Family: Ken (32), Emma (30), Lisa (2) Ken is a software engineer earning $90,000 per annum (before tax and excluding superannuation). Emma works part-time (3 days a week) as an administration officer for a priv
Assessment 3 (40%) – Statement of Advice (Report)
Submission: Via Turnitin, with a front cover that includes your name and student ID Due Date: Wednesday, 30th October 2024, 17:00 AWST
Objective: To formulate appropriate financial solutions tailored to a set of circumstances, goals and objectives.
Instructions:
Ø Review the information provided in the case study along with the knowledge acquired in this unit, and conduct additional research to investigate various solutions to formulate a suitable plan for achieving the stated goals and objectives as outlined in the case background.
Ø Use the format provided below (Guidance) to complete your Statement of Advice.
Ø Clearly state all assumptions and sources of information, including but not limited to interest rates, tax rates, inflation rates, growth rates, etc. All research is to be included in the appendix (screenshots are permitted).
Ø While specific product recommendations are not required, you may reference examples encountered during your research in your analysis.
Ø The maximum number of pages for this assessment is 10 (including the front cover but excluding any appendices). Please refer to the guidance notes for a detailed breakdown.
Suggested Research Sources:
Ø Moneysmart website: https://moneysmart.gov.au/
Ø Major bank websites: For checking borrowing capacity and upfront costs associated with home purchase.
Ø Major insurance company websites: For insurance premium quotes based on your calculated cover amount needed. Ø Textbook/learning materials
Case Background
Family: Ken (32), Emma (30), Lisa (2)
Ken is a software engineer earning $90,000 per annum (before tax and excluding superannuation). Emma works part-time (3 days a week) as an administration officer for a private firm, earning $35,000 per annum (before tax and excluding superannuation). Their daughter, Lisa, is 2 years old and attends childcare while Emma is at work.
The family is currently renting, paying a weekly rent of $550. They plan to purchase a small villa or apartment in 5 years, aiming for property ownership for increased security and stability. The property they are considering is currently valued at approximately $500,000, and they wish to make a deposit of at least 20% to avoid Lender’s Mortgage Insurance and borrowing too much. However, they are concerned about affordability in 5 years, given potential increases in property prices.
They currently have $50,000 in their joint bank account. Ken also owns 100 BHP shares, purchased on 18th September for $37.80 per share. Ken has a credit card with a $10,000 limit, which he keeps for emergencies only, and there is no outstanding balance. The family owns two cars: a Ford Focus 2009 with an estimated value of $8,000 and a Mazda 3 with a market value of $20,000. Both cars were bought with cash. Ken has accumulated $45,000 in his employer-sponsored superannuation fund, and Emma has $25,000. Excluding their rent, the family’s annual expenses amount to approximately $50,000.
The clients seek advice on the following matters:
1. How much do they need to save each month to accumulate a 20% deposit, and can they afford to make a larger deposit?
2. What will their cash flow statement look like once they purchase the new house?
3. Does Ken need to purchase life insurance to protect his family in the event of his premature death? If so, how much and what type? They wish to cover: o Funeral expenses: $10,000; o Emergency funds: $25,000; o Enough money to clear their home loan; o Financial support until Lisa turns 18, assuming Lisa needs $1,000/month; o Financial support for Lisa’s education, estimated to be $100,000 in total.
Emma would continue working until age 67 in the event of Ken’s premature death.
Guidance for report
Pages Title Details
1
Front cover
• Your
name
• Student
ID
2
Executive summary
• One
page maximum
• Statement
of the present position of the family (1 paragraph, in words)
• Goals
and objectives
• Strategies
and recommendations
• Outcome
and projections (addressed how objectives are met, projections have supported
the outcomes)
3
Personal information
• Summary
of personal background and relevant information for the family
• Goal
and objectives (provide motivation, dollar amounts, and time frame)
3-4
Financial information
• Create
a personal balance sheet for the family and calculate their net worth
− Investigate
how much are the shares worth (date of when you are completing your
assessment)
− Ignore
any of the dividend payments for this assessment.
• Create
a cash flow statement for the family and calculate the surplus/deficit
position
5
Initial investigation
• Calculate
how much can be saved each fortnight based on the cash flow statement
• Investigate
other upfront costs of purchasing a property that might be relevant
• Calculate
the future value of the property and 20% deposit needed
• You
will need to ascertain how much money will be needed to complete the purchase
6
Initial investigation
•
Investigate how much the
family can borrow and determine an appropriate residential home loan rate
based on current interest rates
•
Discuss between the following loan features:
− Fixed vs variable rates
7
Initial investigation
•
Discuss options for saving
up for the home deposit via direct and indirect investments, and summarize
the advantages and disadvantages of each option
•
Calculate the expected
amount that would be accumulated based on the surplus and current savings.
