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.]
FP3B-1SN3-2
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.
FP3B-1SN3-2
Note: Assessors should double-click on the fields below to select the students result.
Project result (assessor to complete)
Result first submission
Not Yet Competent
Sections that must be re-submitted:
[insert assessor feedback]
Result re-submission (if applicable)
Not Yet Competent
Result summary (assessor to complete)
First submission Re-submission (if required)
Section 1 Not yet demonstrated Not yet demonstrated
Section 2 Not yet demonstrated Not yet demonstrated
Section 3 Not yet demonstrated Not yet demonstrated
Section 4 Not yet demonstrated Not yet demonstrated
Section 5 Not yet demonstrated Not yet demonstrated
Feedback (assessor to complete)
[insert assessor feedback]
FP3B-1SN3-2
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.

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

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

5. Answer Sections 3 - 5

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.

FP3B-1SN3-2
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 Teds 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 Elizas current details.
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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 Elizas salaries exclude superannuation guarantee (SG) contributions, which are currently
paid at 9% per annum.
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Annual expenditure
Mortgage $37,800
General living expenses $50,400
Accountants 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. Teds 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 Teds
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.
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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.
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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 Elizas 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 Elizas goals.
FP3B-1SN3-2
Project questions (student to complete)
Section 1 Establish the relationship with the client and identify their objectives,
needs and financial situation
Part A
List particular strategies you will use to ensure that the Hardgraves are comfortable with the
interview process. (200 words)
[insert student response]
Part B
Give details of any legal requirements you need to comply with at the initial stage of your
relationship with the clients. (250 words)
[insert student response]
Part C
If, at a later stage, Ted and Eliza wish to make a complaint about your advice, what are their
options? How much information are you required to give them, initially, about complaints
procedures? (150 words)
[insert student response]
Part D
Neither of your clients have trauma insurance and they are unsure about the adequacy of their
current level of life and TPD insurance. Prepare a list of questions that you could use during the
initial interview to help you determine appropriate levels of cover. You should cover asset
preservation, income preservation and future expenditure needs and the answers to the questions
should enable you to complete the risk needs section of the fact finder (250 words)
[insert student response]
Part E
Discuss the benefits and drawbacks of using tools to gather the information required to develop a
financial plan for clients as compared to a more casual, conversational style approach. (200 words)
[insert student response]
FP3B-1SN3-2
Section 2 Analyse client objectives, needs, financial situation and risk profile to
develop appropriate strategies and solutions
Part A
Record the information you have gathered from your clients in the fact finder below. Include the
information you obtained from your questions in Section 1 Part D.
[insert student response]
Part B
Identify any gaps in your data collection form as well as any other issues that would need to be
followed up with Ted and Eliza. (100 words)
[insert student response]
Fact finder
Personal and employment details
Personal details
Client 1 Client 2
Title
Surname
Given & preferred names
Home address
Business address
Contact phone
Date of birth
Age
Sex Male Female Male Female
Smoker Yes No Yes No
Expected retirement age
Dependants (children or other)
Name Date of birth Sex School Occupation
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Employment details
Client 1 Client 2
Occupation
Employment status Self employed Employee Self employed Employee
Not employed Pensioner Not employed Pensioner
Permanent Part time Permanent Part time
Casual Contractor Casual Contractor
Other Government Other Government
Business status Sole proprietor Partnership Sole proprietor Partnership
Private company Trust Private company Trust
Notes: Any other person to be contacted? E.g. accountant, bank, solicitor, etc.
Income, expenditure and net worth
Cash flow statement
Income and expenses
Client 1 Client 2 Notes
Income from employment
Salary
Salary sacrifice
(state % if applicable)
Salary after salary sacrifice
Rental income
Unfranked dividends
Franked dividends
(state % return if applicable)
Franking (imputation) credits
(state franking % if applicable)
Interest
(state % return if applicable)
Other income, e.g. taxable benefits
Capital gains <1yr
Capital gains >1yr
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Tax-free component of capital gains
Assessable income
Deductible expenses
Rental expenses, repairs etc.
Taxable income
