EFN421 Financial Planning assessment
Question 1:
(a)
(1) The sale of Southport, pay-out of mortgage and investment of excess funds into a term deposit is consistent with the advice recommended in the Statement of Advice (“SOA”) . The recommended retirement date remains 31 December 2016 .
(2) Although not included in the SOA, the $20,000 gifted to the other children will not greatly impact the preferred retirement date at the end of 2016 . Note that these gifts will not be deductible for income tax purposes.
(3) Although no included in the recommendations of the SOA, in theory the investment should receive greater returns than the interest earned on the term deposit recommended, therefore the retirement date based on Scenario 3 of 31 December 2016 is still achievable.
(b) As Charlie and Tina are risk adverse, it is not recommended to invest in a single managed share fund containing mainly or exclusively Australian shares as this poses concentration risk. Should anything happen to the Australian share market, there could be consequences on their entire investment portfolio. Whereas if Charlie and Tina invested these funds in a balanced portfolio of funds (or various portfolios) which contain both Australian and international shares in addition to other types of investments, then the concentration risk will be greatly reduced.
Commonwealth Bank offer many managed fund combinations which can be tailored based on risk profile to ensure a good return is achieved from a wide spread of asset classes of both growth and defensive assets. Commonwealth Bank may also be able to provide a discount on fees as Charlie and Tina still have a mortgage with them.
Alternatively MLC provide a variety of diversified portfolios in the Horizon Series where diversification and risk is considered to provide consistent investment returns over a given timeframe. An ideal portfolio is MLC Horizon 4 Balanced Portfolio as this is risk adverse but still balanced .
Both investments are backed by big four
(a)
(1) The sale of Southport, pay-out of mortgage and investment of excess funds into a term deposit is consistent with the advice recommended in the Statement of Advice (“SOA”) . The recommended retirement date remains 31 December 2016 .
(2) Although not included in the SOA, the $20,000 gifted to the other children will not greatly impact the preferred retirement date at the end of 2016 . Note that these gifts will not be deductible for income tax purposes.
(3) Although no included in the recommendations of the SOA, in theory the investment should receive greater returns than the interest earned on the term deposit recommended, therefore the retirement date based on Scenario 3 of 31 December 2016 is still achievable.
(b) As Charlie and Tina are risk adverse, it is not recommended to invest in a single managed share fund containing mainly or exclusively Australian shares as this poses concentration risk. Should anything happen to the Australian share market, there could be consequences on their entire investment portfolio. Whereas if Charlie and Tina invested these funds in a balanced portfolio of funds (or various portfolios) which contain both Australian and international shares in addition to other types of investments, then the concentration risk will be greatly reduced.
Commonwealth Bank offer many managed fund combinations which can be tailored based on risk profile to ensure a good return is achieved from a wide spread of asset classes of both growth and defensive assets. Commonwealth Bank may also be able to provide a discount on fees as Charlie and Tina still have a mortgage with them.
Alternatively MLC provide a variety of diversified portfolios in the Horizon Series where diversification and risk is considered to provide consistent investment returns over a given timeframe. An ideal portfolio is MLC Horizon 4 Balanced Portfolio as this is risk adverse but still balanced .
Both investments are backed by big four