FPAFA501A Applied Financial Advice

Case Study Details – Assessment Events 2 - 4

Semester 2, 2023

Submission Details:

Submission is due NO LATER than by 11:59 pm Sunday week 11 in a soft copy format via the link
placed on the Moodle course website.

NO ASSIGNMENT WILL BE ACCEPTED VIA EMAIL OR ANY OTHER FORM/S

The assignment consists of the preparation of an advice document in a form of a professional &
compliant Statement of Advice (SOA) in relation to this case study. The SOA must adhere ASIC RG175
requirements in particular the “Clear, Concise and effective” requirement.

Submission details:
The submission must include the assignment (SOA) in a PDF format, incorporating all the relevant
elements to ensure the prepared SOA is compliant with the relevant financial services laws,
technically accurate and professionally presented.

Use the submission link provided on Moodle. Late submissions will be allowed. However, they will
incur 25% penalty for every 24 hours after the due date.

Please Note: YOU CANNOT overwrite your submission after the due date (No resubmission past the
due date).

Plagiarism - Important rules that MUST be followed:

The aim of this task is to demonstrate competence in constructing a professional and compliant SOA.
The work therefore must be your own. Turnitin similarity reporting is strictly applied. It will be
considered as plagiarism if you copying from other students work or starting from a template
completed by a student who completed this course or a similar course at TAFE/other educational
institutions in the past and will be penalised and likely lead to failing the assignment.
Your similarity result should be in low single digit (less than 10%). Systematic plagiarism will be
penalised regardless of the similarity score. Similarity between 10 to 20% will be closely investigated
and similarity exceeding 20% will not be graded.
You CANNOT use software or other licensees /companies’ templates.
Important Notes:
• You need to answer the question in a Statement of Advice (SOA) format in accordance with
ASIC guidelines (refer to RG 90 for examples only). The SOA must have a two (2) page
“Executive Summary” section where you summarise the client’s current situation, needs,
concerns, goals, objectives and your recommended strategy.
• Attempt ALL questions and issues raised in the case study assignment based on your scope
of advice.
• Ensure your SOA contains all the relevant sections, to ensure your SOA is compliant with the
relevant financial services laws, technically accurate and professionally presented in line with
the industry best practice.
• Show workings and calculations where applicable. Where appropriate, the use of tables,
graphs, flowcharts, etc. is encouraged to help illustrate your advice clearly.
• Clearly state your source references. Be clear in answering the questions and/or clients
enquiry.
• Assumptions must be clearly stated, assumptions need to be reasonable and logical and
cannot conflict with the facts in the question/s
• Provide the excel spreadsheet projection/workings in the appendix of the SOA document.

Assumptions
• Inflation 2.5%, AWOTE 3% (use for wages inflation)
• The investment growth rate is to be provided by you, however, you must apply due
diligence on the rate provided and provide your source or research reference/s. This would be
based largely off the investment and the asset allocation of your investment portfolio.
• Use current tax rates where applicable.
• Use FBT rates effective 1 April 2023 where applicable.
Case Study - The Webb Family

Chris Webb (aged 50) and Anne Webb (aged 45) have been married for 20 years. They live in
Dural in Sydney. They have two children, Charlotte (aged 17) and George (aged 13).

Chris is a geriatrician working part-time at Royal North Shore Public Hospital and a 50%
partner in a private medical consultancy. Anne is a cyber security expert working at Atlassian.

Chris and Anne have been thinking about their future retirement needs and have been
discussing the need for them to see a financial adviser to help them put a plan in place to help
achieve their goals and objectives.

They would like to ensure they have an appropriate budget to allow them to maintain their
lifestyle and help them save for their key goals, including their children’s education, paying off
their debt, while also making sure they have plans to ensure they are saving well for their
long-term retirement objectives.

Although Chris and Anne can see the need to focus their attention on their key immediate
priorities of paying off their debt and paying for their children’s education, they also would
like to see if it is possible to retire early.

Both Chris and Anne have some experience when it comes to investment and management of
their financial affairs though they are not interested in having to spend too much time on this.
In recent times Chris and Anne have been too busy to pay attention to their financial affairs,
but they feel with the appropriate help from the professionals in the field (financial adviser,
accountant, etc.) they would be able to be more focused in setting and achieving their goals
and objectives.

Chris and Anne established new wills shortly after they were married. They have not been
updated since.