Tax on taxable income
Non-refundable tax offsets (e.g. LITO/SAPTO)
Medicare levy
Medicare levy surcharge
Franking rebate
Refundable rebates and offsets
Net tax payable
Family cash flow
Client 1 Client 2 Combined Comment
Salary less any salary sacrifice amount
Non-taxable income (e.g. income from superannuation
income streams for a person aged over 60, Family
Tax Benefits)
Interest income
Dividends received (excluding franking credits)
Rental income
Other income
Total income received before tax
Living expenses
Other expenses
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Total expenses
Total income received before tax less expenses
Net tax payable from the Income and Expense
table above
Net cash flow
Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Total
Investment assets
Total
Superannuation assets
Total
Net worth
Liabilities
Loan Current debt Percentage deductible Comments Repayment
Total
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Goals and objectives
Details Comments
Estate planning
Do you have a Will? Yes No
When was it last updated?
Executor/rixs name and contact details:
Do you have powers of attorney? Yes No
Attorneys name and contact details:
Do you have a funeral plan? Yes No
Funeral provider and contact details:
Amount paid
Do you have superannuation
beneficiaries in place?
Yes No
Type Binding Non-binding
Beneficiary names and contact details:
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Current superannuation, rollovers, insurances & investments
Superannuation details
Member
Superannuation fund
name
Date of joining fund
Type of fund Accumulation
Defined benefit
Pension
Accumulation
Defined benefit
Pension
Contributions By employer
By yourself
Other
By employer
By yourself
Other
Current value of your
superannuation fund
Amount of death &
disability cover
Is there provision for
additional contributions or
salary sacrifice?
Yes No Yes No
Non-concessional
contributions
Amount Year
Amount Year
Amount Year
Amount Year
Spouse contributions
received
Amount Year
Amount Year
Amount Year
Amount Year
Concessional
contributions
Amount Year
Amount Year
Amount Year
Amount Year
Any other contributions Amount Year
Amount Year
Amount Year
Amount Year
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Life insurance details
Life insured Policy Owner Company Policy number Benefit type Benefit or
insured amount
Annual
premium
General insurance details
Item covered Owner Policy type Company Policy
number
Cover
Amount
Other benefit Annual
premium
Investment details
Investment type Company Purchase date Units held/
fixed rate
Current value Owner
Risk needs
Insurance needs life and TPD
Client 1 Client 2
Gross annual income (before tax)
Less business expenses
Number of years income required
Property repayment
Other debts
Sub-total = (income years) + debts
Less existing realisable assets
(Insurance/savings/superannuation)
Insured benefit shortfall (before tax)
Gross income is the total of earned income (i.e. before tax earnings derived from personal exertion, including salary, fees,
commission, bonuses, fringe benefits or similar payments that would cease on disablement).
Business expenses are expenses incurred by you in the process of earning income from your profession,
business or partnership.
Insurance needs Income protection/trauma
Income protection Client 1 Client 2
Gross annual income
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Employer superannuation contributions
Other employer fringe benefits
Maximum allowable benefit
(75% of annual income)
Monthly income
Less existing insurance
Monthly benefit required (pre-tax)
Waiting period to be served
Trauma
Medical costs (to cover out-of-pocket
health costs)
Additional expenses of a permanent
nature, wheelchairs, home
alterations etc.
Additional income: income protection
only covers 75%, would you need extra?
Total funds required
Less cash available or assets
that can be readily cashed
Shortfall/surplus
Acknowledgment
The information provided in this financial fact finder is complete and accurate to the best of my knowledge.
I understand that a policy purchased without the completion of a fact finder, or following a partial or inaccurate completion, may
not be appropriate to my needs. I also understand that a policy purchased that differs from that recommended by the planner
may not be appropriate to my needs. I acknowledge that the planner has provided me with the completed financial fact finder,
signed by me.
Customer(s) signature(s)
Adviser's name
Adviser's signature
Date
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Part C
Now that you have determined the Hardgraves needs and objectives you need to identify their
likely risk profile based on the information they have provided. Ted and Eliza completed the risk
profile below prior to your meeting with them.
Identify any concerns that you may have with their responses compared with the information in the
case study and suggest questions you could use to clarify the responses. Justify why you do or do
not think that the score and the resulting risk profile category is an accurate reflection of their
tolerance to risk. (250 words).
[insert student response]
Investment attitude details
Please answer the following questions regarding your attitude to financial issues.
Are you concerned about the amount of tax that you are paying? Yes/No
Why?
How important is liquidity (i.e. funds available) to you? Very/Moderately/Not
Why?
