Reference no: EM132339202 , Length: word count:2500

Assignment - Superannuation and Retirement Planning

Case Study - Nathan and Mary Davidson

You are a financial planner for AFS licensee EANWB Financial Planning. Nathan and Mary Davidson have been undertaking their own research into planning their retirement, and recently attended one of your firm's retirement seminars. After this seminar they spoke with you about their concerns that they may not accumulate enough money in superannuation to fund their retirement.

You met with them and during your initial meeting you provided them with some basic information, including a fact finder for them to fill out. You then organised a second meeting, at which you collected more information on their current financial situation and spent time clarifying their needs and objectives.

A summary of their financial situation, based on your interviews with the clients, is provided below. The completed fact finder, including the risk profile questionnaire, can be found on page 10 of this assignment.

The Assignment -

Section 1 - Part A - Analyse client objectives, needs, financial situation and risk profile to develop appropriate strategies and solutions.

Section 1 - Part B - Risk profile

Identify the Davidsons' likely risk profile based on the information they have provided. Identify any concerns that you may have with their responses compared with the information in the case study.

• Suggest questions you could use to clarify the responses.
• Justify why you do or do not think that the score and the resulting risk profile category is an accurate reflection of their tolerance to risk, and decide on a profile for each. (250 words)

Section 1 Part C - Strategies

Summarise appropriate retirement strategies for Nathan and Mary.

• Consider superannuation and non-superannuation assets and strategies.
• Provide a detailed explanation of why you consider these assets and strategies to be appropriate.
• Include the lump sum amount that Nathan and Mary will need at retirement to achieve their income goal, and strategies to help them reach that goal.
• Provide a summary of other recommendations that you will include in your SOA for Nathan and Mary. (500 words)
• Make clear recommendations in this question. Both superannuation and non-superannuation recommendations. Keep them simple - you are not expected to make family trust recommendations at this level.

Section 2 - Address clients' questions and concerns about superannuation matters

Part A - Product research

Nathan and Mary have stated they are happy with their current superannuation funds. If, however, it is requested, provide a summary of the type of research you would conduct to ensure the suitability of these funds for the clients' future retirement needs. (250 words)

What type of research would you do when researching products, For example - Fees, Insurance, benefits, ratings, value for money etc. What research tools could you use?

Part B - Client queries on superannuation contributions

Nathan and Mary have a number of questions about superannuation contributions after the seminar they attended and as a result of their research. Respond to their questions, basing your answer on their personal situation. You may be required to re-educate the clients where they are confused or misunderstand the superannuation rules.

Question 1 - Nathan is confused about taxation of superannuation contributions. He has friends who write a cheque, send it to their superannuation fund and claim a tax deduction. He asks:

Am I correct in assuming that we can both claim personal tax deductions for any superannuation contributions we make? Could you explain the tax deduction rules that apply to our situations, how much can we contribute and when we can start?

Answer Nathan's questions. (250 words)

• Can they both claim personal tax deductions for super contributions? If so, how and why? You may refer to the changes that came into effect on 1 July 2017. See topic 4, section 3.2 for further guidance.

Question 3 - Nathan is concerned about tax payable if they invest any of their cash savings into superannuation. He says:

I've heard that some people have had to pay tax on superannuation contributions at the highest tax rates. How can we be sure we won't fall into that trap?

Answer Nathan's question. (150 words)

How can they contribute their cash savings into super? You will need to provide a discussion on the bring-forward rule here.

Part C - Client queries on superannuation benefit payments

Question 1 - Mary asks:

When and how can we access our superannuation? Can we get it if we are still working?

Explain the rule that applies in their circumstances.

Explain when and under what circumstances they will be able to access their superannuation. (200 words)

Be specific to their situation. What about preservation rules?

Question 2 - Nathan asks:

I understand that we are too young to access our superannuation any time soon. In general terms, please explain how we would be taxed right now if we were old enough and retiring and we took our money out as a lump sum. I don't want to commit to something that will work against us.

Discuss the situation if the lump sum was taken at retirement after age 60 and just before age 60. Include a brief explanation of components of the lump sum, how they are taxed and any other matters relating to them? (200 words)

Question 3 - Mary asks:

I don't like the idea of paying lump sum tax and then losing some benefits. Tell us more about these income stream options. How do they work? What are the rules that apply and how much tax do we pay if we were to commence an income stream now or could we access our superannuation now? How much can be drawn etc?

Discuss this in broad terms and explain the situation immediately before and after reaching age 60. Assume Mary and Nathan will continue to work until age 60 and then retire. (300 words)

Section 3 - Present appropriate strategies and solutions to the client and negotiate a financial plan, policy or transaction. Provide ongoing service where requested by the client.

You must now prepare an SOA based on the recommendations made, which will be used to record this advice (including amendments, if any) for Nathan and Mary. Remember that the SOA must be of a standard that is compliant and would be suitable to present to a client.

Section 4 - Agree on the plan, policy or transaction

Part A - The SOA has been completed and a meeting has been organised with Nathan and Mary to present the recommendations and, if they agree, to implement them.

Describe the steps that should be followed in presenting this advice to Nathan and Mary. In your answer, you should address at least four (4) of the following requirements regarding presentation of advice:

• The order in which you present the information.
• What backup information and documents might you need?
• Any risks associated with the solution.
• Two (2) questions that the Davidsons are likely to ask you, and the answers you will give.
• The language you will use to present the strategy to Nathan and Mary. (400 words)

Once you have completed your SOA in full - review this response.

Part B - Suggest a minimum of two concerns that the Davidsons might have about the strategy that you have proposed. Explain how you would address each of these concerns. (100 words)

Once you have provided clear strategies in your SOA - complete this question.

Part C - Assume the recommended superannuation strategy for Nathan is to commence salary sacrificing into his superannuation fund. What information pertaining to a salary sacrifice arrangement would you recommend be confirmed between Nathan and his employer and how should this be recorded to ensure that the arrangement is correctly implemented? (75 words)

Part D - In the checklist below, list six (6) key actions &/or documentation and record who should complete these throughout the financial planning process with the Davidsons.

Only once you have completed your SOA in section 4 with clear strategies and recommendations, will you be able to complete this section.

Attachment:- Accounting and Finance - Assignment Files.rar