, Brisbane, QLD||$870,000||$220,000||Joint ownership||House purchased 5 years ago with original mortgage of $270,000. Interest rate of 4.4% P&I. The clients are making additional payments of $1,000 per month in addition to the minimum required payments on their mortgage.||$697,000|
|Cash management trust||$28,000||$0||Joint ownership||Interest of 2.0% per annum, can be reinvested.||N/A|
|Everyday bank account||$9,000||$0||Joint ownership||No interest, used for holidays and daily expenses, balance varies.||N/A|
|B & M Agricultural Consultants Pty Ltd||$119,544||$0||Two shares each||Value is 50% of the value of the company. Value is calculated as 2 times profit before tax.||Cost base of shares is $2 each|
|Home contents||$65,000||$0||Joint ownership||Estimated value for insurance purposes.||N/A|
Provided below are details of Sarina and Ben’s superannuation.
|Financial assets||Value||Ownership||Other information|
|Superannuation||$315,678||Ben||Invested in the high growth option (5% cash; 5% international fixed interest;
20% property; 40% Australian equities; 30% international equities). Eligible start date is 1 July 1992. Average annual return over 10 years is 5.9%. There are no exit fees or entry fees and the annual member fee is $124, with investment fees of 0.25% per annum.
|Superannuation||$133,634||Sarina||Invested equally between two single sector options, the cash fund and Australian share fund (asset allocation is 50% cash, 50% Australian equities). Eligible start date is 1 July 1999. Average return over 10 years is 4.1%. There are no exit fees, no entry fee, and no member fees, however the investment fees are 1.1% per annum.|
Both Ben and Sarina’s superannuation benefits are fully preserved.
Ben has a tax free component of $63,000 and a taxed element of the taxable component of $252,678.
Sarina’s benefit is all in the taxed element of the taxable component.
Sarina’s much loved aunt, Ruth, died 4 months ago. Ruth never married and was Sarina’s late mother’s only sibling. Sarina and Ruth were very close with Sarina acting as Ruth’s carer for many years before her death. Sarina herself is an only child and is the sole beneficiary of her aunt’s estate.
Sarina inherited her aunt’s former home in Spring Hill, Brisbane and she is currently negotiating the final sale of the property. It is a two-bedroom, ground floor apartment and holds no sentimental value for her. She would rather invest the funds in more flexible assets to provide for the future needs of her family. There is no outstanding loan attached to the property and it was never rented out. She will receive the values shown in the table of inherited assets below, after meeting all expenses related to the sale. Sarina is unsure of how best to invest these funds.
In addition, the trustees of Ruth’s account-based pension fund have paid the remaining benefit amount to the executors of her estate. Sarina is expecting to receive the death benefit payment shortly. The amount and components of the death benefit are:
Sarina would like to know what tax is payable on this benefit and how the net proceeds should be invested.
Table of inherited assets at date of Ruth’s death (but excluding superannuation benefit)
|Asset||Shares held||Purchase date||Purchase price||Share price at date of death||Value at date of death||Other information (assumed dividends and franking level)|
|BHP Billiton Ltd||1,212||9/03/1984||$10.75||$20.56||$24,919||Current annual dividends: $0.72 per share 100% Franked|
|Commonwealth Bank||320||19/05/1997||$3.31||$72.21||$23,107||Current annual dividends: $4.20 per share 100% Franked|
|Insurance Australia Group||1,100||19/06/2000||$1.78||$5.34||$5,874||Current annual dividends: $0.26 per share 100% Franked|
|Insurance Australia Group||110||8/08/2000||$2.75||$587|
|National Australia Bank||740||30/07/1985||$4.08||$27.08||$20,039||Current annual dividends: $1.98 per share 100% Franked|
|National Australia Bank||50||4/02/2000||$21.73||$1,354|
|Rio Tinto Ltd||242||1/01/1988||$6.67||$46.53||$11,260||Current annual dividends: $2.23 per share 100% Franked|
|Wesfarmers||1,000||1/02/1985||$2.15||$42.83||$42,830||Current annual dividends: $1.98 per share 100% Franked|
|Online cash account||n/a||n/a||n/a||n/a||$9,500||Earning 1.5% p.a.|
|Apartment in Spring Hill, QLD (selling now)||n/a||23/5/1986||$62,000||n/a||$419,000||Ruth’s principal residence in Spring Hill, Brisbane. Debt free, no income, net value after sale.|
|Total inheritance excluding super benefit||$561,431|
B & M Agricultural Consultants Pty Ltd
Ben and Sarina own 50% of the eight issued shares in B & M Agricultural Consultants Pty Ltd with their business partners Mark and his wife Sarah. Ben and Mark are joint Managing Directors with Sarina and Sarah the other directors. The company’s constitution states that all directors are employees of the company and are entitled to be paid employee benefits from the company, such as the provision of cars, superannuation contributions, directors fees, etc. at the discretion of the Managing Directors.