If you had funds available for investing, how would you choose to invest them?
Why?
Are there certain sorts of investment that you wish to avoid? Yes/No
Which ones?
RISK PROFILE
Determining your investor risk profile Points
This investor risk profile questionnaire has been designed to help you understand the type of investor you are, so that with the
help of your adviser, you can choose the investments that best match your financial objectives.
Which of the following best describes your current stage of life? Ted Eliza
Single with few financial commitments. You are keen to accumulate wealth for the future. Some funds
must be kept available for enjoyment, such as cars, clothes, travel and entertainment.
50 50
A couple without children. You may be preparing for the future by establishing and furnishing a
home. There are a lot of things you need to buy. You are probably better off financially now than you
may be in the future.
40 40
Young family. This is the peak home purchasing stage. You have a mortgage and a very small
amount of savings. Probably dissatisfied with your financial position and the amount of money saved.
35 35
Mature family. You are in your peak earning years and have the mortgage under control. Many partners
also work and any children are growing up and have either left home or require less supervision. You are
starting to think about retirement, although it may be many years away.
30 30
Preparing for retirement. You probably own your own home and have few financial commitments;
however, you want to ensure that you can afford a comfortable retirement. Interested in travel,
recreation and self-education.
20 20
Retired. No longer working and must rely on existing funds and investments to maintain your lifestyle.
You may be receiving the pension and are keen to enjoy life and maintain your health.
10 10
What return do you reasonably expect to achieve from your investments? Client 1 Client 2
A return without losing any capital. 10 10
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37% p.a. 20 20
812% p.a. 30 30
1315% p.a. 40 40
Over 15% p.a. 50 50
If you did not need your capital for more than 10 years, for how long would you be prepared to see your investment
performing below your expectations before you cashed it in?
You would cash it in if there were any loss in value 10 10
Less than 1 year 20 20
Up to 3 years 30 30
Up to 5 years 40 40
Up to 7 years 45 45
Up to 10 years 50 50
How familiar are you with investment markets?
Very little understanding or interest 10 10
Not very familiar 20 20
Have had enough experience to understand the importance of diversification 30 30
Understand that markets may fluctuate and that different market sectors offer different income, growth
and taxation characteristics
40 40
Experienced with all investment sectors and understand the various factors that may
influence performance
50 50
If you can only get greater tax efficiency from more volatile investments, which balance would you be most
comfortable with?
Preferably guaranteed returns, before tax savings 10 10
Stable, reliable returns, minimal tax savings 20 20
Some variability in returns, some tax savings 30 30
Moderate variability in returns, reasonable tax savings 40 40
Unstable, but potentially higher returns, maximising tax savings 50 50
Six months after placing your investment you discover that your portfolio has decreased in value by 20%, what would
be your reaction?
Horror. Security of capital is critical and you did not intend to take risks 10 10
You would cut your losses and transfer your money into more secure investment sectors 20 20
You would be concerned, but would wait to see if the investments improve 30 30
This was a calculated risk and you would leave the investments in place, expecting
performance to improve
40 40
You would invest more funds to lower your average investment price, expecting future growth 50 50
Which of the following best describes your purpose for investing?
You want to invest for longer than five years, probably to the age of 5560. You are mainly investing
for growth to accumulate long-term wealth
50 50
You are not nearing retirement, have surplus funds to invest and you are aiming to accumulate long-
term wealth from a balanced fund
40 40
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You have a lump sum, e.g. an inheritance or an eligible termination payment from your employer, and
you are uncertain about what secure investment alternatives are available
30 30
You are nearing retirement and you are investing to ensure that you have sufficient funds available to
enjoy retirement
20 20
You have some specific objectives within the next five years for which you want to save
enough money
20 20
You want a regular income and/or totally protect the value of your savings 10 10
Investor profile total points 220 140
INVESTOR RISK PROFILE SUMMARY
050 Defensive
You are a conservative investor. Risk must be very low and you are prepared to accept lower returns to protect capital. The
negative effects of tax and inflation will not concern you, provided that your initial investment is protected.
51130 Moderate
You are a cautious investor seeking better than basic returns, but risk must be low. Typically an older investor seeking to protect
the wealth that you have accumulated, you may be prepared to consider less aggressive growth investments.
131210 Balanced
You are a prudent investor who wants a balanced portfolio to work towards medium to long-term financial goals. You require
