This assessment item requires you to submit a working paper which includes; an overview of the interview with Matt, including his current situation, goals and objectives and any issues raised, and then based on this information, your strategic recommendations that address how he should achieve his goals. These recommendations should include wealth creation (both inside and outside of superannuation), wealth protection (insurance), and lifestyle recommendations.
Financial Planning Assessment – Griffith University Australia.
Please refer to the instructions below which sets out what you need to cover for each section in detail. A reminder that this assessment item is worth 40% of your final grade.
In terms of this assessment item please note the following:
- Your submission must be prepared using the template provided on L@G;
- Your submission is a strategy document only, as such you are NOT required to price any actual quotes or recommend specific investment products;
- A standard SOA template generally contains generic information such as what is a managed fund, what is total and permanent disability insurance etc. Accordingly, you are not required to include generic information such as this in your working paper. Instead, the focus of your working paper should be your strategy recommendations (and reasons why etc) as indicated in the instructions below.
- As illustrated in the template and the working paper example, please bullet point your responses. Please start a new bullet point for each separate point you make.
- There is no word limit for this assessment item. As a guide, your submission should be roughly 2,500 to 3,000 words (excluding the appendices), though you may exceed this,particularly if you are providing detailed explanations for each section with the aim of achieving an excellent result. However, please remember it is quality over quantity!
- Please ensure you refer to the Appendices at the end of this document. Appendix 1 contains information about the future value calculations required (including the rates and fees you must use) and Appendix 2 contains answers to frequently asked questions.
- Before starting, we strongly suggest you watch the ‘Getting started: how to complete the working paper’ video on L@G.
- Finally, please ensure you have reviewed the marking rubric and the checklist on L@G as well.
FSG and adviser profile / Scope of advice
There are no marks for these sections and therefore they have been completed for you. Please do not amend these.
Financial Planning Assessment – Griffith University Australia.
Current situation:
• Complete the tables provided as accurately and thoroughly as you can. Please refer to the working paper example to assist you.
• This should be fact based and is based on the information provided in the client interview.That is, his current situation now right, not after you have provided him with advice.
• Do not make up additional information if you do not have it.
Potential issues / special consideration:
• Detail any potential issues or special considerations that you would like to mention e.g. anything unusual or issues that may not be relevant to your current advice, but could be an issue in the future etc. This may include anything you wish to expand on based on his current situation.
• Overall, please ensure these are relevant to your client rather than generic potential issues / special considerations. For example, saying a client who is single could get in a relationship/ get married / have children when there is no mention of these would be a generic consideration (i.e. could apply to anyone). Please do not include generic considerations, but rather focus on those relevant to your client.
Objectives:
• Clearly state all of Matt’s goals and objectives, including any non-financial objectives (e.g.‘play more golf’) if relevant.
• Do not include your goals or objectives or what you will recommend to the client. This section simply covers what the client’s goals are. Your recommendations will be discussed later in the working paper.
• Please be as specific as possible, e.g. where possible include time frames, priorities and $ amounts (i.e. prioritised SMART goals).
Risk profile:
• State the risk profile you arrived at in the interview and any details arising from your discussion about risk.
• Include how you determined your client’s risk profile (e.g. did they just tell you or did you complete a questionnaire with them etc), what it means (in terms of time frames, asset allocation etc) and what the client thought about this.
• If you will be recommending an asset allocation that is not in line with the client’s risk profile(as discussed in Topic 5), please include your reasoning for this in the recommendations section(s) below, as it is easier for us to identify your rationale when applied to the individual recommendations.
Wealth creation / lifestyle recommendations – outside superannuation
Before completing this section, please watch the ‘Investment choices’ video on L@G.
For each wealth creation and lifestyle goal that you are advising on, you need to detail your recommended strategy(s) which should be linked to the client’s objectives and the advantages and disadvantages of each strategy, i.e. why your recommended strategy is appropriate for the client and any potential costs / downsides. You also need to include details of any alternative strategies considered and why these were not recommended. The specific requirements of each section are detailed below.
1.Objective 1 [change the title to the client’s objective you are advising on – try to make these ‘SMART’ goals where possible]
Financial Planning Assessment – Griffith University Australia.
Recommended strategy:
• State your recommended strategy to achieve this goal, i.e. what should Matt do? This may be multiple steps, if so; a separate bullet point should be used for each step.
• Make sure you are specific about the type of investment; i.e. not he should invest in x or y – which one? (or both?) How much should he invest? For how long? Should the investment have any particular features?
