Regulatory Guide RG 90 Example Statement of Advice: Scaled advice for a new client.pdfPLANFORIT SOA...

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Regulatory Guide RG 90 Example Statement of Advice: Scaled advice for a new client.pdf
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 1 of 23
PLANFORIT Financial Planning
Statement of Advice
Prepared by Sally Chong
For Brad and Zara Black
31 March 2017
Phone: XXXXXXXXXX
Email: XXXXXXXXXX
Address: 12 Monet Street Melbourne VIC 3000
Australian financial services licence no.: 456789
ABN: XXXXXXXXXX
Authorised representative no.: 45678
Planforit Pty Ltd website: www.planforit.com.au
What this document is about
Attachments
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 2 of 23
Table of contents
Summary of my insurance recommendations and commissions ................... XXXXXXXXXX3
What you want ............................................................................................... XXXXXXXXXX5
What you should know about my advice ........................................................ XXXXXXXXXX6
About you: Brad and Zara .............................................................................. XXXXXXXXXX7
My advice....................................................................................................... XXXXXXXXXX9
Reasons for my recommendations............................................................... XXXXXXXXXX14
Consequences of my advice ........................................................................ XXXXXXXXXX17
How to follow my advice............................................................................... XXXXXXXXXX21
My commissions........................................................................................... XXXXXXXXXX22
Authority to proceed ..................................................................................... XXXXXXXXXX23
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 3 of 23
Summary of my insurance
ecommendations and commissions
Recommended product overview: Brad
Cover and
product
Insure
owne
Amount
of cove
Premium
paid from
Key features of
new policy
First year
premium
Total n/a n/a n/a n/a $4,140
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 4 of 23
Recommended product overview: Zara
Cover and
product
Insure
owne
Amount
of cove
Premium
paid from
Key features
of new policy
First year
premium
Total $1,950
Payments to me and Planforit
Total commissions
Detail Planforit Me Total
Conflicts of interest
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 5 of 23
What you want
What you both want
What we discussed Explanation
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 6 of 23
What you should know about my advice
What my advice covers
What my advice does not cove
My advice is limited
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 7 of 23
About you: Brad and Zara
Personal details
Brad Zara
What you own and what you owe
You own Owner Value You owe Amount Total
Total n/a $720,000 n/a $440,000 n/a
Net wealth n/a n/a n/a n/a $280,000
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 8 of 23
What you earn each yea
Details Amount
Total annual income (after tax) $81,799
What you spend each yea
Details Amount
Total annual expenses $70,000
Estimated annual surplus cash $11,799
Your cu
ent personal insurance
Cover and product Insurer Owner Amount of
cove
Annual
premium
Total annual premium $2,095
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 9 of 23
My advice
Insurance needs: Brad
Life insurance
Financial need Amount of cover Explanation
Total $1,110,000
Total and permanent disability (TPD) insurance
Financial need Amount of cover Explanation
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 10 of 23
Financial need Amount of cover Explanation
Total $510,000
Trauma insurance
Financial need Amount of cover Explanation
Total $150,000
Income protection insurance
Financial need Explanation
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 11 of 23
Superannuation contribution strategy
Recommendation Explanation
Insurance needs: Zara
Life insurance
Financial need Amount of cover Explanation
Total $660,000
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 12 of 23
Total and permanent disability (TPD) insurance
Financial need Amount of cover Explanation
Total $840,000
Trauma insurance
Financial need Amount of cover Explanation
Total $235,000
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 13 of 23
Income protection insurance
Financial need Explanation
Superannuation contribution strategy
Recommendation Explanation
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 14 of 23
Reasons for my recommendations
How my advice is appropriate
Recommendation Why it is appropriate
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 15 of 23
Recommendation Why it is appropriate
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 16 of 23
Recommendation Why it is appropriate
PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX
© Australian Securities and Investments Commission December 2017 (Example SOA) Page 17 of 23
Consequences of my advice
Consequences of replacing products
Comparison of replacement and existing insurance products:

asic-rg90-sample-soa-ih2ex11r.pdf 200627aut20-assessment-brief-statement-of-advice-20-unofzlu4-tz0402my.pdf