an investment strategy that will cope with the effects of tax and inflation. Calculated risks will be acceptable to you to achieve
good returns.
211300 Growth
You are an assertive investor, probably earning sufficient income to invest most funds for capital growth. Prepared to accept
higher volatility and moderate risks, your main concern is to accumulate assets over the medium to long term. You require a
balanced portfolio, but more aggressive investment strategies may be included.
301350 High growth
You are an aggressive investor prepared to compromise portfolio balance to pursue potentially greater long-term returns. Your
investment choices are diverse, but carry with them a higher level of risk. Security of capital is secondary to the potential for
wealth accumulation.
(Section 3 Part D commences on the next page)
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Part D
Given the information you now have on the Hardgraves current situation and their tolerance of
risk, what are the critical issues you need to consider to appropriately advise them?
What sorts of investments would they each be comfortable with? (400 words)
[insert student response]
Part E
Prepare appropriate insurance and superannuation strategies for Ted and Eliza, and provide a
detailed explanation as to why you consider them to be appropriate. Include the lump sum amount
that they will need in retirement and strategies to help them reach that goal. Include
recommendations on the amounts and types of insurance cover you will recommend. Provide a
summary of other recommendations that you will include in your SOA for Ted and Eliza.
(500 words)
[insert student response]
Part F
Provide a summary of the research that you have conducted to support one insurance product
recommendation you will make for Eliza or Ted. (250 words)
[insert student response]
Part G
You must now prepare a Statement of Advice (SOA) based on the recommendations made, which
will be used to record this advice (including amendments, if any) for Ted and Eliza. Remember that
the SOA must be of a standard that is compliant and would be suitable to present to a client.
[insert student response]
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Important instructions
What to submit: you have been provided with a Statement of Advice Preparation Checklist and
cash flow templates to use for the project SOA. Please include these with your submission.
Template SOAs and SOA preparation software: it is preferable that you do not use the
sample SOA published by ASIC as a basis for your submission. The use of financial planning
software and dealer templates to prepare your SOA is also not permitted. Submissions that
exhibit excessive reliance on SOA templates may be considered a case of plagiarism or
collaboration, and may not be considered to be a reasonable attempt at the project.
Assumptions: you must list the assumptions used in your SOA in your project submission.
These will generally include:
any assumptions you have made regarding missing background information on the clients
any assumptions you have used to calculate future income from your
recommended investments
any assumptions used for fees relating to the products you have recommended.
Strategy advice: you must provide strategy recommendations in the following areas based on
the information given:
personal investment or debt reduction
personal insurance
superannuation
estate planning.
Use the information on each of these areas given in the subject notes to provide reasons for each
of the strategies recommended.
Product advice: product recommendations for any personal investment or estate planning
recommendations are not required. However, you should recommend an appropriate
superannuation and/or life insurance product to implement the advice you have provided. You
are required to source, or develop, your own fund details. It is not necessary to include Product
Disclosure Statements in your project for any products you may recommend in your SOA.
Including insurance quotes in the SOA is not required. For insurance recommendations you
may estimate the premiums based on the clients ages, health and occupations but they do not
have to be prepared from actual quotes.
Cash flow projections: you must include detailed cash flow tables using Appendix 1 and
Appendix 2 as a template showing Eliza and Teds situation before and after your
recommendations. These should be included as Appendices 1 and 2 to your SOA. Remember
to include any insurance premiums in the analysis.
Recommendations: You should include superannuation projections up to the retirement age of
your clients before and after your recommendations as Appendix C to your Statement of Advice.
In addition please show that your strategy will enable your clients to meet their retirement
income goal until Ted is at least 84 (Eliza is 83, her life expectancy).
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Statement of Advice preparation checklist (student to complete)
SOA section Action Completed?
i. Cover sheet The following elements should appear on the cover sheet:
the words Statement of Advice
the clients name
the authorised representatives name, AR number and contact details
(if different to the licensee)
a statement that the authorised representative is an authorised
representative of the licensee
the licensees name, ABN number, AFSL number, address and
contact details
the date of issue of the SOA
a warning about the importance of the document