Ben and Sarina have a buy/sell agreement with Mark and Sarah that in the event of death or total and permanent disability of Ben or Mark their four shares would be transferred to the other party. Ben and Mark have a good working relationship and are of similar ages.
At this stage, Ben and Sarina have not put in place a funding arrangement nor do they know how to do this. Under the buy/sell agreement the consideration is half the value of the company. The value of the company is calculated as two (2) times the average of the last two year’s profit before tax.
|B & M Agricultural Consultants Pty Ltd — Profit and Loss Statement|
|Other revenue (bank interest etc.)||$3,578||$4,140|
|Marketing and advertising||$9,130||$8,421|
|Insurance and legal expenses||$18,257||$18,070|
|Administration and compliance||$84,679||$82,296|
|Costs directly associated with Consulting (MD salaries, contracted consultants fees, etc.)||$481,703||$458,548|
|Profit before tax||$125,161||$113,927|
|Net profit after tax||$89,490||$79,749|
|B & M Agricultural Consultants Pty Ltd — Statement of Financial Position|
|Trade and other receivables||$57,403||$57,251|
|Plant and equipment||$18,183||$18,427|
|Trade and other payables||$46,675||$41,867|
Redundancy details – Sarina
Sarina has been working for the same company since her daughter Sally started school and has completed nine years of service. Her role has been made redundant following a restructure of the large allied health services business she works for. She has an offer to work for her old boss, who started his own physiotherapy business about four years ago. He is able to match her current salary and she can start as soon as she is ceases work with her current employer.
Since her aunt died Sarina has wanted to work in a more supportive environment than her current employer offers.
|Type of payment||Basis for calculation||Pre-tax amount ($)|
|Lump sum annual leave||Accrued entitlement – 18 weeks||26,534|
|Lump sum long service leave||Pro-rata entitlement – 7.8 weeks||11,400|
|Payment in lieu of notice||5 weeks||7308|
|Golden handshake||Lump sum||20,000|
Annual income details
The figure below shows the income sources that Sarina and Ben are expected to have in the current financial year. As no dividends were paid from the company, they are not shown in the diagram.
Ben and Sarina have a detailed family budget that they presented to you at their meeting. It is provided below, together with any relevant notes about the expenses. They are confident that their expenses are unlikely to vary significantly in the next few years.
($ per annum)
($ per annum)
($ per annum)
|Accountant’s fees||$750||$550||$1,300||For individual personal annual tax returns|
|Charitable donations||$450||$450||$900||Total donation amount to Cancer Council Australia and the McGrath Foundation, in equal proportions— both DGRs.|
|Children’s school expenses and ‘pocket money’||$1,800||$1,800||$3,600|
|Council rates||$740||$740||$1,480||Principal residence|
|Discretionary: restaurants, gifts, clothing, shoes, etc.||$19,299||$19,299||$38,598|
|Health insurance||$1,566||$1,566||$3,132||Family hospital and extras policy with excess of $500|
|House insurance||$721||$721||$1442||Home and Contents policy|
|House maintenance and repairs||$5,500||$5,500||$11,000||Includes cleaners, etc.|
|Income protection||$1,305||$737||$2,042||90 day wait, benefit to age 65, 75% income plus superannuation (SG)|
|Mobile phones and internet||Paid by company||$1,698||$1,698||Work related use for Ben|
|Mortgage||$15,070||$15,070||$30,140||Annual repayment amount inclusive of additional monthly payments of $1,000 ($500 each against budget item)|
|School fees||$550||$550||$1,100||Alastair and Sally’s school fees are $550 each|
Investment objectives and attitude to risk
Ben considers himself to be quite knowledgeable about investments and understands how volatility in markets can affect investment performance. He has seen significant fluctuations in the returns of his superannuation fund, though that did worry him for a while. He has said that now Sarina has receiving the inheritance he would be happy to leave investments in place and ride out any negative short term performance.
Sarina however is more conservative than Ben. She thinks that they are now doing well enough that they don’t need to take on higher levels of risk. She would prefer to see some less aggressive investments for the money she receives from her inheritance. She thinks property is great, although she is not sure she wants the responsibility of managing an investment property at this point in time, which is why she is selling her aunt’s apartment.
Ben and Sarina believe they do not need additional income from any investment strategies but want long-term capital growth. They completed the risk profile below and sent it to you prior to your initial meeting. At the meeting you confirm that these are the correct risk profiles to be allocated to each of them based on their attitudes towards investing.
|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?||Ben||Sarina|
|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.||50||50|
|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.||40||40|
|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.||35||35|
|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.||30 P||30 P|
|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.||20||20|
|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.||10||10|
|What return do you reasonably expect to achieve from your investments?||Ben||Sarina|
|A return without losing any capital||10||10|
|8–12% p.a.||30||30 P|
|13–15% p.a.||40 P||40|
|Over 15% p.a.||50||50|
Ben and Sarina created wills and powers of attorney with the help of their lawyer about five years ago.
Ben’s will states that when he dies everything is left to Sarina and Sarina’s will leaves everything to Ben. This includes their respective shares in the company.
