FPC003 Superannuation and Retirement Advice - Case Study Assignment

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Assignment 2 details

  • This assignment covers Topics 2 to 10 and accounts for 40% of your final
  • There is one (1) section in this assignment:

– Section A refers to Case Study A and requires you to develop a financial plan for the clients worth a total of 95 marks.

Answer all questions.

  • Marks will be awarded for referencing and
  • Your overall mark for this assignment will be rounded to the nearest whole
  • Refer to the Criteria-Based Marking Guide for guidelines on what is expected for each
  • Full workings must be shown for all calculations. Show all calculations in the text of your assignment and not attached as an Appendices to the assignment will not be read.
  • Indicative weightings are noted beside each question. Use these weightings to assist you with your allocation of time and The weightings indicate the relative importance of each question.

State all assumptions used in providing your answer.

Independent research

For some or all questions in this assignment, you will be required to complete independent research beyond the provided materials. You will also be expected to analyse this research and use it to support your own reasoned conclusions.

This includes:

  • consideration of multiple sources beyond topic notes or other provided resources
  • sources included are academically sound and credible
  • analysing and understanding the argument or information the source presents
  • using the material appropriately to directly support your

Where significant independent research is required for a given question, it will be clearly indicated in the question instructions and the Criteria-Based Marking Guide.

Assignment 2 referencing and presentation (5 marks)

Your assignment should be presented in a clear and appropriate format, with all sources correctly referenced and cited.

You are required to:

  • structure a clear response to each question, using headings if required
  • number questions (including sub-questions) and pages
  • use correct font style and size
  • ensure tables or graphs are clearly labelled and readable
  • clearly set out calculations or workings, where they are required
  • adhere to the assignment word limit
  • cite sources and provide a reference list at the end of your It is recommended to use Kaplan Professional’s preferred referencing style, Harvard (see Kaplan Australia: Harvard Referencing Guide, available from the ‘Build Your Skills’ hub in KapLearn), but the consistent application of any other referencing style will also be accepted.

Section A

There is one (1) question in this section worth 95 marks.

Case study A: Francesca and Robert Kincaid

It is 1 July 2022 and you are assisting Francesca and Robert Kincaid. Robert (aged 78) has been finding it hard to manage at home since he suffered a stroke which has resulted in the onset of dementia.

The disease makes Robert aggressive at times, and it is unpleasant for Francesca (aged 69) who is not capable of looking after him at home. They have investigated home care and do not want to take up that option. Although they do not want to be separated, they have agreed that the best solution for them both is for Robert to enter an aged care facility. Francesca has been granted an enduring power of attorney (POA) from Robert, so she is able to make decisions on his behalf if needed. At this stage, however, Robert is still capable of understanding advice on most days and should be included as a client.

(Note: You are not expected to deal with this aspect of authority in the statement of advice (SOA), but your outline of their current situation should include acknowledgement of this concern.)

Robert and Francesca have discussed the situation with their three adult children, and they all agreed and encouraged Robert to move into an aged care facility near the family home. Francesca has found a room at an aged care facility near her that she and Robert liked. The required lump sum entry contribution (refundable accommodation deposit or RAD) for this room is $550,000.

Robert and Francesca own a small house with no mortgage and an old car. They are unsure about what to do with the house but ideally Francesca would like to stay there until she too needs to go into care, although she doesn’t expect that to be any time soon as she is relatively fit and healthy.

Robert and Francesca’s primary goals in order of priority are:

  • Optimise their situation to make aged care
  • Francesca to remain in the family home, and Robert to move to residential aged
  • Obtain some age pension to assist with their
  • Francesca would like to maintain her current lifestyle and estimates she would need about

$39,000 per annum to do so (see details in Table 3).

  • Leave an estate benefit for their three children and two grandchildren. Although they want to live comfortably in their retirement, they have both always intended to leave something for their

Assets, liabilities and cash flow

The following section details relevant assets and liabilities, details of Robert and Francesca’s account-based pensions and their current cash flow.

