Sasa ProjectQuestionGuide

DPE Project Student Question Guide DPE version 1206.3

www.pinnacle.edu.au

Total Possible Marks

Part A: 73

Part B: 31

Part C: 80

DPE Project - Student Question Guide

Published by Pinnacle Financial Services Academy Pty Limited

Level 7, 100 William Street

Woolloomooloo, NSW 2011

www.pinnacle.edu.au/

Tel: 1300 782 822

Fax:1300 794 820

Email: [email protected]/

Copyright:

© Pinnacle Financial Services Academy Pty Limited (ACN 116 541 256) 2012

Version number:

DPE Project_STUDENT_QUESTION_Guide_v1206.3

Disclaimer:

This project (“Material”) has been developed as a guide to current students of Pinnacle Financial Services Academy Pty Limited (ACN 116 541 256) (“Pinnacle”) and is to be used by such students subject to the terms and conditions on which such students are enrolled with Pinnacle. This Material is not intended to be a comprehensive or exhaustive resource relating to financial services education, but a basis on which knowledge and skills can be formed. Pinnacle believes that the Material is up-to-date as at the date identified on the front page of the Material but does not warrant that the Material is up-to-date as at the date on which the student uses the Material. Students undertaking education within the financial services arena should be aware that the law, regulations and policy in relation to the content of the Material are liable to change without notice and students must ensure that they keep themselves informed of any such changes.

DPE Project

DPE Project v 1206.3 - Student Question Guide 3

Attention: Read these instructions first

1. This project is required into three Parts – A, B, C. This Question Guide contains all the questions you must answer for this module.

2. You should answer each question in the separate Student Answer template provided by Pinnacle. In Part B you will also be required to submit some answers in a spreadsheet.

3. You must achieve a pass mark of 80% to be deemed competent

4. On completion, save your Answer Document including your name in the file name and refer to the instructions online on how to submit your answers.

DPE Project Part A – Student Question Guide

DPE Project v 1206.3_Part A Student Question Guide 4

Question 1

Marks allocated: 2 marks

What is a financial intermediary (1 mark) and what is their chief role in the financial system (1 mark)?

Question 2


The financial service industry consists of many interrelated sectors. Describe the following sectors, including their interrelationship to other sectors (1 mark per sector):

a) Financial planning sector

b) Investor sector

c) Credit management sector

Question 3


Part A


Complete the table below.

It lists the three chief regulators of the Australian financial services industry.

For each regulator answer the following where indicated in the table:

a) What legislation they administer (Legislation) (1/2 mark per regulator)

b) Their primary role in the Australian regulatory environment (Role) (1 mark per regulator)

c) Regulator’s website and link to home page (Website) (1/2 mark per regulator)

Part A Student Question Guide Financial Services Overview and Compliance

Total number of questions: 9 Total marks awarded: 73 Required pass mark: 59

DPE Project Part A - Student Question Guide

DPE Project v1206.3_Part A Student Question Guide 5

d) Provide an example of how the regulator impacts on your job role (Job role) (1 mark per regulator)

Part B


List three sources of other experts, either within the business or external to it that you could refer to for advice or guidance on technical or financial planning issues (3 marks)

Part C

Marks allocated: 1 mark

How can changes in technology be adapted to in a timely manner within the financial services workplace? (1 mark)

Question 4


When you provide personal financial advice to retail clients:

a) What documentation must be provided to the retail client and, where applicable, in what timeframe? (1½ marks)

b) Explain the financial (civil) and custodial (criminal) penalties for not providing the required documentation (1½ marks). What are the specific penalties for non-provision of a Statement of Advice? (1 mark)

Question 5


The compliance officer of your organisation has just phoned, indicating that he will see you at your workplace on Monday. He wants to ascertain how well you are complying with the legislative and regulatory requirements in relation to your provision of financial advice.

Your manager has provided you with a comprehensive advice checklist which lists the following:

1. Financial product advice requirements including documentation and organisational procedures.

2. The source of each requirement (i.e. the name of legislation, code of practice, ASIC regulatory guide etc.)



The checklist is excellent – but there is one problem. It is incomplete. There are 15 items missing from the checklist. The 15 missing items are:

- Confirm exemption to provision of FSG doesn’t exist

- Ensure confidentiality of information acquired using information only for the specific purpose intended

- Act within the requirements of the licensee

- Information regarding remuneration and benefits that the planner or associates may receive

- Explain cost of such review service or basis for calculating the cost of such ongoing services

- Ensure ethical behaviour is displayed at all times and in compliance with relevant codes of practice

