TFIN304 Personal Financial Planning Assignment

Reference no: EM132653712 , Length: word count:3000

TFIN304 Personal Financial Planning Assignment - Australian National Institute of Management and Commerce, Australia

Question 1 - Financial planner's role & duty of care

Stephen runs into you at a friend's barbeque. You have not seen each other for many years. 'While catching up on old times, you tell Stephen that you are a financial adviser.

(a) Stephen asks you what the role of a financial adviser is and how they are compensated. How would you respond to Stephen? (Word limit: 300 words)

A colleague of Stephen's has told him about an alpaca farm investment that he feels Stephen should invest in - not only is it tax effective, but it will also provide Stephen with a 200% return on capital.

Stephen wants to know what you think of his colleague's tip.

(b) In this situation, would you owe him a duty of care? Explain your answer. (Word limit: 100 words)

Question 2 - Risk profile

It is two weeks later. Stephen has booked an appointment to see you. You give Stephen your firm's Financial Services Guide (FSG) and explain its main features.

You follow this by collecting personal data from Stephen and finish by examining his attitude to risk. You conclude that Stephen is a conservative investor.

Explain to Stephen, in plain English, why conducting a risk profile assessment is essential. 3 marks

Question 3 - Insurances

Stephen must first consider how to protect his wealth before any strategies to accumulate wealth are recommended to him.

(a) Is Stephen's level of life cover sufficient? Why/why not?

(b) What personal insurances would you recommend that Stephen take out? (Discuss both the cover needed and dollar figure recommendations. Remember to justify the level of cover that you recommend.)

(i) life insurance?

(ii) income protection insurance?

(iii) trauma insurance?

Question 4 - Goals and strategies

Stephen's short-term goal is: to pay off his personal loan.

Stephen's medium-term goals are: to save for bis children's education, to buy an investment property on the beach, with a view to retiring there eventually and to, perhaps, buy another motorbike.

Stephen's long-term goals are: to live in his beachside property in retirement (he doesn't expect to retire until he is in his late 60s).

(a) Compile a cash flow table for Stephen for the current financial year.

(b) The next step to organising Stephen's finances is to eliminate debt. What recommendations could you make to Stephen in this regard?

(c) What recommendations could you make in regard to Stephen's medium-term goals? You should discuss particular investment vehicles that may suit him as part of your answer.

Question 5 - Investment strategy

It is three months later. Stephen contacts you with the news that he has received a windfall of $50,000. Your initial advice is that he use these funds to pay off some of his debt. However, he resists this recommendation.

Stephen is considering investing the funds in the alpaca farm that he mentioned prior to your first meeting.

The Australian Tax Office has not yet issued a ruling on this investment.

(a) Discuss any general concerns you might have regarding this investment.

Alternatively, Stephen says he has also heard about the advantages of negative gearing, especially near the end of the financial year.

(b) The following are investments into which investors gear:

(i) shares

(ii) property

(iii) agricultural activities

(iv) other, such as films.

Source and select one investment in each category, summarise the promoter's offer, the promised tax benefits and outline what you consider to be the two (2) most risky features.

Question 6 - Estate planning

Stephen says he does not currently have a will. He tells you that, in the event of his death, he would like Cassie and Rob to inherit all of his assets. However, he is anxious that his mother is cared for, in the unlikely event that he predeceases her.

(a) Outline, to Stephen, the importance of having a will in place. (a) Stephen accepts that he will need a will and has seen some will kits in the post office. What pitfalls can you see in that approach?

(b) Given his personal circumstances, what are the specific issues that Stephen will need to address in his will?

Question 7 - Code of Ethics

Outline practical ways that you can comply with the following Standards of FASEA's Code of Ethics:

(d) Standard 1 - You must act in accordance with all applicable laws, including this Code, and try not to avoid or circumvent their intent.

(e) Standard 10 - You must develop, maintain and apply a high level of relevant knowledge and skills.

(f) Standard 5 - All advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client's individual circumstances.

You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.

Attachment:- Personal Financial Planning Assignment File.rar

Reference no: EM132653712

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