• Please be as specific as possible without actually recommending a particular product. Your advantages / disadvantages below should then be directly relevant to your recommendations (not just generic advantages / disadvantages that could apply to any client). Please refer to the investment choices video on L@G for more information.
• Overall, your recommendations must be clear on where his savings (both current and any monthly surplus) are being directed to achieve his specific goals.
• Where he has a specific dollar ($) goal he is wanting to achieve, make sure your recommendations do give him a chance to achieve this goal.
• For any goals greater than 1 year, you are required to prove your recommendations do give him a chance to achieve his goal. To do this, please either use the Future Value (FV) calculations (covered in Topic 3) or use an online calculator as shown in the Future Value calculations video [we recommend the latter]. For these calculations, you are required to use the rates and fees provided in Appendix 1 below. As noted there, for the purposes of this course, you are not required to adjust these to take tax and inflation into account, so please simply use the stated rates and fees provided below.
• Show any workings / online calculators used (including your inputs) in Appendix 1 below. Before completing this, please refer to the video, ‘Future value calculations’ on L@G.
• Make sure you do actually provide recommendations on how Matt can achieve his goals -leaving it up to the para planner (the person who will receive your working paper) or saying we will discuss this further with Matt is not acceptable.
• The reasons for your recommendations should form part of your advantages below. This section is simply what Matt should do to achieve his first objective.
Financial Planning Assessment – Griffith University Australia.
Advantages of strategy [reasons why]
• This is where you need to include the reasons why you have recommended the strategy(s) above.
• As per above and the marking rubric, please ensure you provide specific advantages for Matt, not just generic advantages that may apply to any client / investor in that particular product. You should be explaining each decision you have made.
Disadvantages of strategy:
• There are always disadvantages with any recommended strategy. For your recommended strategy(s) what are the disadvantages? Again, be specific rather than general. For example, rather than stating ‘taxation implications’ as a disadvantage you would need to explain what the taxation implications are and how this is a disadvantage for Matt.
• If there are severe disadvantages with your recommended strategy that cannot be overcome, you should consider changing your strategy – particularly if your strategy means he cannot achieve his goals.
Alternatives considered:
• You need to consider all ‘reasonable’ alternatives and most importantly, why these where not recommended.
• For example, if you are recommending a defensive investment option you should include other defensive investment options and why these were not recommended. Likewise, with any growth investment recommendations.
• Typically, an alternative strategy is a strategy that still meets the client’s goal, but one you haven’t recommended for a particularly reason(s). Please ensure you explain what these reasons are, so it is clear why your actual recommendation is more appropriate for your client.
• Remember too, that one possible investment alternative is to do nothing. That is, leave his current investment / savings as is. If you are not recommending this, why not?
Repeat this process for all of Matt’s wealth creation and lifestyle goals (including his superannuation goal below).
Please remember that you can only use the savings that your client has available to them (as per the interview transcript), and that once you have allocated these (e.g. for one goal) they are no longer available for the other goal. This includes superannuation. This is discussed further in the investment choices video. Refer also FAQ 2 below.
Further, as his goals have different time frames, it is unlikely to be appropriate to combine all of his funds into one investment for both goals. Accordingly, we suggest you work on one goal at a time (as shown in the template).
Therefore, for each goal, you need to consider how much of his current savings (if any) and how much of the ongoing savings (if any) are you allocating towards this goal (remembering you can only use these once) and how these funds are being invested. Please refer to the investment choices video on L@G for further information.
Wealth creation recommendations – superannuation
Overall, Matt wants to ‘sort out’ his superannuation, including making sure it’s invested appropriately.As part of this, there are two overall recommendations you need to make:
- What investment option should he use for his superannuation fund?
- Should he make additional contributions to superannuation?
These are expanded on below. For completeness, please ensure any reasoning why / why not is included in the ‘advantages of strategy’ section below.
1.What investment option should he use for his superannuation fund?
• You should assume he does not have access to a defined benefit fund as these are generally closed to new members. Accordingly, any superannuation fund recommended will be an accumulation fund and therefore, you need to recommend an investment option for him (e.g. conservative, balanced, growth, high growth, life cycle or a single sector option(s)) and explain why you have recommended this.
• Note: as you are not required to recommend a specific product, please do not make a recommendation on what superannuation fund he should be in. This will be discussed in latter courses. For this course, please focus on the investment option instead.
2.Should he make additional contributions to superannuation?