Explain why the investment may be appropriate, assuming the couple have a
balanced risk profile. Scenario analysis is recommended
•
Clearly state all
assumptions used in the calculations
8
Initial investigation
•
Calculate how much life
insurance Ken needs to purchase to protect his family in the case of his
premature death
•
What would be an expected
premium if he needs to purchase the insurance (consider life insurance
outside of superannuation)
•
Clearly state all the
assumptions used in the calculation
9
Strategy presentation
•
Based on your research
recommend the solutions that you feel are most appropriate
•
Provide reasons to justify
your recommendations
•
Discuss the implications of
selling investment assets to purchase the property (you have to know the
price of the share today and when they were purchased to determine the profit
or loss if the share were to be sold)
10
Outcomes
•
Making reasonable
assumptions, prepare a cash flow statement after the home purchase (e.g.
consider other possible cash outflows after the home purchase) and compare
against the original
Marking Rubric
Below expectations (0 –
49%)
Meets expectations (50 –
69%)
Exceeds expectations (70 –
100%)
Executive
Summary (10%)
•
Did not keep to one page • Statement of present position unclear or
incomplete
•
Missing Goals and objectives, Strategies and
recommendations, or/and Outcome and projections.
•
Kept to one page maximum • Statement of present position
summarised
•
Goals and objectives stated with dollar
amounts
•
Strategies and recommendations summarised
•
Outcome and projections presented
•
Kept to one page maximum
•
Statement of present position clearly
summarised with relevant information • Goals and objectives stated with
dollar amounts and time frame
•
Strategies and recommendations clearly
summarised
•
Outcome and projections clearly presented
Personal and financial
information
(20%)
•
Summary of personal background:
incomplete
•
Goal and objectives: incomplete • Personal
balance sheet: incorrect format
•
Cash flow statement: incorrect format
•
Summary of personal background:
clear
•
Goal and objectives: provided motivation,
dollar amounts
•
Personal balance sheet: complete format with
some relevant information • Cash flow
statement: complete format with most information
•
Summary of personal background: clear and
complete
•
Goal and objectives: provided motivation,
dollar amounts and time frames
•
Personal balance sheet: complete format, no
errors in relevant information
•
Cash flow statement: complete format, no
errors
Investigation (40%)
•
Insufficient evidence of research, planning
and effort
•
Did not or incorrectly factored in future
values in calculations • Did not provide options for purchasing home
•
Incorrect or incomplete calculations for home
purchase and insurance; omitting various fees and charges
•
Showed some evidence of research, planning and
effort
•
Factored in future values in calculations
•
At least one option provided for purchasing
home with consideration of risk profile
•
Calculations, include fees, charges and taxes
for home purchase and insurances
•
Home loan rates clearly stated
•
Showed clear evidence of research, with
sources, planning and effort
•
Factored in future values in calculations,
including the possibility of poor investment performance
•
More than one option provided for purchasing
home with consideration of risk profile
•
Detailed calculations, including fees,
charges, taxes and other relevant
5
•
No evidence of research on the home loan
rates
•
Unclear and unlabeled charts and graphs
• Provided
charts and graphs
• Clear
and concise discussion
assumptions for home
purchase and insurances
•
Home loan rates clearly stated with evidence
of research
•
Provided relevant charts and graphs • Provided
clear evidence that the information presented is correct • Clear and concise discussion
Strategy (10%)
•
Did not provide options for saving up for the
home deposit
•
Did not discuss direct vs indirect
investing
•
Unclear or inappropriate recommendation of
investment for saving and incorrect calculation of the expected amount that
would be accumulated
•
Investment is inappropriate for the time
frame
•
Unclear or disjointed discussion
•
Discussed the options for saving up for the
home deposit
•
Detailed discussion of direct vs indirect
investing
•
Recommend an investment for saving and
calculate the expected amount that would be accumulated
•
Investment is appropriate for the time
frame
•
Discussed and summarised the options for
saving up for the home deposit
•
Detailed discussion of direct vs indirect
investing; summarised the advantages and disadvantages of each option
•
Recommend an investment for saving and
calculate the expected amount that would be accumulated
•
Investment is appropriate for the time frame
and has considered the possibility of poor investment performance
Outcome (10%)
• Did not present the cash flow statement
after the home purchase • Ignored
other related expenses after purchasing property.
• Presented the cash flow statement after
the home purchase with few errors • Considered other related expenses after
purchasing property with some research
•
Presented the cash flow statement after the
home purchase with no errors
•
Consider other related expenses after
purchasing property which have been justified with other research/data
Presentation of the SOA
(10%)
•
Did not follow the guidance notes and did make
any assumptions • Many spelling and grammar mistakes
•
Incorrect formatting
•
Followed the guidance notes and made some
assumptions
•
Some spelling and grammar mistakes •
Presentation of report/SOA is of a
good quality with few
inconsistencies
•
Followed the guidance notes and made
reasonable assumptions
•
Few spellings and grammar mistakes •
Presentation of report/SOA is of a high quality with consistency
6
