Risk, Insurance and Superannuation II

Risk, Insurance and Superannuation (Kunkun: 12/11/2020)
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Submission details
The submission must include the following in ONE PDF document / file:
The assignment (SOA) in a PDF format, incorporating all the relevant elements to ensure the
prepared SOA is compliant with the relevant financial services laws, technically accurate and
professionally presented. The SOA must include in the appendix a compliance statement
(maximum 2 pages) demonstrating compliance with the relevant financial services regulations
and legislations (i.e. Best Interest Duty, Better position statement, Switching advice rules (refer
to the ASIC info sheet 182) and the disclosure requirement).
Use the submission link provided on Moodle. Only submissions via the link will be accepted
VERY IMPORTANT _ Rules You Must adhere to
The aim of this task is to demonstrate competence in constructing a professioan
aand compliant SOA. The work therefore must be your own. Turnitin similarity
reporting is strictly applied. Copying from other students work or starting from a
template completed by a student who completed this course or a similar course at
other educational institutions previously is considered plagiarism and will be
penalised and likely lead to failing the assignment.
Your similarity result should be in low single digit (less than 15%). Systematic
plagiarism will be penalised regardless of the similarity score.
Plain and simple this work must be your own work in its entirety.
Similarity between 15 and 30% will be closely investigated
Similarity exceeding 30% will not be graded
You CANNOT use software or other licensees /companies’ templates. This
assignment must be entirely your work cover to cover.
Risk, Insurance and Superannuation
Individual Assignment – Term 3 2020
Due to be submitted no later than 11.59 pm on Friday the 20th of
November 2020 in a soft copy format via the Turnitin link placed on the
Moodle course website.
*Please allow a minimum of 20 to 30 minutes to upload your assignment.
Do not wait untill the due date to upload your assignment as the system can
become slow closer to the due date.
NO ASSIGNMENT WILL BE ACCEPTED VIA EMAIL OR ANY OTHER FORM/S
This assignment will comprise a total of 40% of the marks allocated for this unit.
The assignment consists of the preparation of a scaled advice related to limited scope
of matters related to insurance, risk management and superannuation. The advice
document needs to be in a form of a professional & compliant Statement of Advice
(SOA) in relation to the case study. The SOA must adhere ASIC RG175 requirements
in particular the “Clear, Concise and effective” requirement. The SOA must meet the
compliance requirement including meeting the Best Interest Duty, Switching advice
rules (refer to the ASIC info sheet 182) and the disclosure requirement ( For insurance
commission refer to ASIC report 527)
Late submissions will be accepted; however, they will incur 25% penalty for every 24
hours after the due date. HOWEVER, Please Note: YOU CANNOT overwrite your
submission after the due date (No resubmission past the due date).
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Important Notes:
• The assignment must be typed (Font 11)
• Attempt ALL questions and issues raised in the case study
assignment
• Ensure your SOA contains all the relevant sections, to
ensure your SOA is compliant with the relevant financial
services laws, technically accurate and professionally
presented in line with the industry best practice
• Your PowerPoint presentation needs to be
professionally presented and represent an accurate
summary of the SOA/ executive summary
• Where appropriate, the use of tables, graphs, flowcharts,
etc. is encouraged to help illustrate your point clearly
• Show workings and calculations where applicable
• Clearly state your source references. Be clear in answering
the questions and or clients enquiry.
• Assumptions must be clearly stated, assumptions need to
be reasonable and logical and cannot conflict with the
facts in the question/s
Assumptions
o Inflation 2.5%
o AWOTE 3% (use for wages inflation)
o Assume the investment rate of return is 5% applied to
investable assets (i.e. Superannuation) where a growth risk
profile asset allocation is used,
o Use 2020-21 tax rates where applicable
o Use FBT rates effective 1 April 2020 if and where applicable
Refer to the mark allocation and what is expected from you
section below for further details and tips
Important Note: You need to answer the question in a Statement of Advice (SOA)
format in accordance with ASIC guidelines (refer to RG 90 for examples only). The SOA
must have a 2 page “Executive Summary” section where you summarise the client’s
current situation, needs, concerns, goals, objectives and your recommended strategy.
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Case Study – The Prada Family
James Prada (aged 40) is married to Lydia (aged 39). They have two children,
Charlotte (8) and Jordan (6).
James is an architect working of a large architectural design firm. He is currently
planning to stay in the same firm for at least the next 10 years, after which he is
considering starting his own firm.
Lydia is a. She is a software engineer working in for a global IT company, she is
always trying to balance between work and family. She would like to reduce her hours;
however, the cost of living pressures including the children’s private school education
require her to work full time.