They last reviewed their home insurance in 2012 when the current home was purchased.
Their motor vehicles are comprehensively insured. They also have family private health
insurance coverage. They are unsure if their general insurance covers are adequate and
appropriate. Their personal life insurance is limited to what they have inside their respective
superannuation accounts. Anne also has group income protection cover with her employer.

Chris and Anne have decided to come and see you. Anne made an appointment for both Chris
and herself for an initial consultation with you. Chris and Anne have left you with the
information below after the first interview.
 Chris Anne
Yearly Income salary & $120,000 $155,000
wages *(excludes employer
SG contribution)
Last year business income $300,000
(net)
Home (principal residence) $3,500,000 (Joint tenancy)
Purchased in Jun 2012
Home loan (30 years loan $842,301
with 18 more years （由于 Chris 想 60 岁退休，Anne 想 55 岁退休，但是
remaining) @5.65% Home loan 还有 18 年，如果退休前要还清的话 Loan 需
standard variable (current 要提早还完，那么新的 repayment 就是$9204 p.m.）
schedule repayment is
$8758 p.m.)
Home contents value $225,000
Chris - BMW Purchased in $75,000
February 2018
Anne – Volkswagen $90,000
Purchased in January 2020
Bank Account (at call) $150,000 (Joint)
Term deposit @ 2.35% $250,000 (Joint)
maturing in 6 weeks
Employer superannuation Aware Super– Growth AMP Signature Super –
(retail funds) Option Choice - Future Directions
Balance: $352,851 Balanced.
Insurance: 6 units of Balance: $181, 252
automatic cover for death Insurance: inside the
and TPD – taken out at superannuation fund
employment $250K life and TPD
commencement Group Income protection.
Income Protection: 50% of （注：Since July 1,
income, 30 day wait to age 2018 if your total
65. Taken out at the start of super fund balance is
employment with RNS. less then $500K you may
（注：Since July 1, be able to contribute
2018 if your total unused concessional
super fund balance is caps from up to 5
less then $500K you may previous years）
be able to contribute
unused concessional
caps from up to 5
previous years）
Westpac shares (Purchased Market value $ 62,000 (Joint)
in July 2012) Cost Base $61,000
（注：可参考 MPFS 的 In Specie Contributions）
Income requirement/ Living $250,000
expenses (includes #Chris and Anne’s current living expenses will continue
Mortgage repayments) until retirement. Except for school fees of about $20,000pa
 per child included in $250,000pa.
Notes to supplied information: *The employer makes only the mandated employer
contribution (SG) to their nominated superannuation fund.

问老师一个问题：是先把所有的 strategies 先想清楚再做数据测算，还是边做策略边输

入数据？

You will provide scaled advice to Chris and Anne considering the issues below:

 You need to ensure that you highlight the benefits and the risk of the scaled advice
relevant to the client’s personal circumstances. You also need to demonstrate how
your advice to the client meets the best interest duty.

 Analyse and address Chris and Anne’s goals, objectives, needs, and concerns and
whether they can and if so then how to achieve their objectives including their
retirement objectives. (You are strongly advised to provide them with options and
alternatives where necessary and appropriate).

 Chris would like to retire once he reaches age 60. Anne is planning to retire when she
reaches age 55. However, they are happy to postpone retirement for a few more years
if this would help them achieve a more comfortable retirement as Chris is happy to
scale down his workload and stay working on a consultancy basis for a few more years
as a semiretirement plan.

 Chris and Anne think they will need an after-tax income of $150,000 in today’s dollars
during their retirement as by then they think their debt will be paid out (assume this
income can be produced tax-free at retirement). You need to provide the calculation
supporting your projections of their retirement needs.

 They would like to pay off their debt as soon as possible. (考虑 Offset account)
 They would like to save and invest to help them achieve their objectives.
 They are happy to consider the concept of borrowing to invest if they feel it can help
them achieve their retirement aim. （考虑 Margin Lending? Or MDA）
 Chris and Anne feel strongly about providing their children with good education. They
intend to cover their children’s university fees of about $150,000 for both children.

 They would like to do some renovations on the house including putting a new kitchen
and a new bathroom in the next 2-3 years. The expected cost is approximately
$220,000 in today’s dollars.

 Chris and Anne have been contemplating borrowing and purchasing a rental property
as some of their family friends have done this recently. They feel that with their level
of income they can take advantage of the benefit of negative gearing. They are
thinking of buying an apartment for approx $800K and renting it out to Anne’s sister
who is getting married this summer. Advise Chris and Anne and the pros and Cons of
 such a strategy. Be specific on relating your advice to Chris and Anne’s personal
circumstances.

