PERSONAL WEALTH MANAGEMENT Semester 1, 2018

| October 14, 2019

 Practical Assessment— Case Study Assignment Individual or a Group of 2 Students Due date: 29th April 2018 11:59pm Weighting: Case Study and Poster – 30% Word Length: No more than 2000 words (part A only). Content Coverage Lecture Materials 1 to 6. Learning outcomes Understand and perform simple financial need analysis. Understand concepts associated with portfolio theory. Appreciate the effects of taxation on financial planning and calculate taxation liability Develop and be able to critically evaluate a financial plan for an individual. Other objectives: Research, problem solving skills, communication skills, critical thinking, writing competence. Assessment task Question 1: Case study You are a financial adviser and the following information is an extract of data you gathered as part of fact finding during an initial client consultation for married couple Janet and Steven Blake. Janet works as a Teacher and Steven works as town planner at the local government. The have two children who are aged 12 and 14. • Janet and Steven would like to know how much money they will receive after paying tax and expenses for the year ended 30th June 2017. They would like advice on how to reduce their tax liability in the future. • The Blake’s have diversified their investments by investing equally in a bank savings account, a fund and some Macquarie Group Ltd Shares. Their risk profile is equivalent to that of a growth investor. They have come to you understand how they should invest in the future. • The Blake’s life goal has been to buy a property in the country and live the quiet life 10 years from now. They need to save a $200,000 deposit to achieve this dream. They have $60,000 invested now and they estimate they can save $5000 p.a. for 5 years and then $10,000 p.a. for the 5 years following this. They have come to you see if they can achieve this goal? Income for year ended 30th June 2017: Income type Amount Gross Salary- Janet $70,000 Gross Salary- Steven $54,000 Vanguard Bond Fund- Distribution 3.85% (Janet) $770 NAB Savings Account Janet- Interest 2.3%- Janet $230 Macquarie Group Limited- Dividend $2.05 per share- Steven $410 (partial franking credit $80) ? Estimated annual expenses Item Amount Rent (650 per week)….……………………………….. 33,800 Electricity/Water/Gas 3,000 Telephone/Mobile 2,200 Pay television/Internet 1,100 Insurance –contents 1,200 Insurance – car3,000 Credit cards repayment ($500 a month for 12 months). 6,000 Car loans repayment ($8000 a year for 5 year term).…. 8,000 Petrol/maintenance ……………………………………. 6,000 Car registration ………………………………………… 800 Public transport ……………………………………….. 2,800 Other expenses Food …………………………………………………… 12,500 Clothing/Haircuts/Beauty …………………………….. 5,500 Medical/Dental ………………………………………… 2,500 Entertainment/Dinners ………………………………… 6,000 Teacher Union Membership (Janet)………………….………… 1,000 Gifts – Birthdays/Christmas …………………………… 3,000 Total ………………………………………………….. 98,400 Current Assets and Liabilities Assets (Ownership) Current valuation $ Liability (Ownership) Current valuation $ Home Contents (Joint) 20,000 Credit cards (Joint) Includes the annual interest cost 6,000 Car (Joint) 35,000 Car loan (Joint) 5 year term at 12% 30,000 Bank Account: Cheque Account (Joint) 8000 Investments: NAB savings Account (Janet) Vanguard Bond Fund (Janet) Macquarie Group Ltd Shares (Peter) 20,000 20,000 20,000 Required: A. Calculate Janet’s and Steven’s after-tax income and savings ratio for the year ended June 2018. Explain one way in which Janet and Steven could reduce their tax liability and show the effect this strategy would have. B. Review the Blake’s investment portfolio and explain whether they are diversified adequately. Consider both investments across different asset classes and investments within classes. Make two recommendations on how they should change their portfolio for future investments and justify these recommendations. C. Calculate the future value of the investment portfolio 10 years from now assuming it will earn a 5% p.a. after tax. In this calculation you should include the FV of the current investments and FV of the contributions that Blake’s estimate that they make over the next 10 years. Assume that contributions are made at the end of the year and that the first contribution will be made 364 days from now. Finally, explain one strategy that Janet and Steven could reach their goal more quickly and show the influence that this will have. Important Note: While answering questions that involve calculations, you are expected to describe your approach and explain your calculations. If assumptions are made, these assumptions must be clearly stated. (5 + 5 + 5 = 15 marks) Financial Formulae savings (or cash surplus) Savings ratio = net income after tax Future value FV = PV(1 + i)n Annuity (Future value) FV = PMT[(1 + i)n – 1] i Question 2: Infographic/poster You are required to design an infographic/poster that would be used on financial planner’s website or displayed in their office. The purpose of the infographic/poster is to explain to investors the key similarities and differences between a small company equity fund (also called a small cap fund) and ordinary equity fund (also called a large cap fund). The poster should be self-explanatory and contain real information. So you need to conduct additional research and you may want to compare two actual investments. For example, you may want to compare the Legg Mason Martin Currie Small Companies Fund to Legg Mason Martin Currie Core Equity Fund as there will be a guest lecture from Legg Mason coming to our class. Make sure to reference your sources in the poster. The aim of the poster is to communicate essential information about fixed interest funds and equity funds to an audience with limited financial knowledge on this topic. Here are some useful website references: Infographic/poster websites: https://piktochart.com/ Otherwise, you can use Adobe Photoshop or PowerPoint to design the infographic/poster. Website for funds: Money Smart https://www.moneysmart.gov.au/investing/managed-funds Information on funds: http://www.asx.com.au/mfund/ Legg Mason funds http://www.leggmason.com.au/en/index.aspx AMP funds http://www.ampcapital.com.au/advisers/investing-with-us/ways-to-invest Vanguard funds https://www.vanguardinvestments.com.au/retail/ret/investments/product.html#/productType=retail Submission of assignment: The infographic/poster can be submitted as an image or by providing a web link. It is your responsibility to ensure that the examiner can accurately view the poster/infographic. (15 Marks) In order to answer requirements of this assignment, you may need to access resources other than the set text. All sources used in your assignment must be clearly referenced, but there is no set referencing style for this course. ? Marking criteria The marking criteria for the total assignment are as follows: Case Study Marks Question 1 A 5 Question 1 B 5 Question 1 C 5 Question1 Sub-total 15 Question 2: Presentation (i.e. layout) 5 Content 10 Question2 Sub-total 15 Overall mark 30 Question 2: Marking guide for Infographic/Poster Question Possible marks Criterion Question 2 Presentation (i.e. layout) 5 5 marks Excellent use of graphics and data. Arrangement of information is coherent with an appeal to the audience. 4 marks Good use of graphics and data. Arrangement of information can be followed but may require more effort by the audience. 3 marks Graphics and data are presented but limited or ill suited. The presentation can be understood but is not audience friendly. 0-2 marks Presentation lacks graphics and/ or information. Arrangement of information does not consider the audience. Question 2 Content 10 8 – 10 marks Very clear, thoroughly researched and referenced. Key similarities and differences identified and an excellent understanding demonstrated. 6.5 – 8 marks Clear, researched and referenced. Most similarities and differences identified and a strong understanding demonstrated. 4.5 – 6 marks Adequate information but not as thoroughly researched and referenced. Not all similarities and differences identified and only partial understanding shown. 0 – 4 marks Poor information, with little research and references. Does not show a clear understanding of similarities and differences. Not to undergraduate standard.

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