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Prepared for Mr. Walter Gannon Prepared by Tracy Burton Authorised Representative Number: 15326 128 Cemex St.,Turramurra NSW 2074 02 9440 5555 Authorised representative of Burton Financial Planning Group ABN: 65 001 232 232 Australian Financial Services Licensee License No. 16029 Head Office: Level 26, 1 Carlyle St., MELBOURNE VIC 3000 12 February 2010 You are entitled to receive a Statement of Advice (SOA) whenever we provide you with any personal financial advice. Personal advice is advice that takes into account your goals, objectives, financial situation and needs. This SOA is a report of the personalised financial advice provided to you and includes information on the basis on which this advice is given, information about fees and commissions and any connective information which might influence the advice. If this advice includes a recommendation to you to acquire a particular financial product (other than securities) or an offer to issue or arrange the issue of a financial product to you, we will also provide you with a Product Disclosure Statement containing highly detailed supportive information about the particular product to help you make well informed decisions about the product. Be aware that the advice contained in the following SOA is valid for a period of 30 days only. If the plan is not implemented within this time, it will no longer be current and will need to be reviewed for accuracy.
February 2010
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Statement of Advice
Table of Contents
Executive Summary ....3 Summary of our recommendations..3 Summary of expected outcomes if you implement our advice....3 Risks in our advice..4 Summary of our fees and commissions...4 Your next step..4 Important information about you..5 Your reasons for seeking us..5 What you would like to achieve.5 Your personal and financial information....6 Personal information...6 Your existing insurance..6 Your existing estate planning....6 Financial Information...7 Current income and expense details....7 Your risk profile.....8 Strategy recommendations9 Recommended action after one year...9 Reasons for recommendation first year..10 Things you should consider..11 Investment product recommendations.12 Recommended asset allocation..13 Disclosure of commissions, fees and benefits...14 Ongoing services....15 Authority to Proceed..16 SOA Appendix 1 Cash flow projections after one year No implementation of strategy..18 SOA Appendix 2 Cash flow projections after one year After implementation strategy21 SOA Appendix 3 Cash flow projections.24
February 2010
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Executive summary
Summary of our recommendations
For the short term - up to one year I recommend that: You pay off your personal debt including the car loan and mortgage of $242000. You open a high yielding savings account and place $15000 within as an emergency fund. You set up Family Tax Benefit B. You see a solicitor to update your Will. For the medium term - one to five years Invest $40000 in a balanced managed fund, and then be accessed in 4 years when Chloe begins her high school studies. Invest $50000 in a growth managed fund for the build up of retirement wealth. For the long term - ten years+ Invest $80000 in a growth investment bond which can be accessed in 10 years when Chloe begins her university studies. Maintain current super arrangements and review in 12 months time. Maintain general and personal insurance and private health cover. Maintain existing share portfolio of $40000.
February 2010
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February 2010
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February 2010
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Personal Information
Personal Details First name Surname Date of Birth Current Age Martial Status Health Status Smoker Status Employment Status Employer name Occupation Annual Salary Walter Gannon ?/? /1974? 36 Single Part-time Manufacturing $42000
Children & Dependent details Name Larissa Gannon Chloe Gannon Date of birth ?/? /2004? ?/? /2002? Sex F F School Primary Primary Occupation Student Student
February 2010
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Financial information
Current income and expense details
Income and expenses Assessable income Income after tax Yearly expenses Estimated surplus/deficit Walter $44014 $37604 $52636 Total $44014 $37604 $52636 -$15032 -
Walter- based upon the income and expenses schedule above, you have a deficit $15032 income available if after 1 year this implementation is not followed. Please refer to your Cash Flow Statement in Appendix 1. Assets and Liabilities Total personal assets Total investment assets Net Worth Value $980500 $153780 Liabilities $233296 $0 Net Value $747204 $153780 $900984
Please refer to Assets and Liabilities in Appendix 1 for more details. Incomplete and/or inaccurate information warning Be advised, that for any reason, information on which our advice is based upon, is either inaccurate or not complete, then it may be necessary to consider its appropriateness in respect to your particular circumstances, needs and objectives.
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The target asset allocation for your risk profile is seen below: Target asset allocation- balanced growth
February 2010
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Strategy Recommendations
The aim of this section is to tell you: what our advice is; reasons for our recommendations; things to consider and risks of our advice. Read this section and ask if you have any queries.
February 2010
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Family Tax Benefit is an exempt tax benefit which Australian citizens have the right to use. Family Tax Benefit B gives benefits for single parent families. Depending on the age of your youngest child, you should be entitled for $2675.45/year. Please check the Cash Flow and Assets and Liabilities Statements in SOA Appendix 2, for your financial position after recommendations.
February 2010
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February 2010
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This chart indicates how your assets have been allocated for your managed funds. Notice the balanced fund bears 40% defensive assets and 60% for growth assets, whilst your growth fund is set to 20% defensive and 80% growth. Defensive assets are asset classes such as fixed interest and cash, whilst growth asset classes are equities and property. Defensive assets are less risky but generate less return compared to growth assets, which bear greater risk but potential for much greater returns.