 At present Chris and Anne’s superannuation contributions go to employer nominated

retail funds and they have asked you about whether their super funds are suitable for
them.

o Some of Chris’s work colleagues have started their own SMSF and they would
like to know benefits and risks of establishing an SMSF relevant to their own
specific and personal circumstances. They have heard that they could acquire
an office space through the SMSF for Chris to run his consultancy business from
as they come close to retirement. (You need to provide a clear
recommendation with appropriate justification as to whether an SMSF is or is
not appropriate to their specific needs).（注：他们加起来的 super balance
已超过 250k，可以考虑 SMSF；
A corporate trustee structure is more expensive to establish and
maintain. The company established as the corporate trustee of an
SMSF will require a company constitution and certificate of
registration as well as pay an annual re-registration fee ($56
if purely a 'superannuation trustee company' increasing to $276
if it has other operations).

You are intending to borrow to purchase property – some banks

may only lend to an SMSF if a corporate trustee structure is in
place. Require peace of mind around personal liability - as a
director of a corporate trustee, personal liability is generally
limited to the assets held within the SMSF. An individual
trustee arrangement does not provide this security and members’
personal assets may be subject to liability claims.

Once the trustee changes have been made, Bob may have to notify
the relevant investment registries such as share registries,
land titles offices and other investment bodies because of the
change in name of the individual trustees as registered owners
of the investment.

In contrast, if the fund had a corporate trustee, no changes

would be needed to the registered ownership of the investments
as they are recorded in the name of the corporate trustee ‘as
trustee for’ the fund where there is no change. Bob would just
have to notify ASIC of the changes to the directors, and he
could continue as sole director.

看 MPFS;）
o Anne has also heard from a colleague at work that the SMSF can borrow to
purchase a property under a Limited Recourse Borrowing type arrangement.
Chris and Anne would like to know more about this and the possibility to use
such a facility through an SMSF to buy the possible apartment to rent out to
Anne’s sister after her marriage this summer. They estimate that the cost of a
desirable rental unit for Annes sister, or an appropriate office space would be
approximately $800-900,000. （可以建议 Business Property 用 LRBA；看
 MPFS 的 Business Real Property into a SMSF; rent the business
properties back to themselves on market rate.

Transferring business real property into an SMSF may be

attractive for the following reasons:

 To release capital back into the business or to the members

directly (by selling the asset to the SMSF depending on
ownership).
 To provide tax concessions on the future investment earnings
(net rental income and assessable capital gains are taxed at
15% in accumulation stage and zero in pension phase).
 To offer some bankruptcy protection
 Assets of an SMSF sold during the pension phase are exempt
from CGT.

Before transferring ownership, Conrad should also consider the

costs to transfer the property into an SMSF (e.g. stamp duty and
capital gains tax).

 Chris and Anne would like to get some advice on the Westpac shares they hold and to
be provide options on whether they should continue to hold the shares. The shares are
currently held in joint names and were bought when they took out their mortgage
thinking it would be a good idea, but they haven’t really appreciated consistently since
their purchase. Advise Chris and Anne on the pros and cons on holding the Westpac
shares. You also need to elaborate on what can be done to make their investment
more diversified and potentially what other options they would have about this
investment.

 The term deposit is maturing soon, and they would like some advice on what they
could be doing and possible options available for them. They would like to have access
to approximately $50,000 for emergencies.

 Chris and Anne would like to ensure they have adequate general and personal
insurance. For the personal insurance, you are required to provide a clear need
analysis and make appropriate recommendations on the amount and type of covers
required. You also need to provide insurance product recommendations and supply
quotes of premiums. Insurance advice must consider the issue of inside/outside of
superannuation.

 They would like you to consider their estate planning and asset protection needs. You
need to provide a clear recommendation on all their estate-planning needs. (Avoid
large generic content in this section). Information provided needs to be relevant and
specific to the clients’ circumstances. Include business succession planning for Chris’s
consultancy business. Consider buy/sell arrangement in your work. （考
虑 Asset/Income tests；考虑 discretionary trust）

 Projections should be made up to Chris & Anne’s life expectancy + 5 years.

