I'm stumped!

Question 4:

There really aren’t too many financial planning strategies out there so the following should cover most strategies you could use, why and how it will meet thier goals. I’ll leave it up to you to pick which ones and explain whether it is appropriate or not and the risks. One of the risks in selling shares would be CGT ect.

Expenditure:
• Sell assets... pretty simple watch out for CGT

Tax minimisation:
• Have the lowest MTR client hold most of the assets to minimise tax on income and future capital gains.

Super:
• Salary sacrifice to super to increase retirement benefits. (Perhaps have client 1 do the majority of the SS as he is closest to sixty and the tax free benefits). You’ll have to ensure they don’t go over the tax deductible limit for SS contributions.

Pension:
• have them start a non-commutable allocated pension (TTR) and commence the income swap strategy (client 2 will have to wait a few weeks till she’s 55 though). Again focus on contributing the most to client 1’s super as he will reach age 60 sooner.
• Alternatively use the TTR to repay debt sooner (probably best if you do from age 60, client could pay IO on their debt, increase SS and use that to repay debt sooner.

Debt:
• Have them clear non-deductible debt first, so credit cards, car loans then mortgage. Then if any surplus above what you need to meet retirement goals, reduce investment debt.
Investments:
• Start an investment (managed fund) to meet a future expense and invest excess cash (grandchildren etc). Don’t see the point in this... but I’ve included it none the less.

Gearing:
• Even though they are already doing this, borrow to invest to meet goals, (quite risky given the time frame till retirement)

Insurance:
• After a needs analysis is complete recommend appropriate levels of death, TPD, Trauma and Income Protection cover. And how it should be structured (inside super or outside, who is the owner etc).

Social security:
• When client 1 reaches age 65, switch his super to his wife’s to maximise age pension (until client 2 reaches pension age). Possibly gift assets and/or purchase funeral bonds to increase this further. Have to watch out for contribution limits

Estate planning:
• Establish an up to date will, powers of attorney and testamentary trust (that should stop that pesky son in law getting his hands on their cash)

Question 5:

This is how I present and implement a plan, it may not match up 100% to what they teach, so check your text books.

1. Revisit the financial planning process and explain what step they are up to.
2. Introduce the document and its purpose (legal requirements etc)
3. Get the client to confirm that the information we have (asset values, income, goals & needs) is correct and that nothing has changed since you last met.
4. Go over the recommendations and the reasons behind them, getting the clients confirmation on each recommendation (whether they agree and wish to proceed with that recommendation etc).
5. Go over the fees, costs and risks of the advice.
6. Give the client the option to “sign up” on the spot or take away our advice have a think about it and get back to you.
7. Ensure all paperwork is explained, signed and correctly filled in.
8. Notify the client once all your recommendations have been implemented and tell them when they can expect to have their situation reviewed.
9. Add them to our review schedule to ensure that they are reviewed on an ongoing basis going forward.

Question 6

Three parts:
Part 1. Determine if he should put that $50,000 into super, off debts, in cash to fund living expenses, into an investment etc. I’ll leave that one up to you.

Part 2. Review income and expenses ensure that the income they will generate enough to cover their day to day expenses and what you had recommended previously in terms of contributions to super etc etc.

Part 3. Using part 3 will they fall short of their retirement goals? Which goals might have to go or change. You might have to make a few calculations.

Young Gun you are a godsend! I'm glad you didn't do the assignment for us by giving us the answers, as I would like to become competent myself, but it helps so much having someone to offer guidelines and add professional insight.

Thank you!

Thank you so much, Young Gun ! I totally agree with C.J. and I'm grateful !
Alright guys, let's knock this out together and move on to the next chapter !

I have only revisited this site tonight and am sorry to have missed all your replies!
I finally struggled through the assignment and passed, so if anyone is still having trouble, let me know.
There are a lot of mistakes/ommissions in the information the clients provided.
Q5 is the easiest as it is set out for you in one of the modules ( can't remember which one)

Anyway, I will keep watch here to see if anyone is struggling - or you can PM me.

I am currently trying to swot for the exam now - still don't really get module 8.
Apparently, this is the hardest subject of the DFP, so that is some good news.

Cheers,
Jen

Just come accross this forum, and I must say my life has been saved.

Big thanks to Young Gun.

I definately feel that the coursework prepares you at one level and the assignment is about 10 times more difficult. I'm not in the industry so maybe thats why. I still have a few questions which it would be great if any of you can answer for me (I'm doing the same ELC assignment).

With question 3. Ive worked out a pie chart with their current investment asset allocation however I'm unsure if I include the full value of their investment property or the equity (value-loan amount)? Also unsure if I include their super as the allocation of this is unknown? Also unsure if you include personal use assets (such as house, contents, car), I assume you don't though?

And finally with question 4: They ask for relevant issues, possible strategies and then selecting one strategy saying why this is appropriate. I'm majorly confused by this??? Ive started the estate planning one. So far for relevant issues ive got wills out of date, concerned that daughters partner is a spendthrift, no power of attorney etc. But then what are the possible strategies??? The strategies I see are creating wills, powers of attorney, testamentary trust etc. But then how can you choose one of these stating its relevant, to me there all relevant. I just don't get it.

Any help greatly appreciated.

Kind of touching on Micky's question above. When question 4 asks you for strategies, are you suppose to come up with them with the whole plan in mind, or each one somewhat separate from the rest.

As an example in the Short Term goals, they want to buy a new car. Am I supposed to just come up with a way for the funds, or am I supposed to figure out whether they need a new car.

Hi Jen,
My names Rachel, I've been studying the DFP1 for a few months now (also working full time) and I'm up to the assignment. p.s thanks Young Guy for all the advice.

I just have a little question for you if you wouldn't mind...
In Question 2 the property is joint however in section 3 it states it's in Zelda's name..so i'm just wondering if you split it between both clients whilst doing the risk profiling of just had it in Zelda's name?
Hope you don't mind answer this one for me.

Thanks

Rachel