Financial Statement of Advice case study

Thank you very much for choosing our service, and spending your time to let me have the opportunity to discuss your financial situation during our interview. This is the Statement of Advice (SoA) that you required me to provide to you, will provide the information and recommendation to maximise your wealth and achieve your financial objectives. In this SoA, there are 7 main parts that will guide you to maximise your wealth and achieve your financial objectives. In this SoA, there will be graphs and tables to let you understand more about your current financial position and how will you achieve your financial objectives in the future.

This SoA will provide you with your current financial position with a cash flow statement and a balance sheet. In order for you to be easy to read, I had point out the financial objectives in point form. It is important to understand the relationship between risk and return, please take some of your time to read it.

Based on the risk profile that you had completed during our interview, I had decided to rearrange your asset into different allocations. Based on your asset allocations model, I will provide you with my recommendations. These recommendations will help you to maximise your wealth and achieve your financial goals effectively.

I had also provided a list of managed fund for you to choose from, this will help you to identify the wealth you are going to earn in the future. The SoA will then help you to relocate your superannuation funds to get the maximum tax deduction.

The following section will provide a clear and easy understandable graphs and tables for you to invest according to my recommended strategies. The SoA will give you some ideas of what types insurance is suitable for you. At last, due to my recommendations, I will provide you with a new cash flow statement and a new balance sheet. Also it will show the total net worth when you retired at 60 year of age.

I hope that this SoA I had provided will met your requirement, I also hope that this SoA I had provided will help you maximise your wealth effectively and achieve your financial goals. Thank you for asking for advice from XYZ Pty. Ltd. , if you need any further information or request, please feel free to contact us. We are also happy to provide you any investment funds for you to invest and growth your wealth. Chris and Eva, the following section of your SoA outlines your personal details, your objectives, and my recommendations and strategies in order to achieve your future goals.

All information and recommendations are provided and will be discuss with you further. Personal details Employment details Chris is 50 years of age, he is currently working as a medical administration. His salary is $110,000 per annual included Superannuation guarantee contributions (SGC) of $9,900. The SGC is contributed under Chris’s salary package. Eva is 47 years of age, she is currently working as a teacher. Her salary is $52,920 per annual. Children Chris and Eva had two children, Beth and Jordan. Both of them had completed University, and they are now both financial independence.

Chris and Eva believed that both of their children will not need their financial support. Superannuation Chris is currently has $320,000 in his superannuation account balance, the account type is a retail superannuation fund. Chris is currently contributing the minimum SGC mandated contribution of 9% from his salary package. Chris had chosen the most aggressive product in his super fund. Eva currently has $48,019 in her Superannuation account. Insurance Chris and Eva currently have life insurance through their superannuation fund account. Chris had $50,000 covered and Eva have $100,000 covered.

Both Chris and Eva did not have income protection and private health insurance. Your house, contents and motor vehicle are currently insured. Other information Chris and Eva had purchased a share portfolio from a loan of $80,000 against their family home, with an interest of 7. 96% per annual. The portfolio current value is $116,735. They also had a bank account balance of $5000 with no interest and a cash management trust account of $60,000 with 4. 75% per annual, under Chris name. Currently they had owed $8,500 debt on their credit cards. When you invest, you need to understand the relationship between risk and return.

There is a trade-off between risk and return. ‘Return’ can be defined as the gain or loss in the value of your investment, and ‘Risk’ is the variability of these returns and the possibility of a negative return. Generally, the higher the potential return, the higher the potential risk. Similarly, investments offering lower returns tend to have a lower level of risk. Diversification Diversification is grouping a group of different asset type into a portfolio. These different types of assets can be widely ranged; they may include foreign shares, domestic shares, property and other different type of funds.

The reason to diversify is to maximise the return and reduce the risk that an individual asset type have. When combining assets that are not close in relation, the variance of the total portfolio may be less then the variance of only one asset. So portfolio can reduce risk and also generate return. When assets types are closely related, diversification will have little effect. Attitudes towards risk I had viewed the risk profiler you had completed during our interview. The profiler had shown that your attitude towards different risks. According to the risk profile, your attitude toward the variation of your return is very high.

Taking taxation advantage is one of your main priorities. You believed that you have a long term corresponds with your acceptance of return. Liquidity is not really a main issue for you. By taking this information from your profile, I believed that you are Semi conservation investors. Asset allocations According to you’re your risk profiler, I had decided a portfolio. I had understood that you (Chris and Eva) are Semi conservation investors. For this reason, I had recommended you re-allocate your investment portfolio into a more conservative structure.

This portfolio will be allocate 65% of your assets into conservative fund, such as cash and fixed interest funds. 35% of your assets in the portfolio will be allocated into aggressive fund such as property funds, International shares and Australia shares. By looking at your risk profiler, you considered that your time horizon is relatively long. But according to your objective, you and Eva are likely to retire 10 years later, and you are very worried about the fluctuation in return. So I recommend you invest a greater portion of your assets into less risky funds. This will make sure you and Eva will retire with enough money to live on.

Your portfolio will be heavily weighted in fixed interest funds, capital stable funds and cash. Some of these funds are not very liquidity; some of these funds may not be able to withdrawn within a certain long period of time. But according your profiler, liquidity is not a main issue for you. But the remaining of your portfolio will have more liquidity, and can they will come with various tax advantage and better expected return. Figure 1 above had showed us how different type of investor should invest and allocate their asset into different type of investment assets.