- Obtain agreement from client

o On each recommendations and strategies noted in the SOA.

o On timing and priority of implementation.

o On value of recommendations to implement

- NOT engage in conduct that is misleading or deceptive in relation to a financial product when dealing in that financial product

- Identification of AFSL on all business documents/ communication

- Information about the remuneration, fees, commission or other benefits that the financial planner, licensee, or any other related parties may receive that is attributable to the advice provided

- All documents formatted according to the style guide/ templates provided by the licensee

- Incomplete/ inaccurate information such as

o Identification of any information provided by the client to the adviser felt to be inaccurate or incomplete or misleading and not rectified to the adviser's satisfaction

o Provide a warning to the client they should consider the appropriateness of the advice having regard to the client's relevant personal and financial circumstances, and they have been notified of this inaccuracy, omission or incompleteness of Information provided.

- Retail versus wholesale client test

- Have you completed an SoA for all advice on Licensee letterhead?

- If required, arrange a meeting with third parties involved with implementation of recommendations, e.g. tax accountant, solicitor

You are required to identify the missing items and place them in the correct place in the checklist (1 mark per item) and then list the source (for example, the Corporations Act) for each item (1 mark per item) (total 30 marks)



Client file checklist

Move the items in the list above to the relevant location on the checklist below and identify the source.

Requirement Source of requirement (Regulation, legislative, organisational, code of practice)

Making services available to clients

Comply with AFS Licensing requirements

Become an (authorised) representative of a licensee Corporations Act

MISSING ITEM SOURCE

Appropriate advertising/ identification of AFSL

Restriction of use of certain words Corporations Act

MISSING ITEM SOURCE

Not engage in ‘holding out’ or giving the impression of a particular association

Corporations Act

Not engage in hawking activities Corporations Act

General conduct requirements

Prohibition of referral selling ASIC Act

General conduct dealing in financial services should be efficient, honest and fair

ASIC Act

Avoid false or misleading statements Corporations Act

Do not engage in unconscionable conduct ASIC Act

Ensure interests of the client and practice are safeguarded and do not conflict with duties and loyalties owed to the general public and the laws

ASIC Act

Objectivity in recommended solutions given, ensuring they meet the client's situation and needs, identifying and managing real and potential conflicts of interest

Corporations Act

Professional independence when providing services and avoiding any circumstances or relationships that may compromise the adviser's integrity, objectivity and professionalism

FPA Code of Professional Conduct

MISSING ITEM SOURCE

Highest technical and professional standards, competence with reasonable care and diligence

Corporations Act, FPA Code of Professional Conduct

MISSING ITEM SOURCE

Making statements or disseminate information that are false or materially misleading

Corporations Act




NOT engage in any dishonest conduct in relation to the financial product or services, in the course of providing the financial services

Corporations Act

MISSING ITEM SOURCE

NOT engage in Insider trading activities Corporations Act

Actions at initial interview

Ascertain type of client and advice

MISSING ITEM SOURCE

Determine if financial product advice is provided

Any statement of opinion or recommendation intended to influence or may influence a decision regarding financial products

Corporations Act & RG175

Exemptions from financial product advice (e.g. property advice)


Determine classification of advice

General Advice - Simple Product Advice with no further analysis needed (consideration to individual client situation)


Personal Advice (no consideration/ expectation to individual client situation)


Provide client with information about services offered

Provision of Financial Services Guide

MISSING ITEM SOURCE

Dispute resolution process is separate and clearly explained to clients, including referral to the external dispute resolution service


FSG contains the following:

Full title ‘Financial Services Guide’ Corporations Act & RG175

Date of the FSG Corporations Act & RG175

Licensee’s AFSL number Corporations Act & RG175

Name and contact details of the providing entity - licensee or authorised representative


Number which has been allocated by ASIC if the Representative is an Authorised Representative


Statement of the purpose of the FSG, and information about other disclosure documents that may be received by the client, (e.g. Statement of Advice (SOA) and Product Disclosure Statement (PDS))


Information relating to the kinds of financial services and products that the licensee and financial planner can provide





MISSING ITEM SOURCE

Statement detailing that full disclosure information will be provided within the SOA


Any relationships or associations which may be capable of influencing the licensee or the financial planner


Details of the dispute resolution procedures the licensee has in place


Fact finding process for personal advice

Know Your Client - Collect sufficient information to be able to provide appropriate advice to the client


Consider complexity and financial literacy issues Corporations Act & RG175

Explain the Fact Find process(including providing complete and accurate information) and its importance in ensuring Financial Advice given is appropriate to Client's circumstances, needs and objectives


