Reference no: EM132847639

Question - Scenario 1 - Read the scenario below before answering the following questions.

Hernando and Jonah, are a married couple in their mid-fifties. Hernando, who is self-employed, earns $60,000 a year and supports Jonah on that income. His marginal tax rate is 32%.

The couple owns a condominium that is currently valued at $350,000, with a mortgage of $62,000 outstanding. They have a line of credit with a balance owing of $25,000 at a rate of 3.00%. The maximum limit on this line is $125,000. They also own a cottage valued at $195,000.

To earn additional income, Hernando and Jonah are thinking of renting out their cottage. They believe that if they put $15,000 toward improvements, they could rent the property out for $1,500 per month. The expected annual cost for maintenance and property taxes is $11,000. Hernando's mother has offered to give Hernando the money for the renovation. However, Hernando knows that his mother is concerned that their marriage will not last, and she is worried about what will happen to this gift if they break up.

Q1. Identify the competency statements you need, as a financial planner, to demonstrate your ability to meet the client's needs.

Q2. Identify the knowledge statements you need, as a financial planner, to demonstrate your ability to meet the client's needs.

Scenario 2 - Thao Pham, a new client, is single, age 55, hoping to retire in 5 years. She expects to use the income from her investments to supplement her income of $65,000 now and in retirement. In addition to providing investment advice, Thao would like you to help her prepare her will.

Thao has $220,000 invested in a laddered GIC portfolio, with maturities from 1 to 4 years. The GICs are earning the following rates: 1 year 3%, 2 years 3.50%, 3 years 4% and 4 years 4.50%. The first GIC matured last month.

She reinvested the funds into a portfolio of mutual funds, which is expected to earn 5% annually. The management expense ratio on this portfolio is 1.8%, and the asset allocation is currently 80% equity and 20% fixed income.

You explain to Thao that, until retirement, a 60/40 split in favour of equities is more appropriate. The change would reduce her portfolio to one equally weighted between equities and fixed income asset classes during retirement. Thao would like to know what the estimated returns will be if she follows your advice, using the current pre-retirement returns and post-retirement asset allocation you suggested. She wants to know if the portfolio will earn the return she needs (5% pre-retirement and 4% post-retirement).

Q1. Identify the competency statements you need, as a financial planner, to demonstrate your ability to meet the client's needs.

Q2. Identify the knowledge statements you need, as a financial planner, to demonstrate your ability to meet the client's needs.