Risk Profiling - Chris and Anne’s attitude to risk:
 Chris likes owning shares and understands that Australian shares and shares in general
may have a higher volatility than some other asset classes. However, he also
understands shares tend to perform well over the long term. Chris is comfortable with
taking risk if he can understand it and see that there are possible rewards.
 Anne on the other hand was brought up in a very conservative family where her family
had most of their money invested either in bank accounts or in term deposits with one
of the major banks. Anne’s family have always talked in front of her that they dislike
share investments as they feel they cannot sleep for worry about market events.
However, they have also said to Anne several times that she could never go wrong
with property investment and have always encouraged her and Chris to buy a house
when they first got married. Anne therefore is more conservative than Chris when it
comes to risky investments; however, after studying finance subjects at university she
can see that sometimes there could be some merit in taking calculated risks to achieve
better returns.
 Chris and Anne have both indicated they would not mind taking some calculated
investment risks to help them achieve their objectives.

Assessment criteria:
You provide limited advice as per licensee arrangement. Your scope of advice is
superannuation, retirement planning, debt management, estate planning, personal insurances
and social security.
1. Complete a comprehensive Financial Needs Analysis (FNA) and complete a Risk Profile
Assessment (RPA) using the information in this Case Study and noting any further
‘discussions’ you have had with the client.
2. Conduct a SWOT analysis of your clients situation and identify their needs and
objectives (S.M.A.R.T. goals). Set and prioritise these S.M.A.R.T. goals into short,
medium and long term. What risks are there to the clients not meeting their goals?
Think about personal risks, legislative and market cycle risks.
3. Complete a current Statement of Financial Position/Balance Sheet/Net Worth
Statement and current Cash Flow Statement （是不是用 Advicelogic 做？Excel
吗？）
4. Calculate the clients annual after-tax income (include Medicare levy) using current tax
rates.
5. Conduct research on different strategy options and identify alternatives including a
needs analysis for each of the advice areas and explanation for at least 2 strategies for
each advice are to meet clients need (using guide below in 6).
6. As a guide (not limited to), you should include the following areas of advice in your
holistic Statement of Advice when comparing, analysing and recommending products:
 Budgeting and debt management:
a) Show the clients’ annual after-tax income (include Medicare levy). Use the
current financial year tax rates.
b) Show a Cash Flow Analysis and Net worth Statement for your clients to
determine what the current income surplus/deficit is and net worth position.
c) Make recommendations for clients to meet their goals in this area and show
 projections of cash flow etc utilising your final recommendations.

 Superannuation:
a) Explanation of the type/s of contributions recommended
b) the structure and features of the fund/s considered
c) the fund’s commencement date and the amount under management
d) Insurance options & limit of cover
e) history of risk and return (include current asset allocation & growth / income
ratio) to match client/s risk profile
f) full disclosure of remuneration and product fees
g) taxation implications
h) minimum initial investment required
i) minimum ongoing investment balance (for insurance premiums)
j) rating by an independent research house i.e. Morningstar, Lonsec or Super
Ratings
 Managed investments:
a) the structure of the fund
b) the fund’s commencement date and the amount under management
c) the fund’s investment style and philosophy
d) history of risk and return (include current asset allocation & growth / income
ratio)
e) rating by an independent research house i.e. Morningstar or Lonsec
f) full disclosure of remuneration and fees
g) minimum initial investment required
h) minimum ongoing investment balance
i) Regular investment plan
j) Regular reinvestment plan
k) taxation implications
 Personal insurance (inside and outside Super):
a) Type and amount of cover/s
b) Name of the product/s
c) Features, advantages and drawbacks of the product/s
d) full disclosure of remuneration and fees
e) Clauses of the product
 f) Exclusions of the product
g) Explain how your recommendations meet client’s goals
h) Document the negotiated outcome on the level of cover and justify your
answer(s)
7. General matters to include as part of your scaled advice to the clients:
 Asset allocations and diversification.
 Cash flow and asset projections (include projections of cash flows for Chris and Anne,
presenting both pre-tax and post-tax results).
 Superannuation and Retirement planning, estate and business succession planning
 Cash flow and net worth tables.
 Replacement of product (switching) advice.
 Provide assumptions used and justifications (cost, risk, suitability, etc.) where required.
 Use diagrams and charts to assist with your illustrations.
 Clear calculation of projections.
 Your SOA should clearly show your recommendations for the clients, how they can
achieve their goals and where the capital and income will be sourced. Your SOA should
address a long-term plan to provide income and should include projections.

8. In the Statement of Advice (SOA), as agreed with the client/teacher, prepare the ‘Next
Steps’ section that complies with regulatory and the licensees’ requirements.

