Pete was handed Financial Services Guide (FSG) version 4 010217 and my Adviser Profile at the interview on 9 April 2018. The FSG was explained to him.
Full statement of advice (SOA). Specifically, the SOA will provide advice on the achievement of wealth creation and lifestyle goals, personal insurances (that is life, total & permanent disability (TPD), income protection (IP), trauma and private health insurance), superannuation (including salary sacrifice, personal tax deductible contributions and/or after tax contributions) and taxation planning where relevant.
The SOA excludes any budgeting and cash flow analysis, as well as any advice on debt repayment, social security and estate planning. Client to be advised on the risks of not receiving advice in these areas.
- Pete is a 28 years old person who is single as he got separated from his wife and currently lives with his daughter Isabelle who is 8 years old. He works as an electrician in a large electric company and earns $65,000 yearly along with 9.5% Super. Pete works for around 40 hours in a week and is a full time employee. Pete has the intention of purchasing a house for them in order to live healthy and happily and accordingly even wants to maintain sufficient income with the help of which he would be able to take care of the future of her child. Pete therefore wants to undertake investments with the help of which he would be able to provide adequate education to his child in order to establish her in the society. Pete has two Super funds in which he has sufficient balance and has a savings bank account in which he maintains a balance of $32,000 and out of this $10,000 is kept for emergency purposes. Pete even wants to undertake investments in order to earn income with the help of which he would be able to maintain the current living style even after retirement. Pete does not have significant amount of assets and only has a car and home contents. Pete even wants to purchase insurance for him and his daughter in order to remunerate financially in case of any kind of accidents and unprecedented events.
- The potential issue that needs to be taken into consideration is that Pete’s only source of income is the salary he receives from the company and a small amount of interest from his savings. It is even seen that Pete does not have insurance and therefore it can cause harm to him in the future due to unprecedented events. Pete’s child is growing and therefore it becomes essential for him to increase his level of income with the help of which the future of his child as well as for Pete can be secured.
- Make sure that his child is protected financially in the event of his death
- Purchase his own house
- Establish adequate future income for his child for her education for the time when she attains the age of 21 years
- Getting the superannuation fund sorted in order to provide adequate income even after his retirement.
- Taking a family holiday in UK
- Purchasing adequate insurance and making investments in such a manner so that the risks would be lower and level of returns would be high.
- The evaluation of the risk profile for Pete suggests the fact that the client is a risk taker and therefore he is a growth investors. As he is quite young, he ready to face risks and earn more and therefore 80% of the investments would be in growth investments and the rest of 20% would be in the defensive assets.
- Goal[house deposit]
Recommended strategy:
- In order to purchase the house, Pete needs to make adequate money in order to pay for the house deposits and therefore Pete has to plan his superannuation in a proper way and invest more in the superannuation. This is a very tax effective tool for the investor as it is seen that balance from the superannuation can be used for the purpose of purchasing properties and therefore the initial deposit of the house can be made with the help of the balance available in the superannuation.
- Tax effective,
- High returns would be available
- Has the potential for long term income
- Would act as a retirement strategy as well.
- The return is not as high as the investment in equities
- Increase the savings in the term deposit which can be used as an alternative in order to pay for the house deposit or else the income that is attained from the portfolio investments can be used for the purpose making the house deposits as the house would be purchased within a span of 5-6 years time from now.
- Goal[holiday]
- The strategy that is recommended is undertaking investments in the asset and share portfolio and the investment should be an aggressive one with the help of which higher level of returns can be attained at a shorter time period and this can be used for the purpose of paying off for the holiday that has been decided.
- Apart from paying for the holiday, additional income would be received from the investment that can be used for the future use.
- The extent of risk associated to such investments is significantly high and income invested can be lost as well.
- Either invests in the share portfolio by investing more in the defensive assets and less in the growing assets or else invest more in superannuation and banking products.
- Goal[sort out superannuation]
Recommended strategy:
- Superannuation Strategies inclusive of the option of setting up a SMSF
Advantages of strategy
- Several choice available for investment
- Effective tax strategies
- Transparency
- Expenses are low
- Flexibility
- Consolidation of the super assets
- The cost increases when the balance gets lowered
- Increase in the level of accountability
- Investing in real estate and even in share and asset portfolio in order to maintain the amount that is desired
- Increasing the level of deposit in the term deposits
- Life insurance
- Australian Income Protection Specialists
- Total and permanent disability (TPD) insurance
- Permanent Insurance Company
- Income protection (IP) insurance
- TAL Income Protection
- Trauma insurance
- Real Life Insurance
- Private healthinsurance
- Australian Health Insurance
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