Table 1          Assets and liabilities

Item Ownership Value
Principal residence: 9 Turnbull Street, Clifton Hill Joint $1,915,000
Contents (insured value) Joint $60,000
Motor vehicle (insured value) Robert $8,000
Cash in bank Joint $245,000
Account-based pension (start date 1/7/2014; however, not assets test exempt) Robert $544,000
Account-based pension (start date 1/7/2018) Francesca $339,000
Total $3,111,000

Although Robert commenced his account-based pension (ABP) in 2014, it does not qualify for a Centrelink exemption. Francesca did not start an ABP until much later than Robert as she is much younger. Their car is old and will probably need replacing in the next couple of years. Francesca is the one who uses it the most and she does not want to be without a car. When their current car breaks down, she would like to

replace it.

Table 2          Account-based pension (ABP) details

Item Robert ABP Francesca ABP
Start date and investment option 1/07/2014; Balanced 1/07/2018; Balanced
Tax-free component $75,000 $3,000
Taxable taxed component $469,000 $336,000
Taxable untaxed component $0 $0
Total $544,000 $339,000
Pension payment (annual) $37,500 $22,500
Tax on income $0 $0
Income after tax $37,500 $22,500

As Francesca and Robert have been retired for some time, they have made no contributions to superannuation since June 2018. They take their income based on needs and a desire to not run down their ABPs. Robert and Francesca are both considered balanced investors as per their risk profile. They currently do not want advice about changing pension fund providers or asset allocation for the ABPs.

Table 3 shows their income and cash flow.

Table 3          Current income and expenses

Item Robert Francesca Combined
Income from ABPs $33,500 $21,500 $55,000
Total age pension $0 $0 $0
Total income $33,500 $21,500 $55,000
Taxable income (ignores interest on cash at bank) $0 $0 $0
Income after tax $33,500 $21,500 $55,000
Expenses
Housing (rates, insurance, repairs and maintenance) $5,200 $5,200 $10,400
Domestic gas and power $1,040 $1,040 $2,080
Groceries and personal care $6,474 $6,474 $12,948
Clothing and footwear $1,080 $1,728 $2,808
Medical and health expenses $2,001 $1,656 $3,657
Phone and internet $727 $727 $1,455
Transport (petrol, registration, servicing car, public transport, taxis etc.) $6,318 $6,318 $12,636
Recreation (theatre, holidays, hobbies) $2,746 $2,746 $5,491
Total $25,586 $25,889 $51,475
Disposable income $7,914 –$4,389 $3,525

Currently, all income comes from their two ABPs. Most expenses are split evenly with the exception of medical care, which has been higher for Robert, and spending on clothing, which is higher for Francesca. Discussions with Francesca indicate that should Robert go into care; she believes she could cut her spending on groceries and recreation by half, but that most other expenses would remain the same for her. In all, she believes she could manage on income of around $39,000 per year.

Question 1

Prepare a statement of advice (SOA) for the clients (95 marks | Word limit: 7,000 words)

Refer to Case study A: Francesca and Robert Kincaid and prepare a statement of advice (SOA) for the clients regarding the strategy to get Robert into aged care. The SOA should provide a recommended strategy(ies) and alternatives, and clarify for the clients what options are available and what is the best option(s) for them based on their needs, wants, goals, constraints and limitations.

Your SOA must include the following:

  • scope of the advice
  • executive summary of the advice
  • analysis of clients’ current situation, needs, goals, wants, constraints
  • detailed discussion of your advice to the clients
  • any recommended products
  • fees and charges
  • actions to proceed
  • client acceptance and authority to proceed
  • appendices and attachments:
    • Appendix 1: Assumptions
    • Appendix 2: Age pension analysis
    • Appendix 3: Aged care analysis
    • Appendix 4: Projections based on recommendations (cash flow, assets and liabilities over time).

Marks

In addition to the marks for overall presentation and referencing, you will be awarded marks as follows:

Category Maximum marks
1. Executive summary of the advice 10
2. Analysis of clients’ current situation, needs, goals, wants, constraints 10
3. Detailed advice to the clients (including ongoing advice) 30
4. Quality of advice: Advice is logical, meets objectives, well explained with risks, benefits, is complete 10
5. Compliance elements: Scope of the advice, fees and charges, any recommended products, action to proceed, client acceptance and authority to proceed 10
6. Appendices:Appendix 1: Assumptions 5
Appendix 2: Age pension analysis 5
Appendix 3: Aged care analysis 5
Appendix 4: Projections based on recommendations (cash flow, assets and liabilities over time) 10
Total for advice 95
Referencing and presentation 5

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