9. 7. In the Statement of Advice (SOA), as agreed with the client/teacher, prepare an

Ongoing Service Agreement that complies with regulatory and the licensees’
requirements

Your task now is to prepare a scaled Statement of Advice (SOA) for Chris and Anne. The
information provided in the client scenario is to be used in preparing your calculations and
advice. As the assignment is to be a SOA for clients, it should be in a suitable format and use
appropriate language. Clarity and conciseness are important but full explanations are
required.
What is expected from your SOA?
Deliver appropriate advice that address all the clients’ goals, objectives, needs, concerns and
special circumstances. The advice need to meet best interest duty and demonstrate the client
will be in a better position in following the advice and recommendation you have presented.
The SOA needs to be professionally presented and reader friendly, aiming for best practice
and not for minimum standards. The statement of advice should be based entirely on your
own work. The SOA need to be compliant with all the financial services regulation for the
format, the advice itself and all appropriate and required disclosures. Providing a compliant
statement of Advice (i.e. disclosure, meeting the best interest duty, regulatory etc.). The SOA
must adhere ASIC RG175 requirements in particular the “Clear, Concise and effective”
requirement.

Key sections you must include in the SOA:

• Covering letter
• Cover page
• Table of Content
• Executive summary (2-3 pages max)
• Scope of advice
• Assumptions
• Current situation- information about the client
• Goals and objectives analysis including needs, concerns and special circumstances
• Risk profile analysis
• Your advice and recommendations
• Retirement planning advice
• Retirement income schedule until age 90
• Estate planning advice
• Superannuation and SMSF advice
• Meeting best interest duty
• Risks of the advice and how they are mitigated
• Disclosure sections – meeting all legal and best practice disclosure requirements:
• The cost of the advice and how you are paid.
• All fees, commission and other benefits including soft dollar commissions
• Specific disclaimers.
• How to proceed. Authority to proceed and actions to proceed
• Implementation schedule
• Cash flow projections and Net Worth statements for the next 5 years
• Appendices

Further suggestions:

Building and structuring from the client’s current situation (including pre advice cash flow and
net worth) to moving the in the direction to meet their goals:
• Clearly analysing the facts in the case study
• Appropriately addressing all the client goals, objectives, needs, concerns, and special
circumstances
• Providing a client with strategies that address all the client goals, objectives and concerns
and aims to meet the client goals
• Providing client with options and solutions – providing alternative strategies
• Highlighting how the strategy is in the best interest of the client – i.e. meeting the best
interest duty
• Highlighting the risk of the strategy (if any) and addressing how the risks can be mitigated
• Providing post advice cash flow and net worth & the requested projections going forward
• Providing specific product recommendations to execute the strategy
• Obtaining Authority from the client to proceed with the recommendation

Specifically address-

Retirement Advice: you need to perform appropriate calculations to identify the amount
required to fund retirement income and other expenditures (if any) the clients intending to
undertake. You need to clearly demonstrate through both cash flow and net worth projections
how the clients is able (or unable if they do not have sufficient resources) to fund their
retirement.

Estate and Business Succession Planning: needs to be clear and non-generic

recommendations. The advice in this section must relate specifically to the client. You need to
address more issues than generic issues related to wills and Power of Attorney.

Risk profile section: you are required to address the key issues and justify accordingly. You
therefore needed to make clear reference to how you determine the client risk profile (Client
risk tolerance, Time horizon, Goals and objective, Liquidity needs and investment experience,
etc.)

SMSF & Superannuation Advice: you need to avoid including generic information and general
pros and cons. Your advice related to SMSF (to set or not to set up, to keep and not to keep,
etc.) needs to be specific to the client’s circumstances and facts listed in the case study.
Other superannuation advice need to be provided with clear justification maintaining or
switching. Any super switching advice need to refer to ASIC information sheet INFO182.

Insurance Advice: you are required to calculate the ideal amount of insurance the client needs
and make recommendations in this area incorporating the clients views on how much
insurance they feel they need and afford.

Switching Advice: All switching advice (superannuation, investment and insurance) need to be
clearly justified.

Projections: Clear cash flow and net worth projection to be provided - you need reference to
your projection in the body of the SOA in relation to the specific goals (i.e. retirement funding,
etc.) Cash flow projections and net worth projections to justify strategy and demonstrate if
financial goals and objectives are met.

Disclosure & Compliance: Appropriate disclosure of fees and benefits and meeting the
regulatory requirement of advice documentation.

Technically accurate advice: It is critically important to provide accurate advice for the client
to rely on. Again, always relate to the clients' specific circumstances throughout the SOA and
ensure you are specific when explaining concepts, rules, regulations and legislative changes in
terms of highlighting their impact on the clients specific and relevant.