James and Lydia have been discussing for a while the need for them to see a financial
adviser to ensure they have adequate insurance and to consolidate their
superannuation accounts since they both have accumulated 2 sperate accounts from
their past employment. They also want to make sure their superannuation is invested
appropriately, to help them grow their superannuation and save for retirement,
particularly in light of the latest superannuation changes.
James and Lydia have a very strong view to do whatever possible for their children
including making the investment to put them through private school education from
primary school and would like to continue to assist them in every way possible.
Both James and Lydia have reasonable experience when it comes to investment and
management of their financial affairs. Although in recent times James and Lydia have
been too busy to pay attention to their financial affairs. They however, hope this will
change in the near future as they are keen to take control of their investments to ensure
they meet their lifestyle and retirement goals and objectives.
James and Lydia have decided to come and see you. They made an appointment for
an initial consultation with you.
James and Lydia have left you with the information below after the first interview.
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The Prada family personal and financial information
James Lydia
Income salary & wages *
(excludes employer SG
contribution)
$270,000 $220,000
Home (principal residence)
Unencumbered $1,600,000 (Joint tenancy)
Home loan
@4.2% variable (current
repayments $8,500 per month) $850,000
Home contents
$150,000
Car $70,000
Bank Account (at call) $28,000 (Joint)
Superannuation Accounts from
previous employments
Australian Super
Account Balance: $130,000
(Insurance $150K life and
TPD included)
Investment: Default Life
stages
(10% Tax free Component
and 90% Taxable, Taxed
component)
Uni Super
Account Balance: $110,000
(Insurance $120K life and
TPD included)
Investment: Default Life
stages
(5% Tax free component and
95% Taxable, Taxed
component)
Current Employer
superannuation where the
employer contribution is made
(retail funds)
CFS – FirstChoice Employer
Super
Account Balance: $250,000
(Insurance $700K life and
TPD included)
Investment: Growth (80%
Growth, 20% Defensive
(100 % Taxable, Taxed
component)
MLC MasterKey Business
Super
Account Balance: $125,000
(Insurance $500K life and
TPD)
Investment: Growth (80%
Growth, 20% Defensive
(100 % Taxable, Taxed
component)
Living expenses **
Exclude loan repayments and
Private school fees
$90,000 p.a
Notes to the supplied information:
* The employer makes only the mandated employer contribution (SGC) to their
superannuation nominated superannuation fund.
** James and Lydia’s total current income requirement will continue until retirement.
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You need to clearly address the following issues:
• Their goals, objectives, needs, and concerns and whether they can achieve their
objectives including their retirement objectives and how (attempt to present
them with more than one option where applicable).
• They also ask you to address and take into account the following specific
issues:
o James and Lydia would like to retire once James reaches age 65. However,
they are happy to postpone retirement for a few more years if this would
help them achieve a more comfortable retirement as James is happy to
scale down his workload and stay working on a consultancy basis for a few
more years. They think that they need an after-tax income of $80,000 in
today’s dollars during their retirement (assume that this income can be
produced tax free at retirement). They would like to know whether they will
have sufficient superannuation savings accumulated to help them fund their
retirement objectives. (Use the longest life expectancy between James and
Lydia and the add 8 years when performing their retirement projection).
o Lydia has attended a seminar at her covering how to use a salary
sacrifice to superannuation strategy to maximise retirement income,
she is questioning whether such a strategy would be suitable to
either her, James and or both of them (provide a calculation
illustration with your explanation).
o James and Lydia would like to consolidate their superannuation, they want
to understand the meaning of the different superannuation component (Tax
free and Taxable components). They have also been considering
establishing an SMSF. They wanted to know the key relevant issues they
need to be aware of including their roles and responsibilities as trustees as
well as the key risks and benefits related to their specific circumstances. At
present James and Lydia’s superannuation contribution goes to an employer
nominated retail fund, they are wondering whether they can consolidate all
their superannuation into an SMSF and have their future employer
contribution directed to the SMSF.
o James and Lydia are keen to save for their retirement and grown their
superannuation savings. They want to also explore the concept of borrowing
to purchase a property by using a Limited Recourse Borrowing
Arrangement.
o James and Lydia would like to know more about the possible investments
available in an SMSF including investment in real property,. They also would
to know the rules surrounding the purchase and leasing of a real property
through the SMSF
o James and Lydia would like to know more about their option in utilising their
superannuation savings to commence a pension or an income stream in
retirement. They would like to know the different types of pensions can be
available to them to utilise with their superannuation savings to fund their
retirement. They also would like to know if the latest superannuation
changes impact their retirement plan.
o James and Lydia would like to pay off their home loan as soon as possible.
