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Overview of Peter and Lisa's Current Financial Situation

Discuss about the Individual Financial Planning in the SOA.

The introduction of the paper would address the client about the aspects that would be covered in the SOA and accordingly the advices and the suggestions that would be provided to them on the basis of their plans and objectives in order to help the clients reach their financial milestones. The SOA would cover the areas like the insurance, superannuation, cash flow planning, investment planning and estate planning for the couple. The advices would even include the other non-financial aims and objectives of the couple that would include the securing their life even after retirement and assisting their dependent children to undergo college and support them till they become independent. The clients would be made aware of the risks and the challenges they would face with respect to these issues and thereby assisting them to create contingency and a buffer in order to mitigate these risks in an effective manner.

By analysing the current scenario of the couple, it is seen that Peter and Lisa are married and have their own house and have two dependent children who are aged 15 years and 12 years respectively Peter works full time and on the other hand Lisa works part time. They both have superannuation contribution. The couple have two properties out of which they reside in one of them and the other property has been used for investment purposes and therefore they receive a rent out of it. Both these properties have existent mortgages and they have the intension of paying off the mortgages before they start their retirement life. The couple are near their retirement age and therefore they are seeking for advices related to making additional investments and along with that make changes in their existing investments so as to receive the best results of their investments. The money that Peter has received from his uncle’s inheritance would even be used for the purpose of investment and in such a manner that they receive effective level of returns without even having to pay for excess taxes. Their living expenses are moderate and therefore are not concerned with the money they are receiving from their superannuation account.

Client 1

Client 2

Title

Mrs

Mr

Surname

Clarke

Clarke

Given Name

Lisa

Peter (Pete)

Salutation

Mrs

Mr

Home Address

25 Ashington Dr

Warners Bay  NSW  2282

25 Ashington Dr

Warners Bay  NSW  2282

Business Address

Not applicable

Not applicable

Contact Phone

(02) 4958 7598

(02) 4958 7598

Marital Status

Married

Married

Age

41

43

Health

Minor back injuries but otherwise good

Good

Employment Status

Employed (part-time)

Employed (full-time)

Occupation

Civil Engineer (degree-qualified)

Business Services Accountant

Employer

KR Engineers

Mindful Professional Services

Sex

Male

X

Female

X

Male

Female

Smoker

X

Yes

No

Yes

X

No

Anticipated Retirement

Would like to retire at a similar time to Peter (around age 63)

Ideally retire at approximately age 65.

Name

Dependant

Age

Dependent Until

Ashlee Clarke

Daughter

15

Age 22

Cameron Clarke

Son

12

Age 22

Asset

Value

Liability

Ownership

Notes

Principle Residence
(Warners Bay property)

$963,000

$220,000

Joint

Purchased property ten years ago with initial mortgage of $700,000. Mortgage principle & interest rate of 3.63%. Peter and Lisa are making minimum mortgage repayments.

Mortgage Offset

$150,000

$0

Joint

Lisa is concerned if this is the best use of these funds that accumulated over the last few years.

Vanguard ETF

$37,500

$0

Peter

Australian shares ETF.

Investment Property
(Wallsend)

$450,000

$268,000

Joint

Minimum mortgage repayments. Interest rate 3.5%.

Home Contents

$65,000

$0

Joint

Estimated value.

Motor Vehicles

$35,000

$0

Joint

No finance, 2013 Mazda 3 (Pete) and 2016 Holden Barina (Lisa).

Uncle’s Inheritance
(Funds available for investment)

$250,000

$0

Peter

Peter’s uncle recently passed away recently. Pete would like to invest these funds.

Bank Accounts
(Cash on hand)

$42,000

$0

Joint

Westpac bank accounts.

Australian Super Account

$319,875

$0

Peter

Invested in pre-mix Balanced option

AMP Super Account

$225,656

$0

Lisa

Invested in pre-mix Conservative asset allocation, largely invested in cash. Admin fees are very high $300 p.a.

REST Super Account

$15,663

$0

Lisa

Lisa is not sure what this is invested in and has not made contributions to this account since she was working in retail while she was at uni.

CBA Credit Card

$0

$15,342

Peter

Peter makes minimum repayments. Interest rate 18%. $50,000 limit.

CBA Credit Card

$0

$0

Lisa

Balance repaid in full monthly.

Income

Value

Frequency

Ownership

Notes

Salary (Part-time)

$145,000

Annual

Lisa

Lisa receives this for working 4 days/ week.

Salary (Full-time)

$130,000

Annual

Peter

Peter is comfortable in his current job.

Dividends (Est at 4% p.a.)

$1,500

Annual

Peter

Vanguard dividends.

Rental Income

$400

Weekly

Joint

Wallsend rental property income.

Interest (Est at 2% p.a.)

$736

Monthly

Joint

Interest on all cash investments.

Expense

Value

Frequency

Ownership

Notes

Living Expenses

$105,000

Annual

Joint

Including mortgage repayments on both properties.

Charitable Donations

$6,000

Annual

Peter

Peter makes a monthly $500 donation to the Salvation Army.