ii. Table of contents Check that the pages in the table of contents agree with the page numbers in
the completed SOA.

iii. Executive summary Headings should include:
Summary of our recommendations
Summary of expected outcomes if you implement our advice
Risks in our advice
Summary of our fees and commissions
Your next steps

iv. Present position
information about
the client
Headings should include:
Important information about you
Your reasons for seeking advice
What you would like to achieve
Your personal and financial information
Personal information
Your existing insurance
Your existing estate planning
Financial information
Current income and expense details

v. Risk profile Heading:
Your risk profile
vi. Strategy
recommendations
(analysis of the
investment
strategies)
Headings should include:
Recommended action:
personal investment or debt reduction
personal insurance
superannuation
estate planning
Reasons for recommendations:
personal investment or debt reduction
personal insurance
superannuation
estate planning
Things you should consider (risks)

vii. Product selection You are only required to provide a superannuation and or insurance product
recommendation. Do not provide product recommendations for personal
investments or estate planning.
Headings should include:
Product recommendations
Cooling off period advice

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SOA section Action Completed?
viii. Recommended
asset allocation
Headings should include:
Recommended asset allocation
Comments on proposed asset allocation versus your risk profile

ix. Disclosure of fees,
commission and/or
benefits
Headings should include:
How are we paid
Commission and fees upfront, ongoing commissions and financial
planning advice fees
Product management and/or operational fees
Other benefits

x. Ongoing service
and review
Headings should include:
Ongoing services
Implementation

xi. Authority to proceed Headings should include:
Authority to proceed
Consent to ongoing contact

xi. SOA Appendix 1 Use the family cash flow template below.
Heading:
Financial position before implementation of strategy

xii. SOA Appendix 2 Use the family cash flow template below.
Heading:
Financial position after implementation of strategy

xii. SOA Appendix 3 Include detailed projections of the clients super account balances before
and after your recommendations up to their retirement age. Also show how
the resultant balance can be drawn down until Eliza reaches age 84, her
current life expectancy.
You should include all assumptions for calculations and rates of return should
be in todays dollars (i.e. net of inflation).