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o James and Lydia would like to continue their commitment towards
their children’s private schooling both for their primary and
secondary school education. They would like to set aside $25,000
p.a. for each child
o James and Lydia would like to ensure they have adequate general and
personal insurance. They want to know the type of insurance and the
amount of cover they should be considering to ensure they are adequately
covered Be specific in your advice and perform an appropriate needs
analysis as part of your justification, discussing why it’s important to have a
risk management plan and the different risk management strategies they
can consider including insurance highlighting the need for insurance and
the risks of under insurance.
o Provide appropriate projection model to justify your recommendations
o Use diagrams and charts to assist with your illustrations.
Risk Profiling- after a risk profile assessment and a through discussion with James
and Lydia on their risk tolerance, attitude to risk and risk capacity, it was determined
that their risk profile is “Growth risk Profile” consisting of 80% growth and 20%
defensive assets.
As per the assumption provided a growth rate of 5 % is applied to investment assets
invested in line with the growth risk profile
Your task now is to prepare a complete scaled advice Statement of Advice (SOA) for
James and Lydia. The information provided in the client scenario is to be used in
preparing your calculations and advice. As the assignment is to be a SOA for clients, it
should be in a suitable format and use appropriate language. Clarity and conciseness
are important but full explanations are required.
Your advice will be limited in scope covering at minimum the key areas below.
• Risk management plan including Insurance needs analysis and insurance
advice including product recommendations
• Superannuation consolidation, contribution, investment asset allocations
strategies and recommendations providing reasoning and justifications
• Retirement planning.
• Debt management
• Cash flow and asset projections
• Provide assumptions used and justifications (cost, risk, suitability, etc.) where
required.
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Assignment mark allocation & what is expected from you
Mark Allocation
Marks breakdown between both tasks SOA and presentation slides (out of 100)
Overall Presentation SOA 25 Marks
Disclosure and compliance 15 marks
Analysing current situation, the client goals, objectives needs and concerns 20marks
Strategy and recommendation 40 marks
What is expected from you
Deliver appropriate advice that address all the clients goals, objectives, needs,
concerns and special circumstances. The advice need to meet best interest duty and
demonstrate the client will be in a better position in following the advice and
recommendation you have presented. You need to clearly identify the risks of the
advice and how they can be mitigated .
Your SOA The SOA need to be professionally presented and reader friendly, aiming for
best practice and not for minimum standards. The statement of advice based entirely on
your own work. The SOA need to be compliant with all the financial services regulation
for the format, the advice itself and all appropriate and required disclosures. Providing a
compliant statement of Advice (i.e. disclosure, meeting the best interest duty, regulatory
etc.). The SOA must adhere ASIC RG175 requirements in particular the “Clear,
Concise and effective” requirement. You also need to ensure other relevant compliance
issues include switching advice
Current situation: Building and structuring the client current situation (including pre
advice cash flow and net worth)
Clearly analysing the fact in the case study
Appropriately addressing all the client goals, objectives, needs, concerns and special
circumstances
Providing a client with strategy that addresses all the client goals, objectives and
concerns and aims to meet the client goals
Providing client with options and solutions – providing alternative strategies
Highlighting how the strategy is in the best interest of the client – i.e. meeting the best
interest duty
Highlighting the risk of the strategy (if any) Addressing how the risks can be mitigated
Providing specific product recommendations to execute the strategy
Obtaining Authority from the client to proceed with the recommendation
Insurance Advice: you need to perform needs analysis based on the clients’ facts and
special circumstances listed in the case study. You need to identify needs and gaps
and provide clear recommendations of what insurance covers should be sought,
increased or upgraded, cover type, sum insured, etc . For Insurance quotes, you can
make appropriate and reasonable assumptions (i.e client is in good health and is a non
smoker, providing there no information to the contrary in the case study).
SMSF & Superannuation Advice: you need to avoid including generic information and
general pros and cons. Your advice related to SMSF (to set or not to set up, to keep
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and not to keep, etc.) need to be specific to the client’s circumstances and facts listed in
the case study.
Other superannuation advice need to be provided with clear justification maintaining or
switching. All super switching advice need to refer to ASIC information sheet INFO182.
Switching Advice: All switching advice (superannuation, investment and insurance)
need to be clearly justified. Retirement Advice: you need to perform appropriate calculation to identify the amount required to fund retirement income and other expenditures (if any) the clients intending to undertake. You need to clearly demonstrate through both cash flow and net worth projections how the clients is able (or unable if they don’t have sufficient resources) to fund their retirement
Presentation – needs to be professionally presented and your SOA document must flow
nicely and need to be reader friendly
Disclosure & Compliance – Appropriate disclosure of fees and benefits and meeting the
regulatory requirement of advice documentation
Technically accurate advice – It’s critically important to provide accurate advice for the
client to rely on
Again, always relate to the clients’ specific circumstances throughout the SOA and
ensure you are specific when explaining concepts, rules, regulations, legislative
changes in terms of highlighting their impact on the clients specific and relevant.