Reiterate the Privacy and Confidentiality Policy regarding the handling of and access to information given by the client to the adviser

Privacy Act 1988

Make reasonable inquiries about the client’s circumstances by completing a Fact Finder including the:

• Client's circumstances and personal data

• Needs and concerns - prioritise

• Life goals and objectives –short, medium and long term

• Risk profile


Confirm and ensure thorough understanding of client's financial situation, needs, objectives and risk profile:

• Obtain Client's signature on Fact Find confirming information given is complete and accurate and FSG has been issued and received by the Client

• Adviser to sign off on the Fact Finder duly completed and date it


MISSING ITEM SOURCE

Obtain documentation of current financial situation of the client including

• Bank statements

• Superannuation, insurance and investment statements, policy documents and any other relevant information


Developing Statement of Advice

MISSING ITEM SOURCE



Have you taken a copy of the SoA on Licensee letterhead including all attachments for the file?


Are all products recommended in the SoA featured on the licensee’s APL. If not, have you obtained and filed written approval for the use of the product.


Licensee requirement

Contents of the SOA

Title “Statement of Advice” Corporations Act & RG175

Executive summary Corporations Act & RG175

Table of contents Corporations Act & RG175

The name and contact details of the authorised representative and licensee


The advice and the basis of advice Corporations Act & RG175

Any warnings in relation to incomplete information provided in the provision of the advice or restrictions on the advice given


MISSING ITEM SOURCE

Information on associations that may influence or reasonably be expected to influence the advice.


Other SOA requirements

All sections of the SOA are complete Corporations Act & RG175

Recommendations clearly explained Corporations Act & RG175

All workings and projections are attached as an Appendix Corporations Act & RG175

Generic educational material is NOT included Corporations Act & RG175

NO technical or industry jargon Corporations Act & RG175

Document personalised to the client Corporations Act & RG175

Information is presented in a clear, concise and effective manner


No material included that is misleading or deceptive Corporations Act & RG175

Present recommendations and strategies in SOA

Present strategies and recommendations in clear, succinct manner, using relevant charts/visuals where applicable:

• Use clear and simple language and ensure all terminologies are explained and avoid using jargon

• Ensure both benefits, risks and limitations of the recommendations are explained

Corporations Act



Pause at each recommendation and strategy, with open-ended questions requesting affirmation from the client, e.g.;

• Does this make sense to you

• What do you think of this strategy?

• Which product features do you like and which you don’t and why?

• How the fees and charges of this product compare to others that you may have come across?

• How do you feel this recommendation would help you achieve your goals?

Corporations Act and

FPA Code of Professional Conduct

Ensure client thoroughly understands the strategies and recommendations in the statement of advice including the total costs, benefits, risk and limitations involved in the product/service implementations.

Corporations Act

MISSING ITEM SOURCE

Get the client to fill and sign off on any other documentation needed to implement the recommendations and strategies.

Corporations Act

Get the client to sign off on the “Authority to proceed” section of the statement of advice that list all recommendations and strategies for clients approval, with indication on timing of implementation.

Corporations Act

Product Disclosure Statement (PDS)

Provide Product Disclosure Statement (PDS) of all products recommended


PDS must present the information in a clear, concise matter and with enough detail about the financial product so the client can make an informed purchasing decision


PDS contains the following:

Features of the product Corporations Act & RG175

Fees that apply Corporations Act & RG175

The benefits and risks of investing Corporations Act & RG175

Commissions that may affect client returns Corporations Act & RG175

Information about complaints handling and cooling off rights Corporations Act & RG175

Other information that is material to the client’s decision to invest


Co-ordinate implementation of agreed action plan

Ensure the client knows the actions that the adviser needs to take, to implement each of the recommendations, by using statements of confirmation such as;

• I will now prepare the application for… for your approval

• I will now place your funds with…

• The cost of these recommendations are …

Corporations Act



Explain clients involvement and role in the implementation of approved recommendations and any follow up actions for the client:

Corporations Act

Give the client a checklist of tasks to do for the recommendations agreed to be implemented.

Corporations Act

Obtain confirmation of clients understanding of their role by getting the client to repeat the tasks they are required to do and the time frame for completion

Corporations Act

Arrange for ongoing review service

Stress the importance of on-going review, and agree with the client the level of ongoing service to put in place:

• Regular annual review

• Client is advised to contact the adviser upon any change in the client’s circumstances, financial situation, needs of objectives.

