Financial Planning (Insurance) Case Study

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Diploma of Financial Services (FP) Case Study
It is November, 2010. You are an authorised representative of a full-service licensed dealer group, Azza Financial Services Pty Ltd. Allison and Simon Callahan have come in to see you to ask for your assistance to plan out their next five years and then help them settle into retirement.

Allison (aged 54) and Simon (aged 52) have been married for 29 years and live at Lot 3 Wattle Road, Hurstbridge, Vic. Their only child, a daughter, Megan, is independent and has two children.

Allison has recently been promoted by her employer, Best Marketing, and now earns $135,000 p.a. working full time. She has commenced salary sacrificing 30% of this amount into superannuation, and her employer contributes Superannuation Guarantee Contributions of 9% of her remaining cash salary. The fund is a balanced growth retail superannuation fund, MM Superannuation. Her current balance is $160,000 and earns on average 7% p.a. after fees and taxes. She also has $100,000 in term life and TPD insurance cover within her superannuation fund. She drives a 4-year old Land Cruiser that is fully paid for. It has low kilometres and she expects to keep it until she retires. She will then need $30,000 to purchase a new car on top of the trade in she expects to receive from the Land Cruiser.

Simon works for Newbold’s Pty Ltd, a company which makes custom furniture. He earns around $45,000 p.a. and intends doing this work for the foreseeable future. He is supplied with a work vehicle and his employer pays his SGC based on his $45,000 salary. Simon has $47,000 in superannuation savings, held within the PP Superannuation Fund. The funds are invested in a balanced/ conservative portfolio with a low allocation to growth assets that earns around 4% p.a. after fees and taxes.

They are living on a semi-rural property which is valued at around $750,000, but they currently have a mortgage of $150,000 as a line of credit. They are paying approximately $1,000 per month as interest-only payments.

Their other personal expenses are around $40,000 p.a. and they spend an additional $15,000 p.a. on holidays. Aside from private health cover, car, and house and contents insurance, the only personal insurance they have is the coverage provided in Allison’s superannuation fund. They do not have a will or any powers of attorney but they want to ensure they have sufficient money for their grandchildren (now aged 6 and 4 years) to attend university. They estimate they will need to accumulate approximately $120,000 (in today’s dollars) over the next 12 years to pay for this.

Allison wants to work for five or six more years and they wish to pay off the remainder of the mortgage over that time. She also wants to increase the amount of money in both her and Simon’s superannuation. When she retires she believes they will need $40,000 (in today’s dollars) for their living expenses in retirement, but Simon intends to continue working part time and estimates he will earn $20,000 p.a. They intend to use Simon’s income to fund any holidays.

Aside from their superannuation assets, they have $9,000 in a bank account for emergencies earning 4% p.a., $15,000 in a term deposit earning 5% p.a. and $12,000 in a cash management account earning 5.5% p.a. They are not happy with the taxation implications of these accounts, as any interest earned on the term deposit and cash management accounts seems to go in tax. You ascertain that they both have balanced risk profiles.

Required:

You are required to provide written responses to the following scenarios and questions, either in short answer form or using bullet points (or both). The following attachments are included:

• Sample Financial Services Guide (Personal Advice)

• Sample Fact...
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