• If yes – explain why he should be making additional contributions, and how much he should be contributing per month. Should the contributions be before tax (i.e. salary sacrifice and/or personal tax-deductible contributions) or after tax? Why?
• When considering how much he should contribute you need to ensure you are still working within his available funds taking in to account the funds required to achieve his goals outside superannuation (remember, you can only use these funds once).
• If no – i.e. you are not recommending he make any additional contributions to super, you should state this and your reasons why in the ‘alternatives considered’ section below to show you have thought of this and did not recommend it because of XXXX…
Advantages of strategy [reasons why]
• As per above (e.g. if you are recommending Matt make salary sacrifice contributions to his super fund what are the advantages / disadvantages of this for him? etc).
• You may choose to cover the advantages / disadvantages / alternatives for each of the 2 points above, or you may prefer to do these altogether.
Disadvantages of strategy
• As per above
Alternatives considered
• As per above
• Note that this section should be quite comprehensive as it should include similar investment options (not all) as well as either;
o different contribution types – for example, if you recommended he salary sacrifice,why not personal tax deductible contributions or after-tax contributions instead? (or vice versa); or
o reasons why additional contributions were not recommended for him.
Wealth protection (insurance) – recommendations
• Note 1: as per the topic content and discussed in the workshops, all insurance recommendations should be done on a needs basis. That is, what are the financial consequences if an accident / illness / injury occurred? Could he still achieve his goals and objectives?
• Note 2: in this course you are not required to price insurance (you will do so in later courses).In practice, any insurance recommendations outside of superannuation will have an impact on Matt’s cash flow, though for the purposes of this assessment item you do not need to consider how he would fund this (i.e. feel free to use his entire monthly surplus for any wealth creation / lifestyle goals, including superannuation).
• Note 3: if you are recommending Matt not take out a particular insurance cover, you must explain why.
1.Life insurance
• Advise whether you recommend Matt take out life insurance cover or not and why
• If recommending Matt obtain life insurance, please advise whether this should be inside /outside superannuation and why
• Provide any advantages / disadvantages for Matt with your recommendation
2.Total and permanent disability (TPD) insurance
• Advise whether you recommend Matt take out TPD cover or not and why
• If recommending he obtain TPD insurance, please advise whether this should be:
o own occupation or any occupation TPD and why; and
o inside / outside superannuation and why
• Provide any advantages / disadvantages for Matt with your recommendation
3.Income protection (IP) insurance
• Advise whether you recommend Matt take out IP cover or not and why
• If recommending he obtain IP insurance, please advise:
o What level of cover he should obtain (e.g. what % of his income);
o What his waiting period and benefit period should be;
o Whether this should be held inside / outside superannuation; and
▪ For each of the above points, please ensure you explain your reasons why.
• A reminder that all new IP policies must be indemnity policies
• Provide any advantages / disadvantages for Matt with your recommendations
Financial Planning Assessment – Griffith University Australia.
4. Trauma insurance
• Advise whether you recommend Matt take out trauma cover or not and why
• A reminder trauma insurance must be held outside of superannuation
• Provide any advantages / disadvantages for Matt with your recommendation
5.Private health insurance
• Should Matt continue to hold his hospital and extras cover? Why / why not?
Other:
• Insert any other objectives / issues that you have not previously dealt with.
• If you have previously covered everything, you wouldn’t be expected to have anything for this section – so just delete.
• A reminder that Estate Planning is excluded from this assignment so please do not make recommendations regarding this.
APPENDIX 1 – Future value (FV) calculations
Include in this section any FV workings and/or a screenshot of an online calculator you have used (including your inputs), which show that Matt has a chance of meeting his goal(s) if he follows your recommendations. We recommend you use for your FV calculations.
A reminder that this section is required for any goals greater than 1 year and forms part of the marking rubric. Accordingly, students who do not complete the Appendix will have their marks reduced. Please note FV calculations are not required for his superannuation. This is out of scope.
Before completing this section, please refer to the video, ‘FV calculations’ on L@G which goes through how to complete the FV calculations, why these are required as part of your working paper, and what you need to include in this section of your working paper. Please only provide FV calculations for your recommended strategy, not your alternatives.
For completeness, please do not include Matt’s emergency funds (or any interest potentially generated from these), in your FV calculations.
For your FV calculations you are required to use the investment return rates given below. Please note that you are not required to take tax or inflation into account for any of your calculations, though this should form part of your overall considerations (reasoning). Please assume monthly compounding for all investment calculations, except for a term deposit or bond, in which case annual compounding should be used.