• Change in legislation

• Significant drop in performance or new factors affecting products/services implemented/recommended

• New products that may be more appropriate

Corporations Act

Discuss frequently of each of these services or factor/s that would prompt a need for a review service

Corporations Act

MISSING ITEM SOURCE

Explain to the client, the regular reporting of their implemented plans that they can expect from of how they can access updated information from the website of:

• Product or service provider

• AFS licensee

• The adviser and the practice

Corporations Act

Complete and maintain necessary documentation

Ensure all documentation, PDSs and application forms are complete and duly signed by the client to implement the recommendations


Ensure client has sign off on the following documents and a copy retained in the clients file and a copy given to the client

• Engagement agreement

• Fact find questionnaire

• Statement of advice

• Authority to proceed section in the SOA


Submit all application forms and documentation to the product provider


MISSING ITEM SOURCE



If the SOA needs to be rectified or adjusted, arrange for the SOA to be rectified by the due date agreed with the client, in time for another meeting for the client to sign the “authority to process: and the product implementation documents


Update client activities summary to summarise the second interview on:

• Issues discussed

• Actions taken and those arranged

• Follow up on action, if any, by the client and the adviser

• Record the version number of SOA, product disclosure statements and other documents given to the client

• Any pertinent details to provide a quick overview of the interview


Organisational procedures

All documents presented in the specific folder provided by the practice

No regulatory requirement -requirements of organisational, industry groups and Codes of Practice

MISSING ITEM SOURCE

All documents grammatically correct No regulatory requirement -requirements of organisational, industry groups and Codes of Practice

No spelling mistakes No regulatory requirement -requirements of organisational, industry groups and Codes of Practice

All documents are saved in a clear and easily found location No regulatory requirement -requirements of organisational, industry groups and Codes of Practice

SOA dated and printed on file No regulatory requirement -requirements of organisational, industry groups and Codes of Practice

Question 6


Refer to the sample Financial Services Guide (FSG) attached at the end of this document. List four errors or omissions, using the following seven point checklist as a guide. (4 marks)

The identity of the licensee and their AFS licensee number



Full address and contact details of the licensee and the representative

The capacity of the representative (only if it is an authorised representative)

The financial services and products the representative is able to provide

Fees and other remuneration

The rights of the client

The complaints resolution process

Question 7


Refer to the Statement of Advice (SOA) template provided for Part C of the DPE Project (available online). List four compliance issues /wording errors, using the following four point checklist as a guide. (4 marks)

Title ‘Statement of Advice’

The name and contact details of the authorised representative and licensee

Any warnings in relation to incomplete information provided in the provision of the advice or restrictions on the advice given

Personalise the document to the client

Question 8


Part A


Each of the following statements contains at least one compliance error. What is (are) the error(s) in each case?

a) Advertisement: ‘Hi, I’m Allan Brown. I can arrange some excellent investments for you in managed funds or direct equities. Call me on 1800 ...’ (1 mark)

b) Advertisement: ‘Come to XYZ Financial Planning for superior service. We are independent and offer impartial advice...’ (1 mark)

c) Interview: "We’ve run out of FSGs. I’ll send one when they’re reprinted". (1 mark)

d) Interview: "ABC Imputation Fund is a great investment. We’ve run out of Product Disclosure Statements, but I can tell you what’s in one of them anyway..." (1 mark)



e) Business card:

Part B


Esme Jones is single and retired four years ago at age 63 with superannuation benefits totalling $350,000, all of which was rolled over by her financial planner Allan Turner:

$150,000 to a complying pension paying $8,000 per annum

$200,000 divided equally among four managed funds, two Australian share funds and two international funds, paying a total of $5,000 per annum in income.

Miss Jones also receives age pension payments of $5,500 per annum.

The four managed funds have lost 25% in value over the last year or so and Miss Jones has telephoned to complain. Among other things she claims that she had no idea that she could ‘lose so much’.

a). What action should Allan Turner take in this situation? (1 mark)

Miss Jones tells Allan Turner that she is not satisfied with his response.

b). What does Allan Turner then do? What happens at this next stage? (1 mark)

Miss Jones decides that the response at this next stage is not satisfactory either, and informs Allan of this.

c) What action does Allan Turner’s organisation take then? What happens at this next stage? (1 mark)

d) Explain the external dispute resolution process (1 mark)



Question 9


Access the FPA’s Code of Professional Practice at the FPA website. This code lists the eight professional qualities an adviser must demonstrate when interacting and providing advice to clients. In your own words, define the principles of:

fairness (1 mark)

diligence (1 mark)

For each of these principles identify two ways in which you can ensure yourself, and a financial services practice, and the advice you give clients could comply with the requirements. (2 marks)

DPE Project Part B - Student Question Guide

DPE Project v1206.3_Part B Student Question Guide 17

DPE Part B Project Question Guide

Question 1


List four ways that you can serve as a role model within your work team (½ mark per factor)

Question 2


Define sustainability (1 mark) and list three Australian government regulatory responses to the issue of sustainable development (3 marks).