February 2010
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February 2010
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Ongoing services
This Statement of Advice is a snapshot of your current circumstances, needs and objectives. Over time, finance changes. The Australian government passes new laws that can affect tax and superannuation rules, which may also apply to your investments. Also with time, new products will be introduced. These changes may bring benefit to you when taken advantage of. Changes such as these must be assessed in an ongoing manner, and related to your particular situation. This will ensure you have the best resources to meet your goals and objectives. The ongoing review is to: Keep us updated on your circumstances, both personal and financial; Revise your risk profile; Keep you updated on the economy and any investment and legislative changes that can impact your current strategy; Keep you updated on your investment portfolio performance; When necessary, recommend changes to your investment or insurance strategy.
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Implementation
Walter- for you to proceed with this recommendation, you need to complete the following: Read, sign and return the Authority to Proceed attached; Organise an appointment with me and bring any completed application forms.
February 2010
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Authority to Proceed
Firstly, before signing this document please check that I have: Given the Burton Financial Planning Pty Ltds Financial Services Guide; Confirmed that the personal information I have collected is correct; Discussed your goals and objectives; Confirmed that you are happy with your risk profile; Discussed any risks in the recommendations; Discussed fees that need to be paid. Secondly, confirm that: You have kept a copy of the SOA and have had the opportunity to read, consider and understand the document, supporting material and have asked questions. The SOA dated 17 February 2010 accurately summarises your current situation, investments, insurances and financial goals. You understand that any inaccurate or incomplete information provided to us, may bring risk to meeting your needs appropriately. You have understood the Disclosure of commissions, fees and benefits section of SOA. You understand that recommended investments may rise and fall with the market, and cannot guarantee future performance. You understand that this statement is solely for yourself; Burton Financial Planning Pty Ltd does not accept liability to others who rely on any of the information in this SOA. You hereby request Tracy Burton to provide services in the Ongoing Services. Consent to ongoing contact We consent to being contacted by our Advisor on an ongoing basis, in line with the ongoing service review within this recommendation. Our preferred hours of contact between_____and_____. Signed__________________ Date __/__/___ Client Name Signed__________________ Date __/__/___ Financial Advisor
February 2010
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SOA Appendix 1 Cash flow projections after one year - No implementation of strategy
Income and expenses Walter Taxable income Salary Salary sacrifice Salary after salary sacrifice Rental income Unfranked dividends Franked dividends Franking (imputation) credits Interest Other income, e.g. taxable benefits Capital gains <1yr Capital gains >1yr Tax-free component of capital gains Assessable income Deductible expenses Rental expenses, repairs etc. Taxable income Tax on taxable income 2009/10 Medicare levy 2007/08 Medicare levy surcharge Franking rebate Tax offsets (e.g. LITO/SATO)2009/10 Other rebates and offsets Total tax Income after tax Notes These figures are based on our assumption that you have received your dividend of 3%. These figures are based on our assumption that you have received your fixed interest deposit of 6%. $42000 $0 $42000 $0 $1200 $514 $0 $300 $0 $0 $0 $0 $44014 $0 $0 $44014 $7054 $660 N/A -$514 -$790 $0 $6410 $37604 =assessable income total tax Tax Refund LITO= $1350-[4%x($44014-$30000)] $4350+30%>$35000 $44014 x 1.5% $5000@6%=$300(fixed term deposit interest) Assume Walter mentioned 3% return on his existing portfolio $1200/.70x.30 (state % if applicable) Notes
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Family cash flow Walter Income after tax (as calculated above) Investment expenses $37604
Living expenses Living Expenses Holiday Home mortgage Car Loan $27400 $1500 $17256 $6480
$52636 -$15032
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Walters Car Total Investment assets Shares Portfolio Employer Super Total Net worth Liabilities Loan Home Loan Mortgage Car Loan
Walter
$32000 $980500
$15520 $233296
$16480 $747204
Walter Walter
Percentage deductible 0% 0%
Interest only No No
Total
$218264
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SOA Appendix 2 Cash flow projections after one year - After implementation of strategy
Income and Expenses Walter Taxable income Salary Salary sacrifice Salary after salary sacrifice Rental income Unfranked dividends Franked dividends Franking (imputation) credits $42000 $0 $42000 $0 $0 $1200 $514 Assume Walter mentioned 3% return on his existing portfolio $1200/.70x.30 $5000@6%=$300(fixed term deposit interest prior to its investment elsewhere) $40000@8%=$3200(balanced mgt.fund) $50000@8.5%=$4250(growth mgt.fund) Interest Other income, e.g. taxable benefits Capital gains <1yr Capital gains >1yr Tax-free component of capital gains Assessable income Deductible expenses Rental expenses, repairs etc. Taxable income Tax on taxable income 2009/10 Medicare levy 2007/08 Medicare levy surcharge Franking rebate Tax offsets (e.g. LITO/SATO) 2009/10 Other rebates and offsets Total tax Income after tax Inclusion Family Tax Benefit B Family cash flow Walter Income after tax (as calculated above) Investment expenses Interest payments Rental expenses $45084 $7750 $0 $0 $0 $0 $51464 $0 $0 $51464 $9289 772 N/A -$514 -$492 $0 $9055 $42409 $45084 =assessable income total tax $2675.45+Income after tax Tax Refund LITO= $1350-[4%x($51464-$30000)] $4350+30%>$35000 $51464 x 1.5% Excluded: (Investment bond- no income tax liability): $80000@4.5%=$3600) (state % if applicable) Notes
February 2010
$0 $0
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February 2010
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