Investment rates of return (per annum):
For any Managed Investment Scheme’s (MIS’s) the above rates are net of fees (i.e. after fees have been taken into account). For the purposes of this assessment item, we have assumed that the net return for MIS’s invested in the same products are the same, regardless of how they are managed (i.e. actively or passively).
APPENDIX 2 – Frequently asked questions
1.The example working paper recommends an investment bond or education bond – is this the same as a Government or Corporate bond? And can I recommend this? Or use it as an alternative?
Answer: An investment (or an insurance or education) bond is very different from a Government or corporate bond that we discussed in Topic 7. An investment bond is only suitable for investment time frames of at least 10 years, which does not apply to Matt, so please do not recommend this.
Please do not include this as an alternative either, as these should be appropriate (possible) investment alternatives. Accordingly, please simply use the example working paper as a guide as to how to write / format your recommendations.
2.Can I advise Matt to save more in order to achieve his goals?
Answer: No. In practice, you may be able to discuss a client’s savings levels and look for opportunities for them to save more by analysing his cash flow, however Matt has specifically asked you not to consider any budgeting / cash flow analysis and as such, it is ‘scoped out’ of this assignment. In the working paper template, you can see that budgeting and cash flow analysis is excluded from the scope of this assignment (under the heading ‘scope of advice’).
Likewise, please do not suggest that Matt sell other assets, such as his car or home contents to achieve his goals or use his emergency funds. Please simply use the funds he has told you he has available for investment.
3.If my investment recommendations are the same for two different objectives (e.g. two managed funds or two term deposits etc) do I need to go through the same advantages and disadvantages again?
Answer: No – just ensure you fully detail your advantages / disadvantages for the first objective and then put ‘as above’ for the second. If there are any differences, e.g. still a managed fund but say a different risk level, or a different length of time used, make sure you clearly explain the reason for these differences as part of the second objective.
Overall, please ensure you are very clear on where his savings are being allocated for each objective.
4. How many alternatives should I have?
Answer: there is no set number and will depend solely on what you are recommending. As per the instructions, you need to consider all ‘reasonable’ alternatives (i.e. similar investment options) and most importantly, why these where not recommended.
Financial Planning Assessment – Griffith University Australia.
Students who provide strong, clear reasoning why the various alternatives were not recommended tend to do particularly well in the assignment, as it is clear they have considered all relevant options and why these were rejected, which in turns helps support the assertion that their recommendations are in fact, in the client’s best interests.
5.How do I complete the future value calculations?
Answer: Start by watching the video, ‘Future value calculations’ available on L@G as well as reading through the information on investment rates and fees provided in Appendix 1 above.
Financial Planning Assessment – Griffith University Australia.
Overall, please remember that your FV calculations are designed solely to support your recommendations and prove your client does have a chance of achieving their goal in the desired time frame. Accordingly, please ensure the FV calculations align with your recommendations provided. For example, if you are recommending your client initially deposit $5,000 into a managed fund, along with monthly contributions of $1,000 for 5 years, this is what should be shown in the FV calculations. Please ensure information on how much the client is contributing to an investment is included within the working paper itself, not just the appendix.
A reminder to only provide FV calculations for your recommended strategy, not your alternatives.
6.How do I work out which insurance products Matt needs?
Answer: please complete your insurance recommendations on a needs based approach. That is, ensuring you are focused on the financial consequences of an event (i.e. death, TPD, loss of income etc) occurring if the client was not adequately insured as discussed in Topic 9.
Financial Planning Assessment – Griffith University Australia.
Please do not focus on the likelihood of an event occurring. In this situation, we would all be recommending that 90-year-olds take out life insurance, however, there is likely to be minimal financial consequences if they did not have life cover and passed away. Focus instead, on the client’s needs. As a general comment, remember that if an event is unlikely to occur (from
an actuarial point of view), then any insurance to cover that event is likely to be relatively inexpensive.
A reminder, you are not expected to calculate the amount of cover your client requires as this will be discussed in the Risk Management and Insurance course.
7.How do I structure the insurance section of the working paper? Do I need to include alternatives like the wealth creation section?
Answer: Follow the above instructions, that is, detail what you are recommending and then advantages and disadvantages of your recommendation.
In terms of wording this, we suggest you word these along the lines of “we recommend Matt take out life insurance inside super / outside super” or “we do not recommend Matt take out life insurance at this stage” [whatever you are recommending] and then explain why.