FP3B-1SN3-2
SOA Appendix 1
Note: The items listed in this template are indicative only and must be adapted to your clients
personal circumstances. There may be other relevant income or expense items that are not
included in this template. You should add, delete or substitute items where appropriate.
Cash flow statement
Income and expenses
Client 1 Client 2 Notes
Income from employment
Salary
Salary sacrifice (state % if applicable)
Salary after salary sacrifice
Rental income
Unfranked dividends
Franked dividends (state % return if applicable)
Franking (imputation) credits (state franking % if applicable)
Interest (state % return if applicable)
Other income, e.g. taxable benefits
Capital gains <1yr
Capital gains >1yr
Tax-free component of capital gains
Assessable income
Deductible expenses
Include income protection premiums if held
outside superannuation
Rental expenses, repairs etc.
Taxable income
Tax on taxable income (state year applied)
Non-refundable tax offsets (e.g. LITO/SAPTO)
Medicare levy
Medicare levy surcharge
Franking rebate
Refundable rebates and offsets
Net tax payable
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Family cash flow
Client 1 Client 2 Combined
Salary less any salary sacrifice amount
Non-taxable income (e.g. income from superannuation income
streams for a person aged over 60, Family Tax Benefits)
Interest income
Dividends received (excluding franking credits)
Rental income
Other income
Total income received before tax
Investment expenses
Interest payments
Rental expenses
Other
Living expenses
General living expenses
Home mortgage
Car payment
Credit cards
Holiday
Childrens education
Other loans, e.g. personal
Insurance premiums
Other
Total expenses
Total income received before tax less expenses
Net tax payable from the Income and Expense table above
Net cash flow
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Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home
Home contents
Car 1
Car 2
Other
Total
Investment assets
Investment property
Savings account
Term deposit
Shares
Other
Total
Superannuation assets
Client 1 superannuation
Client 2 superannuation
Total
Net worth
Liabilities
Loan Current debt Percentage deductible Interest only Repayment
Loan
Home loan
Investment property
Other
Total
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SOA Appendix 2
Note: The items listed in this template are indicative only and must be adapted to your clients
personal circumstances. There may be other relevant income or expense items that are not
included in this template. You should add, delete or substitute items where appropriate.
Cash flow statement
Income and expenses
Client 1 Client 2 Notes
Income from employment
Salary
Salary sacrifice (state % if applicable)
Salary after salary sacrifice
Rental income
Unfranked dividends
Franked dividends (state % return if applicable)
Franking (imputation) credits (state franking % if applicable)
Interest (state % return if applicable)
Other income, e.g. taxable benefits
Capital gains <1yr
Capital gains >1yr
Tax-free component of capital gains
Assessable income
Deductible expenses
Include income protection premiums if held
outside superannuation
Rental expenses, repairs etc.
Taxable income
Tax on taxable income (state year applied)
Non-refundable tax offsets (e.g. LITO/SAPTO)
Medicare levy
Medicare levy surcharge
Franking rebate
Refundable rebates and offsets
Net tax payable
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Family cash flow
Client 1 Client 2 Combined
Salary less any salary sacrifice amount
Non-taxable income (e.g. income from superannuation income
streams for a person aged over 60, Family Tax Benefits)
Interest income
Dividends received (excluding franking credits)
Rental income
Other income
Total income received before tax
Investment expenses
Interest payments
Rental expenses
Other
Living expenses
General living expenses
Home mortgage
Car payment
Credit cards
Holiday
Childrens education
Other loans, e.g. personal
Insurance premiums
Other
Total expenses
Total income received before tax less expenses
Net tax payable from the Income and Expense table above
Net cash flow
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Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home
Home contents
Car 1
Car 2
Other
Total
Investment assets
Investment property
Savings account
Term deposit
Shares
Other
Total
Superannuation assets
Client 1 superannuation
Client 2 superannuation
Total
Net worth
Liabilities
Loan Current debt Percentage deductible Interest only Repayment
Loan
Home loan
Investment property
Other
Total
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SOA Appendix 3
Use an excel spreadsheet to project the balance of the clients super funds up until the age of
retirement (i.e. Ted is 65) before and after your recommendations. You should then show the
analysis that proves that the clients can generate $125,000 per annum from their super up until
Eliza is aged 83.