Key sections you must include in the SOA:
• Covering letter
• Cover page
• Table of Content
• Executive summary (2-3 pages max)
• scope of advice
• Assumptions
• Current situation- information about the client
• Goals and objectives analysis including needs, concerns and special
circumstances
advice and recommendations
• Insurance advice
• Superannuation and SMSF advice
• Other advice related to specific goals and objectives (education funding,
• specific questions, etc.)
• Meeting best interest duty
• Risks of the advice and how they are mitigated
• Disclosure sections – meeting all legal and best practice disclosure
requirements:
• The cost of the advice and how you are paid.
• All fees, commission and other benefits including soft dollar commissions
• Specific disclaimers.
• How to proceed. Authority to proceed and actions to proceed
• Implementation schedule
• Appendices
End of Assignment
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Individual Assignment Rubrics and marking guidance
The rubric below is read conjunction of the assignment expectation listed below
Very Good to Excellent ( D – HD) Satisfactory (Pass to Credit) Unsatisfactory
• Clear and appropriate
SOA/assignment layout and
structure
• Clearly addressing and providing in
depth analysis of all the clients goals,
objectives, risks and concerns
• Clear and thorough analysis in
determining the client risk profile
addressing different goals and time
horizon (i.e. utilizing goal-based risk
profiling)
• Clearly identify strategies to help the
clients achieve their objectives, with
addressing clear alternatives/
scenario analysis
• Clear and concise and effective
articulation in addressing the
required contents requested in the
assignment question
• Good and efficient use of Visual aids
(table, graphs, headings, etc.) for
illustration
• The SOA is Professionally presented
flow nicely and reader friendly
• Meeting the compliance
requirement of an SOA.
• Clearly demonstrating the advice
meets Best interest duty
• Highlighting the risk of the advice
and how they can mitigated
• Meeting best practice standard
• Providing alternative options strategies and
recomendations
• Providing clear cash flow
projections
• Regularly relating the advice to the
client personal circumstances and
facts in the case study
• Little or no generic information in the
body of the advice
• Professionally prepared and
presented PowerPoint slides with
detailed speakers notes
• Clear evidence of independent
research and analysis incorporated
throughout assignment as required
• Appropriate use of referencing where
necessary
• Thoroughly Addressing all the points of
what expected of you below
• Very Low Similarity (Turnitin
report)
• Adequate SOA/
assignment layout and
structure.
• Clearly addressing and
analysing the clients goals,
objectives, risks and concerns
• Clear and adequate analysis in
determining the client risk
profile addressing different
goals and time horizon (i.e.
utilizing goal- based risk
profiling)
• Clearly identify strategies to
help the clients achieve their
objectives, with addressing
clear alternatives and scenario
analysis
• Clear and somewhat concise
and effective articulation in
addressing the required
contents requested in the
assignment question
• Adequate use of Good and
efficient use of Visual aids (table,
graphs, headings, etc.) for
illustration
• The SOA is reasonably
Professionally presented and
reader friendly
• Meeting the ompliance
requirement of an
SOA.
• demonstrating the advice
meets Best interest duty
• Clearly highlighting the risks of
the advice and how they can
mitigated
• Providing clear cash flow projections
• Adequately relating this advice
to the client personal
circumstances and facts in the
case study
• Some generic information in
the body of the advice
• Clearly prepared and
presented PowerPoint slides
with detailed speakers notes
• Some evidence of independent
research and analysis as required
• Appropriate use of referencing
as required
• Covering the key points of what
expected of you below
• Low Similarity (Turnitin report)
• Poor assignment layout and/or
structure
• No Adequately
addressing or
analysing the
clients goals,
objectives, risks
and concerns
• No clear analysis in
determining the client
risk profile
addressing different
goals and time
horizon (i.e. utilizing
goal-based risk
profiling)
• Vague or unclear strategies
• Failing certain
compliance
requirement.
• Not adequately
demonstrating the
advice meets Best
interest duty
• Not highlighting the risks
of the advice and how
they can mitigated
• No or unclear cash flow
projections
• High use of generic information
• Poor presentation overall
• No demonstrated
independent
research or analysis
• Little or no use of references
• Not adequately Covering
the points of what expected
of you below
• High Similarity (Turnitin report)

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