Susan is 39 years old and works as a senior operations manager. Michael, 41, is an...

 

 

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Susan is 39 years old and works as a senior operations manager. Michael, 41, is an IT project manager. They have approached you to provide advice on their financial position, specifically in the creation of wealth over the long term. They have provided the following income and expense details: Susan's salary: $120,000 (plus SG) Michael's salary: S180,000 (plus SG) Michael's bonus: usually $50,000 p.a. Michael has an investment unit at Camperdown, in inner-city Sydney, valued at $650,000 (market value) with rental income of 3% net of associated management expenses. The unit is in Michael's name with an investment loan of $500,000 with interest-only repayments of 7.70% p.a. Their home is jointly owned and valued at $700,000. They repaid their mortgage last year and plan to spend $45,000 to renovate the kitchen and bathroom next year. They have an Australian share portfolio of $120,000 which is owned jointly. They estimate their living expenses to be approximately $80,000 p.a. Their Year 1$ Year 2 $ combined annual cash flow would be constructed as follows: Income 300,000 50,000 Rental income 19,500 4,836 300,000 50,000 19,500 4,836 Salaries Bonus Dividend income* Total income 374,336 374,336 Expenses Living 80,000 80,000 expenses Tax (incl. Medicare) 124,879 124,879 Loan 38,500 38,500 герауments Renovations Total expenses 243,379 Net surplus 45,000 288,379 85,957 130,957 Susan and Michael's net worth, based on the information in the case study above, can be established by the following balance sheet: Assets Asset Owner Value ($) Lifestyle assets Principal residence Total Joint 700,000 700,000 Investment assets Australian shares Joint 120,000 650,000 Investment property Total Michael 770,000 Liabilities Liability Owner Interest Value ($) Payment Payment amount/ Тах rate % уре deductible p.a. 7.70% frequency $2567/ Investment Michael loan Total Interest Yes 500,000 only month 500,000 970,000 Total net worth Required i. To visualise the client's net worth, develop a pie chart of the current asset allocation. This can be used as a basis for discussion about the client's risk tolerance and asset allocation requirements. In constructing this initial asset allocation pie chart, you must remember to: _exclude all lifestyle assets exclude cash lump sums awaiting investment include existing savings and investment assets. Review the pie chart and list 4 issues that may exist with their current asset allocation. ii. Discuss what recommendations you would make to the clients regarding their current asset allocation versus their goals and objectives. (200 words). iii. Your senior adviser has asked you to prepare cash flow projections for the clients. You believe that further information is required. List 6 questions around their lifestyle, goals and objectives that you would ask the clients before preparing the cashflow projections. (Total 9 marks) Susan is 39 years old and works as a senior operations manager. Michael, 41, is an IT project manager. They have approached you to provide advice on their financial position, specifically in the creation of wealth over the long term. They have provided the following income and expense details: Susan's salary: $120,000 (plus SG) Michael's salary: S180,000 (plus SG) Michael's bonus: usually $50,000 p.a. Michael has an investment unit at Camperdown, in inner-city Sydney, valued at $650,000 (market value) with rental income of 3% net of associated management expenses. The unit is in Michael's name with an investment loan of $500,000 with interest-only repayments of 7.70% p.a. Their home is jointly owned and valued at $700,000. They repaid their mortgage last year and plan to spend $45,000 to renovate the kitchen and bathroom next year. They have an Australian share portfolio of $120,000 which is owned jointly. They estimate their living expenses to be approximately $80,000 p.a. Their Year 1$ Year 2 $ combined annual cash flow would be constructed as follows: Income 300,000 50,000 Rental income 19,500 4,836 300,000 50,000 19,500 4,836 Salaries Bonus Dividend income* Total income 374,336 374,336 Expenses Living 80,000 80,000 expenses Tax (incl. Medicare) 124,879 124,879 Loan 38,500 38,500 герауments Renovations Total expenses 243,379 Net surplus 45,000 288,379 85,957 130,957 Susan and Michael's net worth, based on the information in the case study above, can be established by the following balance sheet: Assets Asset Owner Value ($) Lifestyle assets Principal residence Total Joint 700,000 700,000 Investment assets Australian shares Joint 120,000 650,000 Investment property Total Michael 770,000 Liabilities Liability Owner Interest Value ($) Payment Payment amount/ Тах rate % уре deductible p.a. 7.70% frequency $2567/ Investment Michael loan Total Interest Yes 500,000 only month 500,000 970,000 Total net worth Required i. To visualise the client's net worth, develop a pie chart of the current asset allocation. This can be used as a basis for discussion about the client's risk tolerance and asset allocation requirements. In constructing this initial asset allocation pie chart, you must remember to: _exclude all lifestyle assets exclude cash lump sums awaiting investment include existing savings and investment assets. Review the pie chart and list 4 issues that may exist with their current asset allocation. ii. Discuss what recommendations you would make to the clients regarding their current asset allocation versus their goals and objectives. (200 words). iii. Your senior adviser has asked you to prepare cash flow projections for the clients. You believe that further information is required. List 6 questions around their lifestyle, goals and objectives that you would ask the clients before preparing the cashflow projections. (Total 9 marks)

Answer rating: 100% (QA)

Susan 39 yrs senior operations manager Michael 41yrs IT project manager advice on the creation of wealth over the long term Susan Salary 120000 Michael Salary 180000 Bonus 50000 Investment value 65000... View the full answer