Policy

Benefit

Life Insured

Owner

Notes

Linked Life & TPD

$650,000

Lisa

AMP Super

Default with AMP super account. Any occupation TPD.

Standalone Life

$500,000

Peter

Australian Super

Default Australian super.

Standalone TPD

$350,000

Peter

Australian Super

Own occupation TPD.

Income Protection

$6,500/ month

Peter

Australian Super

Payable to age 60; 90 day wait.

Statement of Cash flow

Particulars

Peter

Lisa

Total

Income

Salary

 $     130,000  

 $       145,000

 $          275,000

Rental Income

 $              19,200

Interest

 $  8,832

Dividend Income

 $1500

 $         1500               -  

Total Income

 $        131,500

 $       145,000

 $          304,532

Expenses

 $                        -  

Living expenses

 

 $              105,000

Charitable Donations

 $6,000

Total Expenses

   

 $            193,532

Net Income/ Taxable income

 $        131,500

 $       145,000

 $          193,532

Tax Payable

 $          39,559.63

 $         43,259.63

 $            82,819.26

Gross Tax Payable

 $          39,559.63

 $         43,259.63

 $            82,819.26

Franking credit

 $                    -  

 $                         -  

Net income after tax

 $          91,940.37

 $       101740.37

 $          110,712.74

 

The couple have the intention of creating long term income creation by taking assistance of which they would have a safe and secured lifestyle for their future and thereafter would not have to think about their level of income once they retire. Risk is looked upon to be one of the essential factors and therefore the couple are searching for investments that would yield the returns they are looking for but would risk level would be moderate. The couple before they plan to retire would look to pay off their existing mortgages for their two properties and accordingly wants to sell the property that is given out on rent in Wallsend. They are even in the idea of wealth creation with the help of which they would be able to generate money during their time of retirement that would be equivalent to $60,000 to the current dollar value. The client even has the idea of reducing their level of taxes wherever deemed possible. They want to continue the donations that they undertake and for that to happen they require a stable return from their income. The couple even wants to pay for the college fees for their children and accordingly wants to attain significant amount of money with the help of which they would be able to pay for the same. The clients do not require additional investments in the superannuation or any other kind of estate planning but if the current superannuation investment is not adequate they are happy to make changes from the current investment to any other superannuation accounts.

Assets and Liabilities

The objectives have been segmented into short, medium and long term and they have been listed as follows:

Short Term

  • Minimise the level of tax wherever possible
  • Make sustainable donations to the charity

Medium Term

  • To pay off the mortgage that is currently existent for the two properties that are existent
  • Purchase sufficient amount of insurances in order to financially remunerate them in case of sickness and accidents

Long Term

  • Accumulate certain amount of wealth that would be useful in giving out returns in the future worth $60,000 of the current dollar value
  • To pay for the educational fees for their children till they become independent
  • Maintain adequate money during the time of retirement in order to maintain the current lifestyle even after retirement
  • Ensure that all their desires are fulfilled once they expire

This part would look to assess the investment allocation and the risk profile plans for the client. The demand of the client is to pay off their existing debts. The couple even wants to generate adequate amount of money with the help of which they would be able to generate sufficient amount of returns in order to maintain their current lifestyle even after retirement. The couple wants to maintain adequate money after their retirement and even wants to attain significant amount of returns with the help of which they would be able to pay for the expenses that is related to the educational activities of their children.

The risk profile of the client can be understood with the help of the risk profile questionnaire and addressing the same by the client would be helpful in creating a better risk and asset allocation for the future.

After the assessment of the risk profile of the client, it can be determined that they are in the notion of receiving balanced risk portfolio and therefore their investments should be made in such a manner that there would be a equivalency among the investments in the equities and even in the debts. In this manner, the couple would be able to gain proper returns and the extent of tax payment would be the lowest. The couple are in the idea that maintenance of a balanced portfolio would lead to the attainment of the long to medium term objectives and hence is in need of an investment strategy, which would be able to stand up with the effects that can occur due to changes in taxes and inflations. The couple are eager to undertake risks that are calculative in order to gain suitable returns. The couple wants to create a capital development and returns with respect to the investment time frame after they pay out their existing expenditures. The effective investment allocation for the couple has been given as follows:

Asset Class

Allocation Percentage

International Equities

20%

Australian Equities

23%

Australian Bonds

24%

Property

4%

Fixed Income

20%

Cash

9%

Total

100%

There are several suggestions that can be given out to the couple and they are as follows:

The primary objective of the couple is to enhance their level of savings and income in order to have a sustainable life after retirement and reduce the level of tax payment. The present financial scenario, suggests that the current investments that they have would be able to maintain their present lifestyle even after retirement.

By assessing the information related to superannuation of the client, it is seen that estimated superannuation balance account during the time of retirement are based on their present scenario. The superannuation account balance would be able to generate sufficient returns when the client reaches their retirement age. It is advisable that they concentrate on this without further postponements by implementing this advice.