Question 3

Marks allocated: 1 mark

Summarise the CPD requirements for financial services professionals under Regulatory Guide 146.

Question 4


Part A

List four areas of the work environment that can be altered in order to maximise work efficiency. (2 marks)

Part B

One of your clients, Ernie, has come to you for advice in a number of areas. One area in which you believe you have the chance to make improvements is Ernie’s home loan. Ernie currently pays his home loan monthly and you believe you can reduce his total annual payment if his periodic repayments are made fortnightly, in line with his pay cycle.

Part B Student Question Guide

Workplace, Sustainability & Spreadsheets

Total number of questions: 8

Total marks awarded: 31

DPE Project Part B – Student Question Guide

DPE Project v 1206.3_Part B Student Question Guide 18

Analyse the task of modelling this concept and detail the steps that need to be undertaken. The headings below can be used as a guide. (6 marks)

Step 1 – Determine your ultimate goal (½ mark)

Step 2 – List two possible resources required (1 mark)

Step 3 – Analyse what needs to be done to achieve your goals (1 mark)

Step 3a – Identify the requirements of the spreadsheet (including inputs, formulae or functions, tools to streamline the sheet, access, storage, outputs and reuse) (3 marks)

Step 4 – Develop a process of review (½ mark)

Question 5


You wish to test whether your client, Ernie, would save money by making mortgage repayments fortnightly as opposed to monthly. You have determined a spreadsheet is the best tool to analyse this.

Create a spreadsheet that will compare the two payment options. Use the following assumptions:

Outstanding loan - $500,000

Interest rate – 7.5%

Term remaining – 10 years (120 payments if monthly, 260 if fortnightly)

You will be assessed on the following

Use an “inputs” sheet and an “outputs” sheet in the same workbook

Create clearly labelled inputs, such as:

• Outstanding loan amount

• Interest rate

• Term remaining (in years) (1 mark)

Create clearly labelled outputs, such as:

• Monthly repayments

• Annualised monthly repayments

• Fortnightly repayments

• Annualised fortnightly repayments

• Difference (1 mark)

Consider whether you wish to use a formula or function to determine the monthly and fortnightly repayments

Answer in spreadsheet



The applicable formula is available in the answers to Question 4

For Microsoft Excel, the “PMT” function is useful. Equivalents may exist in other software programs. Remember:

• To click on the relevant cells on the “inputs” sheet to fill in the data inputs for the formula (use the “fx” button next to the command line)

• Consider absolutely referencing the input data

• Divide the interest rate by 12 for monthly repayments and by 26 for fortnightly repayments

• Multiply the “Term remaining” input for the “Number of Periods” field by 12 for monthly repayments and by 26 for fortnightly repayments

• The future value is 0

• The payments are to be made at the end of each period

Considering formatting to make the sheet as user friendly as possible (1 mark)

Ensure you test the outputs of the spreadsheet using the equation provided in Question 4 or the example shown in the answer to this question (1 mark)

This answer to be provided in spreadsheet format.

Name these worksheets YOUR NAME Question 5 Inputs and YOUR NAME Question 5 Outputs…

Question 6


A simple macro is to be added to an existing spreadsheet with the purpose to delete the inputs in this spreadsheet. If you have completed Question 5 you should undertake the following exercises in this worksheet.

Part A

Create a macro that will clear the three input fields on the “inputs” spreadsheet. (2 marks)

Part B

Create a button on the input sheet that can be used to execute the macro and assign the macro to that button. (2 marks)

If you have NOT undertaken Question 5, create a simple spreadsheet or use an existing spreadsheet. For example create a single sheet with three input fields “input 1”, input 2” and “input 3”. Enter a number in each

Answer in spreadsheet



of the input cells. Create a cell labelled “output” that adds the three input cells.

Tips for creating the Macro (specific references are for Excel 2010)

Ensure your spreadsheet software allows the use of macros.