Preeta · Accepted Answer

Contents
1. Summary of Advice:	3
1.1 Goals of the client:	3
1.2 Recommendation:	4
2. Basis of Advice:	6
2.1 Scope of advice:	6
2.2 Client’s current situation:	6
2.2.1 Personal information:	6
2.2.2 Goals:	6
2.2.3 Financial situation:	8
2.2.4 Issues and concerns:	9
3. Risk Profile and assessment:	9
4. Advice:	11
4.1 Assumptions:	11
4.2 Recommendation:	11
4.3 Justification:	13
4.4 Post implication projection:	14
5. Disclosure:	15
6. Disclaimer:	16
7. Next Steps and Actions Required:	17
References:	19
1. Summary of Advice: 
The risk tolerance of the client is moderate and the investment advice has been made accordingly based on the goal of the client. 
1.1 Goals of the client: 
· A mortgage loan of $95,000 is due against the house and need to be paid off.
· Renovation of the house worth $65,000 within six months of the retirement that is by February, 2021. 
· There is a debt on the credit card worth $5,000, which she wants paid off. 
· She would like to give her son $150,000 after her retirement. She will also like to have the financial advice for her son as how he can strategically use that money. 
· Europe trip in 2021 worth $20,000.
· Annual trip worth $15,000. 
· She wants to give part of her real estate that is a bequest worth $20,000 to the council. 
· A new car worth $30,000 is to be bought soon. 
· She wants to take benefits of Centrelink. 
· The current expenditures:
· Mortgage payment - $18,000 p.a
· Term life insurance premium - $3,500 p.a 
· Building and contents insurance - $1,000 p.a 
· Telephone and internet charges - $1,600 p.a 
· Golf membership - $1,300 p.a 
· General living expenses - $17,500 p.a 
· Medical and dental expenditure - $1,200 p.a 
· Discretionary leisure/recreation holidays - $10,000 p.a
· Utilities charges: 
· Council rates - $2,000 p.a 
· Water - $2,100 p.a 
· Gas - $1,400 p.a 
· Electricity - $2,200 p.a 
· Home maintenance expenses - $2,500 p.a 
· Motor vehicle expenditure: 
· Third party insurance and CTP insurance (insured with GIO) - $1,250
· Servicing costs - $400 p.a 
· Petrol - $2,000 p.a 
· Total registration - $500 p.a
· Private health insurance - $2,600 p.a 
· She estimates her other living expenses to be $40,000 p.a after the retirement. 
1.2 Recommendation:
The following funds are to be used for spending:
	Superannuation fund in Australian Super – Balanced Option
	348,000
	Superannuation fund in PodSuper
	34,000
	Account with local Community credit union
	6,000
	Bank Account 
	10,000
	Sale of old car
	12,000
	Discontinue of term deposit
	132,960
	Total amount available
	542,960
Payment for debt expenses and other expenses to be met:
	Mortgage loan 
	95,000
	Credit card loan
	5,000
	House renovation cost 
	65,000
	Payment to son
	150,000
	Europe trip
	20,000
	Car 
	30,000
	Yearly expense (living + travelling)
	55,000
	Total
	365,000
Balance amount = 122,960
$120,000 is to be invested in listing property with 3% income and 3.5% growth for five years. 
The cash flow is as follows:
	Starting Value
	Return
	Value in the end with 3.5% growth
	120,000
	3,600
	124,200
	124,200
	3,726
	128,547
	128,547
	3856.41
	133,046.15
	133,046.15
	3991.34
	137,702.71
	137,702.71
	4,131.08
	142,522.30
A part of the house can be rent out to meet yearly expense. $60,000 p.a income can be drawn from the house rent. Yearly expense is of $55,000 including living expenses and travelling expense. The rent is enough to cover those and there will be additional $5,000. 
The things which are to be continued as it is:
· Insurance cover is to be continued since Pat is becoming old.
· The share investment portfolio of Pat and Jack is to be continued since the market condition is not well currently and so the price of the investment is low. 
2. Basis of Advice: 
2.1 Scope of advice: 
Investment advice will be given to the client for insurance and other short term as well as long term investment plans based on her goals and current financial situation. 
There is no conflict of interest since the financial planner do not take commission from any of the investment funds or has personal benefit in any of the funds. 
2.2 Client’s current situation:
2.2.1 Personal information:
Patricia (Pat) Miller will be of 66 years of age in August, 2020 and wants to retire then. Her husband, Jack expired in a car accident and she is single since then. She has a 37 years old son Simon. She made a will around 20 years ago and made her husband, Jack the beneficiary and the executor. Now she wants to make the will in her son’s name. She works at an architect’s firm as the office manager.  
2.2.2 Goals: 
· A mortgage loan of $95,000 is due against the house and need to be paid off.
· Renovation of the house worth $65,000 within six months of the retirement that is by February, 2021. 
· There is a debt on the credit card worth $5,000, which she wants paid off. 
· She would like to give her son $150,000 after her retirement. She will also like to have the financial advice for her son as how he can strategically use that money. 
· Europe trip in 2021 worth $20,000.
· Annual trip worth $15,000. 
· She wants to give part of her real estate that is a bequest worth $20,000 to the council. 
· A new car worth $30,000 is to be bought soon. 
· She wants to take benefits of Centrelink. 
· The current expenditures:
· Mortgage payment - $18,000 p.a
· Term life insurance premium - $3,500 p.a 
· Building and contents insurance - $1,000 p.a 
· Telephone and internet charges - $1,600 p.a 
· Golf membership - $1,300 p.a 
· General living expenses - $17,500 p.a 
· Medical and dental expenditure - $1,200 p.a 
· Discretionary leisure/recreation holidays - $10,000 p.a
· Utilities charges: 
· Council rates - $2,000 p.a 
· Water - $2,100 p.a 
· Gas - $1,400 p.a 
· Electricity - $2,200 p.a 
· Home maintenance expenses - $2,500 p.a 
· Motor vehicle expenditure: 
· Third party insurance and CTP insurance (insured with GIO) - $1,250
· Servicing costs - $400 p.a 
· Petrol - $2,000 p.a 
· Total registration - $500 p.a
· Private health insurance - $2,600 p.a 
· She estimates her other living expenses to be $40,000 p.a after the retirement. 
2.2.3 Financial situation: 
· Her current salary is $72,000 plus compulsory superannuation. 
· Owns a house worth $ $1,100,000. 
· She has a credit card with $40,000 limit. 
· She has a superannuation fund in Australian Super – Balanced Option worth $348,000. This is contributed by her employer entirely.
· She has another superannuation fund in PodSuper worth $34,000. This is from a job she had long back. There is a management expense ratio (MER) of 2.5 % pa, member fee of $96 p.a and exit fee of $30.

Regulatory Guide RG 90 Example Statement of Advice: Scaled advice for a new client.pdf PLANFORIT SOA for Brad and Zara Black • 31 March 2017 • by Sally Chong • XXXXXXXXXX © Australian Securities and...

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