It is advisable that Peter and Lisa move ahead with the present superannuation account balance because of the fact that evaluation of the same has discovered that it would be able to reach their income that are looking for even after their retirement. Therefore, the additional money that has been received from the inheritance from Peter’s uncle can be used for the purpose of additional investments and this money can be invested by taking additional risk so that better returns can be attained.

Income and Expenses

The couple should purchase a savings plan as they would be receiving additional income and thereby would receive additional cash returns which would act as a buffer in case of any unprecedented events. The maintenance of the cash barrier is an effective strategy in order to maintain the current lifestyle of the couple and even able to take care of any sort of unprecedented events and scenarios.

The couple are even advised to create process with the help of which they would be able to analyse their existing insurances after the successful incorporation of the investment portfolio approach. The couple are even advised to purchase additional health insurance covers in order to eliminate the risks related to their health. It is seen that the funds can have certain limitations like the tax implications and limited access over it during the lock in period of the invested capital. 

There are several products that can be recommended to the client for making additional investments with the help of the money that is attained from the inheritance from Peter’s uncle. This money can be used to purchase a health insurance cover for both Peter and Lisa and the money that would be left can be invested in a balanced product in order to attain effective returns with the lower level of risks. It is seen that the existing insurances of the couple are sufficient in order to handle any financial losses due to accidents but the purchase of a health insurance cover would be helpful in remunerating the financial loss due to sickness. The product that is recommended is “Russell Investments Diversified 50 Fund Class A”. The features of the product have been given as follows:

“Russell Investments Diversified 50 Fund Class A”

Establishment fee

 Nil

Contribution fee

Nil

Withdrawal fee

Nil

Termination fee

Nil

Management cost for the investment

0.79 p.a

For every $5,000 invested, $0 will be charged.

“PLUS Management costs: 0.79% p.a.” and for each investment of “$50,000” in the Fund, a fee charge of “$395” each year will be levied.

The total cost for the couple will be dependent on the charges that will be negotiated with the financial consultant.

  • Managed actively, multi-asset solutions
  • Quality Product
  • Effective Incorporation

The investment goal of the fund associates to the development of the estimated returns with lower level of risks.        

The couple needs to incorporate these recommendations in order to enhance their level of income and returns even after retirement and Peter and Lisa requires further advices from the financial advisers on a frequent basis in order to make improvements in their existing investments with respect to the changing time and risks in the market. The couple even needs to undertake payment for the ongoing services so that effective level of returns can be attained from their respective investment portfolio.

This involves all the relevant documents that are related to advise that are given to the clients and thereby the client would have extensive understanding of all the advices and the documents that are related to them.       

The report disclaimer addresses that the advices that have been provided to Peter and Lisa needs to be reviewed and evaluated on a timely manner because these investments can create extensive losses due to internal and external factors. Therefore, this is a caution that the recommendations given may turn out to be unsuccessful due to the change of events. The financial adviser would not be liable for any circumstances and thus effective monitoring needs to be done in the investment market prior to implementing the investments. It is even suggested to go through the “offer documents” of the products before purchasing the investment.

By signing this authority to proceed, I/we Peter and Lisa acknowledge the following:

  • “I/We acknowledge that the data I/we have provided in the financial needs assessment has been used to arrive at the recommendations contained in this SOA”.
  • “I/We have read, understood and retained a copy of the SOA prepared by Mr John Wilson dated 18/04/2018. This document contains information which accurately summarises my/our current situation, investments and financial objectives”.
  • “I/We have been provided with a Financial Planning FSG”.
  • “I/We have read and understood the PDSs for the recommended products”.
  • “Please note that a cooling-off period may apply to your initial investment or insurance policy. Refer to the PDS”.
  • “I/We acknowledge that the product(s) listed in the table below are to be implemented in my/our name/s:”
  • “I/We wish to make the following change/s to the recommendations within the SOA”

Falconier, M. K. (2015). Together–A couples’ program to improve communication, coping, and financial management skills: Development and initial pilot?testing. Journal of marital and family therapy, 41(2), 236-250.

Tilahun, T., Coene, G., Temmerman, M., & Degomme, O. (2015). Couple based family planning education: changes in male involvement and contraceptive use among married couples in Jimma Zone, Ethiopia. BMC Public Health, 15(1), 682.

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My Assignment Help. (2019). Financial Planning Advice For Peter And Lisa Clarke. Retrieved from https://myassignmenthelp.com/free-samples/individual-financial-planning-in-the-soa.

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My Assignment Help (2019) Financial Planning Advice For Peter And Lisa Clarke [Online]. Available from: https://myassignmenthelp.com/free-samples/individual-financial-planning-in-the-soa
[Accessed 14 July 2024].

My Assignment Help. 'Financial Planning Advice For Peter And Lisa Clarke' (My Assignment Help, 2019) <https://myassignmenthelp.com/free-samples/individual-financial-planning-in-the-soa> accessed 14 July 2024.

My Assignment Help. Financial Planning Advice For Peter And Lisa Clarke [Internet]. My Assignment Help. 2019 [cited 14 July 2024]. Available from: https://myassignmenthelp.com/free-samples/individual-financial-planning-in-the-soa.

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