Ensure you are on the “inputs” sheet

Select “Record Macro” from the “Macros” option (in the “View” menu)

Title the macro “clear”

Assign a shortcut key. Please note that shortcut keys cannot be those that are already assigned (e.g. Ctrl + x is already the shortcut for “cut”)

Once the macro is recording, perform the actions you wish to be repeated (e.g. click on cell C2, hit delete, click on cell C3, hit delete, click on cell C4, hit delete)

Stop the macro recording (use the small blue square at the bottom left of the window)

Test the macro by re-entering inputs and then using the shortcut key

Tips for creating the button (specific references are for Excel 2010)

Insert a rectangle (in the “Insert” menu, click on “Shapes” then choose a rectangle)

Drag the rectangle to the position and size you want on the “inputs” sheet

Enter the text “clear inputs” (right click on the shape and choose “Edit Text”)

Assign the macro to the shape (right click, choose “Assign Macro” and assign the correct macro)

Test the button by entering inputs then clicking on the button to execute the macro

Add the macro to your spreadsheet.

Name the worksheet YOUR NAME Question 6

Question 7


You have created a spreadsheet to determine whether your client, Ernie, would be better off making his mortgage repayments monthly or fortnightly (Question 5). Ernie is a visual person and you want to demonstrate this using a graph or chart.

Part A

Part B: Answer in spreadsheet



What sort of graph or chart should you use and why? (1 mark)

Part B

Using the spreadsheet created in Question 5, or the information provided in this question, create a graph to demonstrate to Ernie the benefit of making his mortgage repayments fortnightly. (3 marks)

If you have NOT undertaken Question 5, create a simple spreadsheet or use an existing spreadsheet which shows comparative figures for a given variable.

Assessment areas

Ensure your data is organised in such a fashion that there are no blank cells between the relevant figures. If need be, replicate the relevant information on the “graph” sheet

Highlight the relevant data and create the graph type required

Edit the graph to emphasise the desired point (e.g. truncate an axis, add or remove a legend, change the colour scheme, add a title)

Part B – create a worksheet called YOUR NAME Question 7…

Question 8


You now need to present these calculations for the client:

In a summary report for the client in the form of a word processing document (e.g. Microsoft Word or Pages) and the relevant information needs to be exported to this document and

in hard copy – you wish to have a printed copy to present to your client as well as to keep on file as a hard copy

For the following questions, please use the spreadsheet created in Question 5 or 6. Alternatively you may use a spreadsheet you have created previously that includes a graph.

Part A

Add the calculations you to a Summary Report for the client in a word processing document by exporting the relevant data from your spreadsheet. The relevant data should include the inputs, the outputs and the graph. Export the data so that any changes to the spreadsheet will not alter the word processing document. (1 mark)

Note: The most common way to export data is to copy and paste.

Part B

Part B: Answer in spreadsheet



Summarise the relevant information in your workbook as follows:

Create a new worksheet to organise the information called Question 8.(1 mark)

Organise the information you wish to be in the one page summary (including the data used, the outcomes and the graph) (1 mark)

Ensure the layout is appropriate and aesthetically appealing by using the “Print Preview” functionality. (1 mark for layout)

Part B – create a worksheet called YOUR NAME Question 8…

DPE Project Part C - Student Question Guide

DPE Project v1206.3_Part C Student Question Guide 23

Part C Student Question Guide

Question 1


Complete the summary of the financial situation of the Tony and Clare Mancini in the table provided in the SOA (including their net worth).

Question 2


Part A


Tony and Clare have completed the annual income details in the fact finder. However, they have left the following table blank: “Current Estimated Taxation Liability & Net Income”. Complete the table below where it is included near the beginning of the SOA and shown in the question guide.

Note: You will need to complete all sections of the table to show adequate workings for the marks allocated in the final two rows. Assume no offsets are available.

Part B


The Mancini’s fact finder does not detail the totals of their annual income and expenditure in the “Annual Expenses and Cash Flow” section. Complete the table below where it is included near the beginning of the SOA.

Question 3


Part C Student Question Guide

Project: Based on the Case Study of Tony and Clare Mancini

Total number of questions: 14

Total marks awarded: 80

SOA

SOA

SOA

DPE Project Part C – Student Question Guide

DPE Project v 1206.3_Part C Student Question Guide 24

Go to the supplied SOA template and complete the section titled “What you want to achieve”.

This section asks you to list the Mancini’s objectives. For each goal and objective, identify it (1 mark total), explain it (1 mark total) and give it a timeframe (1 mark total).

Question 4


Complete this question in the “Additional information to assist your decision making” section in the SOA template.