In the event that both of them should die, their respective wills leave everything to their children in equal shares. They have not nominated any guardians for their children in the event of both of them dying.
Ben has granted enduring power of attorney (EPOA) to his father. Sarina had granted enduring power of attorney (EPOA) to her mother Gloria, now deceased.
Both Ben and Sarina have made binding death nominations in their superannuation, again to each other.
Ben’s buy/sell agreement with his business partner Mark is in the form of call options. Both hold a call option obligating the other to sell on death or permanent disability. The surviving partner can ‘call’ upon the ceasing owner or the executor/executrix of the estate, to transfer the business interest and legally binds them to sell at a predetermined value. The value of each partner’s share has been defined as half of the net value of the business.
Ben and Sarina have not put in place a funding arrangement for the buy/sell agreement and are unsure how to do this. Further, this conflicts with the terms of their wills.
Insurance and risk management
They have the following insurance policies:
|Policy||Life insured||Owner||Cover||Premium per annum||Notes|
|Death and TPD||Ben||Superannuation fund||$432,000||$1,532||Any occupation TPD|
|Death and TPD||Sarina||Superannuation fund||$280,000||$993||Any occupation TPD|
|Income protection||Ben||Self||$9,581 per month||$1,505||90 day waiting period, benefit to age 65|
|Income protection||Sarina||Self||$5,201 per month||$737||90 day waiting period, benefit to age 65|
|Home and contents||NA||Joint||$450,000 home $55,000 contents||$1,242||Multi-policy discount applies as all policies are held with the same company|
|Private health insurance||Family||Joint||$500 excess for hospital and extras||$3,332||Applicable rebate taken up front as a premium reduction|
Ben and Sarina both have income protection policies because their accountant told them that they were tax deductible. They each own their own policy and are both covered for 75% of their income plus superannuation contributions.
They have not provided any details of their other insurances and have said they do not need a review of their general insurances at the moment.
Ben and Sarina’s needs and objectives
This is one of the reasons why she is concerned that at least some of the portfolio does not lose value over the next five years. She would also like to keep the inheritance separate from her other assets but is happy to take advice on this.
At your request they have completed a retirement budget and in today’s dollars they believe they would need $64,000 p.a. after tax, plus $18,000 every two years for overseas travel. Any additional local holidays they may wish to take in retirement have been factored into their annual retirement budget.
|Estate planning goals||On death of Ben||On death of Sarina||Death of both|
|Provisions for each spouse||Replace Ben’s income until Sally is 22 so that Sarina can stay home.
All assets would be left to Sarina.
|Income to provide for full time housekeeper, estimated at $55,000 p.a. until Sally is 22.
All assets would be left to Ben.
|Pay off the mortgage||Yes||Yes||Yes|
|Pay off other debts||No||No||Yes|
|Provisions for the children||They would like to leave all assets in trust for the children until Alasdair and Sally have attained the age of 25. Income to be generated for a family member to care for the children, plus income to enable them to meet current expenses for the children.
|Equalisation of children’s inheritance||They cannot see this as being an issue. Both children are treated equally.|
|Provisions for others||Any children of their children, if they formed a trust.|
Based on the information in the case study and your analysis of the clients’ objectives, use the template provided to produce your Statement of Advice (SOA) which is a record of your advice (including amendments, if any) for Ben and Sarina.
Remember: Your SOA is both a legal document and a representation to the client of your professionalism, prepared to assist them in understanding the recommendations that you, as their financial planner, are making. Accordingly, as a legal and professional document, it should be spell checked and reviewed to ensure that there are no typos, grammatical errors, or spelling mistakes.
Important instructions for completing the SOA
SOA preparation software: The use of financial planning software and dealer/licensee templates to prepare your SOA is not permitted. Submissions that exhibit excessive reliance on SOA templates may be considered a case of plagiarism or collusion and may not be considered to be a reasonable attempt at the assessment.
Assumptions that you cannot make:
In support of the recommendations made, you must include:
You must include at least one (1) alternative strategy that you considered and rejected for each of the clients’ goals. Include a brief explanation of why the strategy was rejected.
Use the information on each of these areas given in the subject notes to provide reasons for each of the strategies recommended.
Product advice: Specific product recommendations for insurance, superannuation and estate planning recommendations are not required. You may recommend generic products to implement these strategies.
You are required to recommend appropriate investment products to implement the advice you have provided in relation to any asset allocation, wealth accumulation or savings goals. Please do not use the products from the case study SOA. You are required to source (or develop) your own fund details. It is not necessary to include Product Disclosure Statements in your assignment for any products recommended in your SOA.
You should include cash flow projections for personal investment recommendations as Appendix 2 to your SOA. Use a Microsoft Excel spreadsheet to calculate your projections and complete the included template. Provide projections to Ben’s projected retirement at age 65.
The SOA template
A statement of advice has been commenced for Ben and Sarina Masoni, using the data collected in the interviews, the fact finder and risk profile. You will need to complete the remaining sections in the SOA as directed. The statement of advice starts on the following page.Order Now