Financial Planning Assessment – Griffith University Australia.
For TPD, you would need to include as part of your recommendations whether it was own/any occupation TPD etc. So something along the lines of “we recommend Matt take out own / any occupation TPD insurance inside super / outside super” [whatever you are recommending]. Then you would go through the advantages (i.e. reasons why) and disadvantages of what you are recommending. As with the wealth creation section, you should have a separate bullet point for each point (advantage / disadvantage) you are making, rather than one big block of text.
Financial Planning Assessment – Griffith University Australia.
Please note for the insurance section of your working paper, there is no ‘alternatives’ section.This is because you should effectively be explaining your choices clearly in each section. For example, if you recommend an own occupation TPD policy for him, part of your reasoning about why own occupation would also cover off why an any occupation TPD wasn’t recommended for him, so you are effectively discussing your alternatives as you go with this section.
8.If I recommend Matt salary sacrifice into superannuation do I need to take into account this will reduce his take home pay?
Answer: Yes. Salary sacrificing will always result in a decrease in a person’s take home pay.Accordingly, if you are recommending he salary sacrifice into superannuation, the reduction in his take home pay needs to be factored into his ongoing savings.
Financial Planning Assessment – Griffith University Australia.
Please be aware that if you are using any of the online calculators sometimes it looks like an increase in take home pay if the calculator is comparing after tax and before tax contributions. But Matt is not making any after tax contributions. Accordingly, by sacrificing a portion of his income, he will be reducing his take home pay. While they would be saving tax, if they sacrifice $100 of income they doesn’t save $100 of tax, so they would be worse off from a cash flow perspective, hence this needs to be factored in.
9.What should I do if I have surplus cash remaining?
Answer: If after achieving all of his objectives, you have surplus cash remaining, we suggest you include one or two lines about what you are recommending he do with this surplus.
Financial Planning Assessment – Griffith University Australia.
Please note, we’re not expecting you to include a detailed cash flow analysis in your submission (as you don’t have the information to do this in any case), so if you do have some surplus cash it should be sufficient to say any surplus should be directed to XXXX and explain your reasons for this. This could include further emergency funds / additional contributions to superannuation (whether before or after tax), or you could achieve his wealth creation goal(s) earlier, or with less risk, or simply have a greater buffer for a particular goal to allow for increased costs.
10.In the marking rubric, the excellent column in “Attention to auditable track record” mentions including conversation quotes where relevant. Do I need to include a quote in every section or is there a specific number of quotes you are looking for?
Financial Planning Assessment – Griffith University Australia.
Answer: This section looks at your overall reasoning which is strengthened by including relevant conservation quotes. You do not need to include conversation quotes in every section, rather if there are certain recommendations you are making because of a relevant comment the client has said, it would make sense to include this conversation quote to support your argument.
Please note that not all firms will have an interview transcript, as they may choose not to record the interview. Therefore, adding conversation quotes into your working paper significantly strengthens this.
11.What is meant by ‘private health insurance’, and how does this fit in with hospital cover and extra’s cover?
Answer: Generally, private health insurance refers to hospital cover, which usually covers some or all of the costs of hospital treatment as a private patient, including doctors’ fees and hospital accommodation. Extra’s cover is an optional additional level of cover which provides cover for things like physiotherapy, chiropractor, optometry (glasses), dentistry etc.
It is possible to have stand-alone hospital cover, stand-alone extras cover, or a combined hospital and extras cover policy.
Please remember that private health insurance (whether hospital or extra’s cover or both) must be held in your own name.
Financial Planning Assessment – Griffith University Australia.
12. Do I need to reference? E.g. acknowledge where we got ideas for any advantages and disadvantages of the recommended strategies?
Answer: The short answer is no. However, while it is fine to use websites etc for ideas (e.g. for say the advantages and disadvantages of an investment), please make sure these are in your own words and are relevant to your client. We had an issue in a previous trimester where a student copied and pasted all advantages and disadvantages from online sites, including those not relevant to the client, and was given 0 for the assessment item (as well as having an academic misconduct issue noted on their record), so please don’t do this!
As the assignment should be in your own words and specific to your client, there should not be any need to reference.
Financial Planning Assessment – Griffith University Australia.
Overall, please remember this is a practice based assignment, not a theoretical discussion of the issues. Accordingly, please ensure any theory we have discussed as part of this course is applied to your client. Students will be awarded marks for the practical application of the course content to a given situation, as shown in the marking rubric.
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