Tony and Clare both complete the risk profile questionnaire (RPQ) attached to the fact finder. Tony has come out as an “aggressive” investor and Clare as a “balanced investor”. Clare has several questions about risk profiling and the definition of a balanced investor. Clare needs your assistance with:

Explaining the standard risk profile of a “balanced” investor (1 mark)

Explaining the concept of risk and return (1 mark)

Understanding what her investment risk profile means with regards to aspects such as risk, returns (capital growth and income), timeframe of investments, volatility, hedging inflation and tax effectiveness (2 marks).

Question 5


Part A


The clients’ main objective is to build wealth and increase retirement savings. They are unsure whether it would be better to do this through investing in a managed fund or using a superannuation strategy. The Mancini’s have $10,000 in a cash account. They would like to retain a $7,000 emergency reserve and have $3,000 available for investment.

Construct a strategy in the “Recommendations” (main) part of the supplied SOA template. Assumptions will include client objectives, access to money, the amount of funds to invest and the surplus cash flow. For the purposes of this case study, assume that these are the only two strategic options the client wishes to consider. Do not recommend an alternative such as repayment of debt.

SOA

SOA



Remember to complete all questions in the relevant blank section of the SOA template.

Outline the proposed strategy (investing in superannuation or managed funds). You will need to fully explain your recommendation (4 marks), list the assumptions used (1 mark), define a superannuation fund and a managed fund (½ mark), along with whose name you recommend the clients invest in (½ mark). (6 marks total)

Prepare a projection of either the managed fund or superannuation strategy using the modelling tools at the Money Smart website. (2 marks)

Go to www.moneysmart.gov.au > Tools and resources > Calculators and tools > Managed Funds OR Superannuation calculator (how fees affect your payout). Note that you can’t save the calculator inputs to return at a later time, but can save the output in PDF format. (Do not send the PDF document as your answer)

Do not include this modelling in your answer or in the SOA template. Instead, use this modelling to list the following items in the SOA template where indicated:

Assumptions used to create projections (½ mark)

The projections for 10 years for the management investment strategy OR The projections until retirement for the superannuation strategy (1 mark)

Figures before and after fees for the management investment strategy

OR Figures with and without the extra contribution for the superannuation strategy (½ mark)

What are the advantages of your proposed strategy? (2 marks)

What are the disadvantages and risks of the proposed strategy? (2 marks)

Part B


Tony and Clare have indicated they didn’t feel they needed advice on personal insurance. During the interview however, Tony asks a question about income protection. In a separate recommendations step in the SOA explain the benefits of having income protection (1 mark) and the risks associated of not having it (1 mark)



Question 6


Refer to the following section “What this advice will cost you and how we are paid” and complete the disclosures for the financial advice provided, making sure your disclosures are made in both percentage (%) and dollar ($) terms. You need to complete the following sections which have been left blank in the SOA template:

a) The disclosure breakdown table (initial and ongoing disclosure) (2 marks)

b) Product annual fees (2 marks)

Make the following assumptions:

Fee for plan preparation is $700

Fee for implementation is $2,000. There is a 10% penalty on the implementation fee if they decide not to go ahead with the advice

The recommended strategy (for the disclosures) is to invest $3000 in a managed fund or superannuation investment with an ongoing commission of 0.80% applied per annum. Note you should assume a total initial investment amount of $3,000 regardless of your recommendations contained within Question 9 of this project.

• Complete the product annual fees in the table in the SOA using the given 60%/40% split of underlying investment options in the fund. For the purposes of this question you are to assume two underlying funds have been recommended regardless of what you have recommended in Question 9 of this project. You specifically need to complete the columns titled “Amount Invested” and “Cost PA $

Question 7


Reviewing the estate planning and power of attorney (POA) information in the fact finder, construct a recommendation in the supplied SOA template (in the “Recommendations” section) addressing their Wills and estate planning needs. Specifically, answer the following questions in your recommendation:

a) What is the current status of their Wills? What are the risks of not having a valid Will in place? What are the benefits of having a Will? (2 marks)

SOA

SOA



b) What would you recommend and why in relation to a power of attorney for Tony and Clare? Ensure you consider all available types of attorneys. (4 marks)

Question 8


Tony and Clare ask you what happens after they receive the SOA and wish to act upon the advice provided.

Note: Students should only complete this question in the Action Plan template included in the SOA adding more rows if necessary. Do not include a separate document as Pinnacle cannot accept this for marking.

a) In the SOA template, explain what is required for an implementation/action plan (just before the actual implementation plan asked for in section D below). (1 mark)

b) In the SOA template, list the broad implementation items required for the implementation of Tony and Clare’s advice. (1 mark)

c) In the SOA template, explain how you would monitor the implementation of the advice to ensure that lodgement dates and plan timings are met (1 mark)

d) Complete the implementation plan template for Tony and Clare which is included in the SOA. Remember to include specialist implementation points for each product, specifically superannuation and managed investments.

