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You have recently commenced your career in financial planning, working towards the goal of owning your
own business, and have accepted a role as paraplanner in a small financial planning practice assisting the
owner and senior financial planner, Tracy Burton. The practice operates under the name Burton Financial
Planning Pty Ltd and Tracy is an authorised representative of Wyze Financial Services.
Tracy has agreed to mentor you while you are completing your Diploma of Financial Services, and as part
of the duties of your role, you will be involved in the entire client process. As such, you will sit in with
Tracy on initial and ongoing client meetings, prepare Statements of Advice in accordance with her
instructions, and ensure that the paperwork required to implement the plans is dealt with appropriately.
Walter, age 36, has made a meeting to see Tracy as he has received a $400,000 payout from his late wife
Patricia¶s superannuation fund, which included a payment from the life insurance she held through the
fund. She was involved in a fatal accident just over six months ago, leaving Walter to care for their two
daughters, Chloe (8 years old) and Larissa (6 years old). As you would expect, the family is devastated but
now that some time has passed since the funeral, Walter has started thinking about the future. He wants to
ensure that he makes the most of the payment, and has been referred to Tracy by a workmate, Justine
Carney.
Walter was working full-time for a manufacturing company prior to the accident, but has had six months
off work as personal and annual leave since the accident. He would like to spend more time with his
daughters and feels he is ready to go back to work on a reduced hour basis, which his employer has agreed
to. He will work three days per week, 9 am to 5 pm, on two-thirds of his previous salary, so he expects to
now earn $42,000 gross plus nine percent superannuation. Walter has arranged for his parents to care for
his daughters before and after school on the days that he works.
Full time Annual Salary $63,000 ± In 7 years when Walter is 43 (22 years till retirement).
Walter would like to continue to work part time until Larissa is 13 years old, and will then probably go
back to full-time work. Ultimately, Walter expects he will retire at 65 and will need about $40,000 p.a. (in
today¶s dollars) at that time to meet his preferred retirement lifestyle.
Patricia¶s Will was last updated in 2003 and provided for all her assets to pass to Walter. Her estate has
now been finalised so any assets that were in her name have passed to him. Walter¶s Will was also updated
in 2003 and states that all his assets are to pass to Patricia; he wonders what will happen to his Will now.
Walter and Patricia owned their home as joint tenants, which is valued at $520,000. There is currently
$220,000 outstanding on the mortgage, which is currently paid off at $1,438 per month (interest is 6.15%
variable over 25 years). Walter has a bank account with a balance of $412,000 (which includes the
payment from Patricia¶s superannuation fund), as well as $5,000 in a fixed term deposit, which matures
next week. He also holds a blue chip share portfolio which he has built up over the past ten years and is
now valued at $40,000. He has accumulated $110,000 in superannuation but as his immediate concern is
funding for his family. He does not require superannuation advice at this time.
Blue Ship is an investment.
Walter bought a car nine months ago ± it is worth $32,000 and he has an outstanding loan of $22,000 with
monthly repayments of $540. Patricia¶s car was owned outright and it is currently sitting in the garage, but
Walter has agreed to sell it to a friend for its market value of $10,000. He expects the sale to take place in
the next few weeks and will place the proceeds in his bank account.
Walter would like to make sure that the money from Patricia¶s superannuation fund is invested in the best
possible way. The girls attend public schools, and will do so for all of their primary schooling. They will
attend the local independent school for their secondary years at a cost of $3,500 (in today¶s dollars) per
student per year. Walter would also like to help them if they go to university and expects that to cost him at
least $80,000 in total for both daughters to complete their degrees.
Walter thinks living expenses for himself and his daughters will be about $450 a week (food, petrol,
utilities etc.), and that annual bills, such as insurance, registration and rates, would be approximately
$4,000 p.a. He would like to continue the annual family holiday to North Stradbroke Island and has
budgeted about $1,500 for this on top of normal expenses.
Walter has private health insurance for the family (premiums included in the living expenses above). He
has life and total and permanent disability insurance cover in his superannuation fund of $300,000, and
income protection insurance, which will provide 75% of his monthly income if he is ever unable to work
through illness or injury. At this time he is not requesting advice on his insurance cover.
Walter would like to get the most income that he can and would like advice on how best to use the money
from Patricia¶s life insurance so that he can bring up his daughters with the minimum of worry.