Part A: instructions

Part A requires you to submit your intended wealth creation recommendations together with any lifestyle recommendations for feedback.

For Part A:

You are only expected to provide your client withstrategic recommendationsfor his wealth creationgoalsoutsideof superannuation as well as any lifestyle goals as indicated in the Part A template. That is, you arenotexpected to provide any superannuation or insurance recommendations for Part A. Please refer to thedetailed file note instructionsbelow which sets out what you need to cover for each section in detail.

Please also ensure you refer to theAppendicesat the end of this document. Appendix 1 contains information about the future value calculations required (including the rates and fees you must use) and Appendix 2 contains answers to frequently asked questions for Part A.

Part A: detailed file note instructions

Client's name:Jonathon Makin

Date of contact:1 August 2020

Re:Initial Appointment

Wealth creation / lifestyle recommendations -outside superannuation

For Part A, foreachwealth creation, and lifestyle goal that you are advising on, you need to detail your recommended strategy(s)which should be linked to the client's objectivesand the advantages and disadvantages of each strategy, i.e. why the recommended strategy is appropriate to the client and any potential costs / downsides.

You also need to include details of any alternative strategies considered and why these were not recommended. The specific requirements of each section are provided below.

1.Objective 1[change the title to the client's objective you are advising on - try to make these 'SMART' goals where possible]

Recommended strategy:

State yourrecommendedstrategyto achieve this goal, i.e. what should Jonathondo? This may be multiple steps, if so; a separate bullet point should be used for each step.

Make sure you arespecificabout thetypeof investment; i.e.nothe should invest in x or y - which one? (or both?) Howmuchshould he invest? For how long? Should the investment have any particular features?

Please be as specific as possiblewithoutactually recommending a particular product. Your advantages / disadvantages below should then bedirectly relevantto your recommendations (not just generic advantages / disadvantages that could apply to any client). Please refer to the 'investment choices' video for more information in this regard.

Overall, your recommendationsmustbe clearon where his savings (both current and any monthly surplus) arebeing directed to achieve his specific goals.

Where your client does have a specific dollar ($) goal he is wanting to achieve, make sure your recommendationsdogive him a chance to achieve this goal.

For any goals greater than 1 year, you arerequiredto prove your recommendations do give Jonathon a chance to achieve his goal. To work it, please either use the Future Value (FV) calculations or use an online calculator. For these calculations, you arerequiredto use the rates and fees provided inAppendix 1below.As noted there, for the purposes of this course, you arenotrequired to adjust these to take tax and inflation into account, so please simply use the stated rates and fees provided below.

Show any workings / online calculators used (including your inputs) inAppendix 1below

Make sure you provide recommendations on how Jonathon can achieve his goals - leaving it up to the paraplanner (the person who will receive your file note) or saying we will discuss this further with Jonathon isnotacceptable.

Thereasonsfor your recommendations should form part of youradvantagesbelow. This section is simply what Jonathon shoulddoto achieve his first objective.

Advantages of strategy [reasons why]

This is where you need to include the reasonswhyyou have recommended the strategy(s) above.

As per above and the marking rubric, please ensure you providespecificadvantages for Jonathon, not just generic advantages that may apply to any client / investor in that particular product. You should be explainingeachdecision you have made.

Disadvantages of strategy

There are always disadvantages with any recommended strategy. Foryourrecommended strategy(s) what are the disadvantages? Again, bespecificrather than general. For example, rather than stating 'taxation implications' as a disadvantage you would need to explain what the taxation implications are and how this is a disadvantage for Jonathon.

If there areseveredisadvantages with your recommended strategy that cannot be overcome, you should consider changing your strategy - particularly if your strategy means he cannot achieve his goals.

Alternatives considered

You need to consider all 'reasonable' alternatives and most importantly,whythese where not recommended.

For example, if you are recommending a defensive investment option you should include other defensive investment options and why these were not recommended. Likewise, with any growth investment recommendations.

Typically, an alternative strategy is a strategy that still meets the client's goal, but one you haven't recommended for a particular reason(s). Please ensure you explain what these reasons are, so it is clearwhyyour actual recommendation is more appropriate foryourclient.

Remember too, that one possible investment alternative is to do nothing. That is, leave the investment as is. If you are not recommending this, why not?

Use this process forALLof Jonathon's goals for Part A including for a house deposit and holiday.

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Further,as his goals have different timeframes, it is unlikely to be appropriate to combine all of his funds into one investment for both goals.Accordingly, we suggest you work onone goal at a time(as shown in the Part A template).

Therefore, foreachgoal, you need to consider how much of his current savings (if any) are used, and how much of the ongoing savings (if any) you are allocating towards this goal (remembering you can only allocated his savings across goals until expended) and how these funds are being invested.

Finally, to ensure Jonathon has flexibility with his house deposit funds, please donotrecommend the Government'sFirst Home Super Saver Schemeor COVID incentives.

Appendix 1 - Future value (FV) calculations

Include in this section any FV workings and/or a screenshot of any online calculators you have used (including your inputs), which show that Jonathon has a chance of meeting his goal(s) if he follows your recommendations.

A reminder that this section isrequiredfor any goals greater than 1 year and forms part of the Part A and Part B marking rubrics. Accordingly, students who do not complete the Appendix will have their marks reduced.

For completeness, please donotinclude Jonathon's emergency funds (or any interest potentially generated from these), in your FV calculations.

For your FV calculations you arerequired to use the investment return rates given below for a range of investment choices. Please note that you arenotrequired to take tax or inflation into account for any of your calculations, though this should form part of your overall considerations (reasoning). Please assumemonthly compoundingfor all investment calculations.

Investment rates of return (per annum) - assume compounded monthly

ABC and LMN Banks Savings account: 0.10% for every day 'at call' account and 0.95% for a high interest 'at call' account when $100 is deposited monthly

Term deposit & bonds: ABC Bank and LMN Bank - compounded monthly:

o3 months 0.95%

o6 months 1.01%

o12 months 1.11%

o2 years 1.25%

Australian shares:7.8%

International shares: 8.1%

Managed Fund/Superannuation Funds-diversifiedfunds:(Active / Passive )

oDefensive fund (90% defensive, 10% growth assets):(2.2% / 1.7%)

oConservative fund (70% defensive, 30% growth assets):(3.6% / 3.1%)

oBalanced fund (40% defensive, 60% growth assets):(4.8% / 4.3%)

oGrowth fund: (20% defensive, 80% growth assets):(5.9% / 5.4%)

oHigh growth fund: (10% defensive, 90% growth assets):(7.3% / 6.8%)

Managed Fund/Superannuation Funds-single sectorfunds:(Active / Passive)

oCash fund:(1.65% / 1.15%)

oGovernment bond fund:(2.95% / 2.45%)

oFixed interest fund:(2.8% / 2.3%)

oAustralian property fund:(4.5% / 4.0%)

oInternational property fund:(4.7% / 4.2%)

oAustralian share fund:(7.5% / 7.2%)

oInternational share fund:(8.1% / 7.6%)

Fees

Assume the administration /management fees are as follows:

Actively managedfund:1.00% per annum

Passively managedfund: 0.50% per annum