Your completed action plan should list the personnel responsible for implementation of each point, completion date for each point, any authorities/signatories required, transaction items required to implement the recommendations, cheques to be written, third party specialists to be followed up, account/ investments/ insurances to be implemented or closed. (3 marks)

Question 9


Tony and Clare enquire about your review service. Write a letter to the client’s (which must be written at the end of the SOA template) about your review service so they can determine if it suits their needs. Do not copy word for word for the sample provided in the course; the letter should specifically include items that may be specific to your clients.

Note: Students should only write this letter at the end of the SOA template. Do not include a separate document as Pinnacle cannot accept this for marking.

SOA

SOA



The letter should include:

a) An outline of the ongoing service being provided, including fees and charges (1 mark)

b) An agreement with the clients to undertake an ongoing service (½ mark)

c) Any referrals to other external or internal professionals (½ mark)

d) Review of client circumstances (½ mark)

e) Review of strategies (strategic review) (1 mark)

f) Review of products (investment monitoring) (1 mark)

g) Regulatory changes and new market opportunities (1 mark)

h) Timeframes for implementation of review items (½ mark)

Question 10


Using the information provided in the Mancini case study describe Tony and Clare’s “typical” life stage (½ mark). Explain how the standard characteristics of their typical life stage will dictate their financial needs and objectives (½ mark) and how they will impact upon your recommendations (1 mark).

Ensure your response covers the advice areas applicable to the Mancini’s, and is tailored to their specific situation.

Question 11


During your fact finding interview and subsequent review of the Mancini’s situation you discover you need more information from them. You also think that you will not be able to assist them with specialised advice in all areas. Refer to the case study and answer the following questions:

Part A


a) What other information do you require from the clients? (List at least four (4) items) (2 marks – ½ mark per item)

b) What additional questions could you ask the Mancinis to elicit qualitative information from them? (List at least four (4) questions) (2

File note

File note



marks – ½ mark per item) (Do not list questions requiring one word answers or yes/no etc.).

c) List four (4) further questions for the Mancinis to clarify their stated goals and objectives? (2 marks – ½ mark per item)

Part B


List two (2) areas you will not be providing advice to the Mancinis and explain your reasons (2 marks – 1 mark per response)

On what occasions should specialist advice be sort? (1 mark)

List any other professionals to whom you will be referring the Mancinis for specialist advice. (1 mark)

Question 12


Part A

Marks allocated: 4 marks (1 mark for each area)

You have determined that you need to research some further information in order to examine at the Mancini’s retirement aspirations. One key area that you have decided need to be addressed to provide retirement advice is the Mancinis’ preservation ages.

You ask your para-planner to conduct this research and need to prepare a summary to guide them in this area. Identify the following areas and prepare your answer in the able provided below:

a) Why the additional information is needed (e.g. legislative, clarification of client specific data) (Purpose)

b) Where you will be able to find the information you require (Sources). Sources can include legislation, other specialists, websites and reports from primary and secondary sources. If secondary sources are cited, provide an explanation on how the information they provided was verified. Do not cite the Pinnacle text as a source.

c) An approximate plan for how long each research task will take to complete (bearing in mind when the Mancinis will come back to you) (Expected duration)

d) Which element of the advice could not be addressed until the research is completed, or when certain information is obtained (Interdependencies).

Present your answer in the table format in the Answer Guide.

File note



Part B


Your paraplanner completes the necessary research and discovers that both Clare and Tony have preservation ages of 60. As such, you create your retirement modelling based on this information.

You identify that the major concern with this information is that the legislation may be changed by current or future Governments. Provide an explanation to be included with the modelling explaining this risk. Be sure to include:

The specific piece information used (1 mark)

How this information was obtained (the research source) (1 mark)

What the risk is (1 mark)

Why this risk is relevant (consider whether there is a history of similar events) (1 mark)

How this risk may be mitigated (consider your review service) (1 mark)

Question 13


It is now time for you to present the SOA to the Mancini’s. You make an appointment for them to come in so you can present your recommendations in person. To prepare for the presentation you:

a) Note down the main headings of the content you will need to cover off in your presentation of the SOA to the Mancini’s in the appropriate order (3 marks)

b) List two key items of supporting documentation that should be provided to the Mancini’s (2 marks)

File note

Documents

Sasa ProjectQuestionGuide