Superannuation and Life Insurance Skills (Capstone project) FP3B-1SN3-2 Capstone project Project…

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Superannuation and Life
Insurance Skills (Capstone project)
FP3B-1SN3-2 Capstone
project
Project Cover Sheet
This document includes:
· student identification
· project instructions
· project submission
instructions
· project result, result
summary and feedback
· project checklist
· Case study
· Project sections (including fact finder
templates, cash flow templates
and managed funds calculations)
Student identification (student to complete)
Please complete the fields shaded grey.

Student number

INT######

Student name

[name]

Telephone number

[phone no.]

Project instructions
Only Microsoft Office compatible projects
submitted in the template file will be accepted for marking by Kaplan
Professional Education (KPE). PDF projects will not be accepted. Do not delete/remove
any sections of the template.
The project must be COMPLETED before submitting it
to KPE. The maximum file size is 5MB. Once you submit your project for marking
you will be unable to make any further changes to it.
You will have 12 weeks from the date of your
enrolment in this subject to submit your project. Should your project be deemed
‘not yet competent’ you will be give an additional 4 weeks to resubmit your
project.
Your project must be submitted to KPE on or before
your project due date.
Please check KapLearn for the due
date.
Project submission instructions
Please refer to the Project
submission/resubmission instructions (pdf) in the Assessment section of
KapLearn for details on how to submit your project.

Note: Assessors
should double-click on the fields below to select the student’s result.

Project result (assessor to complete)

Result
— first submission

Sections that must be re-submitted:

[insert
assessor feedback]

Result — re-submission (if applicable)

Result summary (assessor to complete)

First
submission

Re-submission
(if required)

Section 1

Section 2

Section 3

Section 4

Section 5

Feedback (assessor to complete)
[insert
assessor feedback]
Superannuation and Life
Insurance Skills
Capstone project
This project contains five
sections based on the information provided on your clients, Ted and Eliza
Hardgraves, and their family. Complete all sections.
The following checklist is provided as a guide to ensure you
have completed the
project requirements.
Project checklist (student to complete)

Step

Action

Completed?

1.

Read the Study Guide
Go to the What
you need to know section and read the advice in the Study Guide on preparing
your project.

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2.

Familiarise yourself with the project
Think about the project
tasks while reading your learning materials and completing the activities and
review questions.

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3.

Answer Sections 1 – 2 up to Section 2 Part
F
Ensure that you
complete the fact finder for Section 2 Part A.

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4.

Answer Section 2: Part G – Statement of
Advice
·
Follow the steps given in the Statement of Advice
Preparation Checklist — you must submit the completed checklist
·
Use the family cash flow templates provided
·
Use an Excel spreadsheet to prepare SOA Appendix
3.

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5.

Answer Sections 3 – 5

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6.

Upload your completed project.
You must submit the
following completed items in this template:
·
the project cover sheet
·
answers to all
five project sections
·
the completed Statement of Advice Preparation
Checklist
·
the completed Statement of Advice and appendices.

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Case study — Ted and Eliza Hardgraves
Background
You work for the financial planning company, B and N Pty
Ltd, which is a licensed securities dealer and a registered life insurance
broker.
Your company specialises in investment, insurance and
retirement planning advice but does not provide stockbroking, real estate
evaluations and advice, income tax preparation, superannuation fund accounting,
superannuation fund administration or the preparation of legal documents such
as Wills or trusts.
Ted Hardgraves is a successful senior geologist with an
international mining company. He has been working for the same company for the
last seven years and due to his success has recently received a significant
promotion and pay rise. He believes there is potential for further improvement
in his salary as well as growth prospects within the company.
His wife, Eliza Hardgraves works part-time as a paralegal
with the same company she worked for prior to having their children, Harriett
and Bill. She has a good relationship with the owners of the firm and does not
see any change in her current employment situation for the time being.
Both Ted and Eliza are in good health and are non-smokers.
They have private health cover
for the family.
Ted and Eliza have approached you for financial advice.
They advise you that they are confused in regard to their
financial situation. This has come about due to conflicting information they
have read, which states that although they will be living longer, nearly half
of all 40-year-olds will die over the next forty years. Also, their children have
asked questions about the insurance plan advertisements they have seen on
television which has raised concerns as to whether they have adequate insurance
cover. Further, they want to make sure their children will be adequately
provided for if something were to happen to them.
They also believe they should have surplus income following
Ted’s recent promotions and pay rises. They would like to save any surplus in
the most tax effective vehicle for the long term. Both Ted and Eliza are
concerned that if they have access to these funds they may spend them.
Ted and Eliza would like to reduce their mortgage faster
than the current repayment schedule and believe that this could help them to
get ahead before they have to pay large school fees. Their current loan has a
redraw facility. However; they enjoy their annual holidays and have an active
social life, and want to make sure they have income available to continue these
activities.
Ted also advised you that his aunt, Jenny, recently died and
he has inherited around $63,700 made up of $10,000 in cash and approximately
$53,700 in shares. They have never considered owning shares before but Ted is
keen to understand the share market and perhaps buy some shares. Ted is
prepared to take some risks in order to accumulate wealth quickly. However,
Eliza is more concerned about risk and does not wish to ‘gamble’ any of their
funds.
Detailed below are Ted and Eliza’s current details.
Personal information

Surname Name:

Hardgraves

Hardgraves

Christian Name:

Ted

Eliza

Salutation

Mr

Mrs

Age/Date of birth

28 March 1970

17 August 1971

Status

Married

Married

Home address

4 Pringle Ave, Kensington

4 Pringle Ave, Kensington

Health

Good

Good

Smoker

No

No

Occupation

Senior Geologist

Paralegal

Employer

Lemon Gold Pty Ltd

Ranier and Jackson

Start date

2004

2008

Sick leave currently available

14 days plus 10 days per annum

6 days plus 10 days per annum

Retirement age

65

64

Dependants/Family
relationships

Harriett (aged 9 years)

Bill ( aged 8 years)

Professional relationships

Solicitor

Carlie Mattieson

Time span of relationship

10 years

Quality of relationship

Poor

Service provided

Conveyancing for home purchase

Accountant

John Watson

Time span of relationship

7 years

Quality of relationship

Excellent

Service provided

Annual tax return

Annual income details

Name:

Ted

Eliza

Salary

$140,000

$55,000

Inheritance – interest

$510

Dividends (99% franked)

$3,436

Notes:
Ted and Eliza’s salaries exclude superannuation guarantee
(SG) contributions, which are currently paid at 9% per annum.
Annual expenditure

Mortgage

$37,800

General living expenses

$50,400

Accountant’s fees

$550

Donations

$1,000

Holidays (annually)

$11,000

Assets and investments

Principal residence

$650,000

Purchased 6 years ago for
$550,000. Outstanding mortgage $470,000 – joint names, variable rate 6.25%

Contents

$50,000

Joint names

Car

$18,000

Fully paid off – joint names

Savings Account

$5,000

Everyday savings account paying no
interest – joint names

Cash management account –
inheritance

$10,000

Cash management account earning
5.1% p.a. – Ted’s name only

ABC Superannuation – Ted

$220,000

Invested in a retail fund,
balanced option. No beneficiaries or binding nominations specified.
The fund accepts salary sacrifice.

SOH Industry Superannuation –
Eliza

$58,000

Invested in an accumulation
industry fund, balanced option. The fund only has a defensive, balanced or
high growth options available. No beneficiaries or binding nominations
specified. The fund accepts salary sacrifice.

Share portfolio

$53,691

Dividend yield of 6.4% p.a. – 99%
franked dividends – in Ted’s
name only

Current share portfolio

Number of shares

Company

ASX Code

Current Value (same as value at date of death)

Price of Shares when acquired by aunt Jenny

500

AMP Limited

AMP

$2,158

$4.40

1,300

Insurance Australia Group Limited

IAG

$5,473

$1.75

400

Commonwealth Bank Limited

CBA

$22,052

$27.7

400

Telstra Corporation Limited

TLS

$1,552

$4.48

400

Westpac Banking Corporation

WBC

$9,900

$19.60

400

BHP Billiton Limited

BHP

$12,556

$11.41

All shares were acquired by the
deceased after 1 January 1986 and prior to 1 December 2011.
Investment objectives
They have rated their investment
objectives, using a scale ranging from 1 (not concerned) to
5 (very concerned).
Ted Hardgraves

Income to keep pace with inflation

2

Legal logical and appropriate tax relief

5

Easy access to your capital

1

Regular income from your investments

1

Easy to administer

3

Capital growth

5

Volatility

2

Eliza Hardgraves

Income to keep pace with inflation

2

Legal logical and appropriate tax relief

5

Easy access to your capital

1

Regular income from your investments

1

Easy to administer

4

Capital growth

5

Volatility

4

Estate planning
Ted and Eliza have Wills which they quickly wrote using
packs bought from the post office when Bill was born. They do not have powers
of attorney.
Insurance and risk management
Ted has three times his salary in term life and total
permanent disability (TPD) insurance within his superannuation. He cannot take
out any higher cover within this superannuation fund.
Eliza has $50,000 of life and TPD in her superannuation
fund. Ted and Eliza do not have income protection or trauma cover.
They have family private hospital cover.
Planning issues
 Ted and
Eliza are seeking a long-term tax effective investment plan which will provide
for them in their retirement.
 Ted has
recently inherited $63,700 from his aunt and would like advice on how to invest
these funds to contribute to securing their future.
 Ted has
told you that he understands the risks associated with investing and is willing
to invest in riskier securities in order to increase their returns.
 Eliza is
more risk averse. She would like to ensure they do not lose any of their
inheritance.
 Ted and
Eliza’s children currently attend a public school but they would like to send
both children to a private school to complete their secondary education.
 Ted and
Eliza would like to do some renovations to their home, such as replacing the
old bathroom which they believe will cost approximately $17,500. They are happy
to use some of their inheritance to do this and anticipate the work to be done
this year.
 Both Ted
and Eliza are not sure if the current asset allocation used in their
superannuation is appropriate and are seeking your advice on determining an
asset allocation that they are comfortable with, and will improve the potential
to meet their lifestyle and financial objectives. They would also like to know
if they are on track to reach their retirement income goal of $125,000 per
annum when Ted reaches age 65.
 Eliza is
unhappy with the service she receives from her industry fund and the limited
number of choices she has for her account. In addition Ted has been earning
better returns every year even after fees are deducted.
 They
wish to have their full insurance needs reviewed.
 Ted and
Eliza would like to reduce their mortgage and believe that this could help them
to get ahead before they have to pay large school fees.
 They
express concern about the fees that you charge and seek clarification on your
fees.
As their financial planner, your task is to prepare a
Statement of Advice (SOA) that will include strategies to meet Ted and Eliza’s
goals.

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