Finance Assignment Question 2

For this assessment, you are required to extract data from a data collection instrument and analyse the information provided. You are then required to undertake research and analysis on a client scenario, then recommend suitable strategies and/or product/s appropriate to the needs of your client and write a report outlining your analysis and recommendations. This comprises of two areas of advice, one is Financial Planning – Budgeting and debt management.

Introduction You are a financial adviser for “St George Financial Planning Pty Ltd” and the following information is an extract of data you gathered as part of the Financial Needs Analysis during the initial client meeting with Andrew Ferrell. The information below is used to formulate an appropriate analysis of Andrew’s needs.

Your Client The client for this case study is Mark. His concerns are about not having adequate savings and available funds for a deposit on his first home. Read Mark’s details below. Financial Needs Analysis Details

Employment Details

Employer Wollongong Council Work Status Fulltime Occupation Civil Engineer Income $95,000 p.a. (gross)


Name Date of Birth Age (next birthday) NO N/A N/A


Description Owner Current Value Home Contents (replacement value) Mark $40,000 Car Mark $25,000 Savings Account Mark $ 1,000 Share Portfolio Mark $ 5,000


Description Owner Current Value Car Loan Mark $17,000 Finance Card Mark $10,000 Credit Card debt Mark $ 8,000

Loan Details

Type Car Loan Finance Loan Credit Card Remaining balance $28,000 $10,000 $8,000 Lender St George GE Virgin Interest Rate 6.49% (fixed) 19.01% (variable) 16.49% (variable) Remaining Term 4yrs 1.5yrs After 55day interest free period Repayment Amount $500 monthly $660 monthly minimum


Fund Owner Current Value Other Details Local Government Super – Conservative Mark $50,000 Life & TPD cover of $100,000 Perpetual WealthFocus Super - Balanced Mark $40,000 Life & TPD cover of $25,000


Description Owner Benefit Value Provider Contents Mark $20,000 GIO Comprehensive Car Mark $20,000 GIO Life and Total Permanent Disability As stated above


Name Mark Salary (gross) $95,000 p.a. Bank interest $200 Dividends (reinvested) $950 Fully Franked

Risk Profile

Name Mark

Risk Tolerance Growth

Expenses client gave us

Expense Amount pa ($)

Rent 6,000

Electricity/Water/Gas 1,130

Telephone/Mobile/Internet 1,250

Insurance – home & contents 800

Insurance – car 1,000

Private Health Insurance 1,000

Petrol/maintenance 4,500

Car registration 1,000

Food 5,200

Grooming 300

Credit card 15,000

Other loans 15,120

Medical/Dental 1,000

Entertainment/Dinners 2,500

Clubs/Prof. Memberships 1,300

Holidays 3,000

TOTAL $55,000

Client Objectives

What the client hopes to achieve

Following discussion with your client, goals to be addressed are as follows:

  1. Maintain a net income of $60,000 per annum.
  2. Establish and maintain a cash reserve of $10,000.
  3. Reduce debt as soon as possible.
  4. Review his budget, as he seems to think he is spending too much.
  5. Save for a deposit on a first home in the next 5 years.
  6. Replace car in five years.
  7. Maintain his holiday allowance of $3,000 p.a.
  8. Would like to propose to his girlfriend in 6 months and fund for engagement rings for approximately $8,000.
  9. Boost his superannuation contributions in order to pay less tax into his employer superannuation fund (Local Government Super).
  10. Ensure he has adequate Life and Total Permanent Disability insurance within the current superannuation funds.

Part A

  1. From the first meeting with your client, was there any missing information that you would need to clarify. Please state the following:
  2. What information is missing or what would you like more detail on?
  3. How would you communicate the collection of this information? and
  4. Where would you document your questions and the client’s reply of this additional information required?
  5. What issues do you believe you should discuss with your client? Include other goals or risks you may identify, if they are not listed in the case study.
  6. Identify, set and prioritise your client’s S.M.A.R.T goals and objectives. Include the goals you have identified and list whether they are short, medium or long term goals.
  7. What goals are there that you may identify (or the client has stated) that you may suggest the client address at a later stage (when their more urgent goals are met)?
  8. What risks are there to Andrew not meeting his goals? Think about personal risks, legislative risks, market cycle risks.
  9. Calculate client’s annual after-tax income (include Medicare levy). Use current financial year tax rates.
  10. Prepare a Cash Flow Analysis and Net worth Statement for your client to determine what the current income surplus/deficit is and net worth position.
  11. Assume from your discussions with client that his credit card expenditure is largely discretionary (clothes, coffees, bought lunches etc) and that he is prepared to follow a budget limiting these expenses. Redo client’s Cash Flow Analysis planning for him to stick to a credit card spend of $700 per month, determining a new surplus/deficit amount.
  12. Using the Life Insurance Calculator (on Moodle), how much Life Insurance (Life, TPD and Income Protection) does client ideally need?
  13. What suitable outcomes (strategies) can you match to the goals you have identified and prioritised, utilising any surplus identified?
  14. Explain how you would deal with client’s superannuation?