You can use the FV formula in excel to calculate annual balances for the accumulation and you
can also use it to show drawdown of the income in a separate calculation.
Assume that in retirement the clients funds are invested in the same asset allocation and have the
same rate of return. All rates of return should be net of inflation and net of fees.
Copy the projections into tables like the one shown below and complete the list of assumptions in
the table on the following page.
Please ensure that you use a rate of return that is net of inflation and is appropriate to the clients
risk profile.
Include details of all assumptions that you have made. You may ignore the impact of contributions
tax on the SG and salary sacrifice if any.
Table 1: Superannuation account balance projections
Current situation After recommended strategy
Teds age Teds account
balance
at year end
Elizas account
balance
at year end
Combined
account
balance
Teds account
balance
at year end
Elizas account
balance
at year end
Combined
account
balance
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Table 1(a): Assumptions.
Assessors note: This table should be complete and appropriate for the clients.
Value Ted: current Eliza: current
Ted: strategy
recommendations
Eliza: strategy
recommendations
Contribution amount:
SG and any other(pmt)
Contribution frequency
Rate = the rate of
return of the fund,
net of inflation
Hints for using the FV formula in Excel to predict account balances. Nper = either 1 for annual or
12 for monthly contributions; PV = value of the super at the end of the previous year and should be
entered as a negative value; rate = annual rate divided by the frequency of contributions; pmt is
the contribution amount and should be a negative value when accumulating funds and positive
when funds as being drawn from the super; type can be left blank and indicates that the payments
happen at the end of each period.
Table 2: Superannuation income analysis post-retirement
Teds age Combined account balance Assumptions Combined fund
60 Rate of return net of inflation
61 Frequency of drawdown
62 Income per annum $125,000
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
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81
82
83
84
(Section 3 commences on the next page)
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Section 3 Present appropriate strategies and solutions to the client and negotiate
a financial plan, policy or transaction
Part A
The SOA has been completed and a meeting has been organised with Ted and Eliza to present
the recommendations and, if they agree, to implement them.
Describe the steps that should be followed in presenting this advice to Ted and Eliza. In your
answer, you should address at least four of the following requirements regarding presentation
of advice:
the order in which you present the information
what back-up information and documents you might need?
any risks associated with the solution
two predictable questions the Hardgraves might ask you and the answers you will give
the language you will use to present the strategy to Ted and Eliza. (250 words)
[insert student response]
Part B
Suggest a minimum of two concerns that the Hardgraves might have with the strategy that you
have proposed. Explain how you would address each of these concerns. (100 words)
[insert student response]
Part C
During the course of your discussion with Ted, you discover that he has suffered from a back injury
and you suspect that this may result in a premium loading being applied to his income protection.
Explain how you would justify the need for this policy to him, despite the extra costs. ? (150 words)
[insert student response]
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Section 4 Agree on the plan, policy or transaction and complete documentation
Part A
Ted and Eliza have finally agreed to proceed with your recommendations. Explain your fee and
cost structure to Ted and Eliza. Ensure that you use language that Ted and Eliza will understand.
(100 words)
[insert student response]
Part B
Prepare a timeframe for implementing the plan. Explain the reasons behind the timeframe.
(100 words)
[insert student response]
Part C
Identify the documentation that you may require from Ted and Eliza to implement your insurance
recommendations. (100 words)
[insert student response]
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Section 5 Provide ongoing service where requested by the client
Part A
Draft an outline of the level of ongoing service you intend to recommend to Ted and Eliza. In your
outline, discuss the type of information that you would regularly provide to Ted and Eliza in relation
to their superannuation. (250 words)
[insert student response]
Part B
What would you do to ensure that Ted and Eliza know the specific costs relating to an ongoing
service? (100 words)
[insert student response]
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