¶ … Advice (SOA): Financial Planning Purpose of this document is to prepare a statement of advice (SOA) on the financial planning for David Smith and Brenda Smith to achieve their financial goals. The advice is to communicate important information to clients in order to make informed decision about their financial portfolios. This document is a Statement of Advice or 'SOA' used to explain my advice, and highlights the important points. Please, be sure to read all sections of the SOA.

Summary of my Advice

I recommend that you sell your shares and reinvest the funds in the managed funds, which will assist you to get a return between $17,000 and $29,000 a year. Moreover, I recommend that you invest 60% of your superannuation in the managed funds. I carefully choose the categories of the managed funds that you could invest your money. Based on my recommendation, you are likely to get returns of more than $2 million from your capital within ten years. However, if you decide to reinvest your returns with your capital, you will get returns of more than $30 million after tax. I also recommend investing the rest of 40% of your superannuation on government bonds.

I recommend that you take insurance coverage to protect your income and yourself from any loss. If you follow my advice, you will be able to achieve your long-term goal and objectives. The risk associated with my advice is that investment carries risks and investment with higher returns carries more risks.

Section 1: Your Important Information

This section provides information about you, which I use to prepare my advice:

goals and objectives,

Financial information,

Risk profile and associated financial knowledge.

Your Goals & Objectives

Based on the information provided both of you are looking forward for a long and active retirement. Your goal is to be in a good health and look forward to a long and active retirement.

Your goals and objectives when both of you retire in 2011 are to:

Effectively manage your superannuation after your retirement,

Be able to keep Graigs free from debts and out of possible loss of money due to divorce,

Secure high income from the money invested in the shares,

Maintain income of $40,000 a year,

Be able to pass your estates effectively to your children and grandchildren. WILL

Additional goals and objectives are to:

Provide a gift of $5,000 for each of four of your grandchildren (if possible),

Spend the costs of $35,000 to renovate your kitchen,

Be able to travel to Europe for holiday in 2011 at the expected cost of $50,000,

Travel around Australia within the next three years at the expenses of $30,000,

Renovate your kitchen and bathroom ( at expected cost of $35,000),

Go for a three-month holiday in late 2011 to Europe (at the estimated cost of $50,000),

Travel around Australia in the next 2-3 years with a budget of $30,000, and Maintain an emergency account of at least $15,000.

Method to Achieve Your Goal

This advice provides various methods to achieve your goals:

The first step is to sell the following shares that you jointly and individually owned:

Harvey Norman- $7,500

Telstra - $5,500

AXA

$9,500

Westpac - $20,000

By selling these shares, you should be able to raise approximately $42,000. You should use the fund to buy managed funds, which will assist you to earn between $17,174 and $29,053 per year at the rate of between 40% and 68%. Leaving these funds with managed funds for 10 years will make you to earn between $170,000 and $290,000 returns.

The second step is to invest your superannuation in the managed funds at the average rate of returns of 55%. Investing in the managed funds will assist you to achieve yearly returns of $211,145.75 before taxation. However, you will achieve a 10-year return of $2,111,457.50 before tax. If you intend to invest your yearly returns with your capital, your worth will be more than $30 Million without tax.

The next step is to create TTR (Transition to Retirement (TTR) for Craig. You will be able to nominate Graig as beneficiary should anything happen to you. Moreover, you should Will large part of asset your to Graig to protect him from financial loss in the future.

Old Age Pension

Based on the information provided, you will receive the old Age pension upon reaching the age of 65. This will not affect your retirement plan based on the superannuation that you will receive and this will be invested to increase your wealth after the retirement. Based on the estimation of the returns from your investment, you will worth more than $30 Million 10-year after your retirement.

Your financial information

The tables 1 and 2 below provide each of your financial information and the table 3 show your financial information when combining the financial resources together.

Table 1: David Personal Financial Information

Remuneration

Expenses

Gross Salary

$60 000

Gift to 4 Grand Children

$5,000*4

$20 000

Home

$375 000

Settle Craigs Debts

$20 000

Accumulated Annual Long Service

Living Expenses per year

$40 000

Annual Leave

$10 000

Kitchen & Bathroom Renovation

$35 000

Long Service Leave

$75 000

Holiday to Europe

$50 000

Others

Travel Around Australia

$30 000

Redundancy Payment

Emergence Account

$15 000

Holden Commodore

$25 000

Tax on Superannuation

Contents of Home

$25 000

15% * 270000

40500

Share owned

Testra

$5 500

However, the net worth of Brenda will be $333,120 after the retirement. If both of you decides to combine your assets, your net worth will be $957,800. Both of you will be able to achieve all your goal and objectives after the retirement, however, you may not be able to continue living on these net worth forever if you do not invest part of your income.
TPD and Income Insurance

TPD (Total Permanent Disability) is an insurance against disability. This type of insurance package will assist you financially in case there is an accident or sickness that will render you disable. TPD package will assist you financially in case you are able to walk again. For example, the TPD will assist you to cover your debts and your ongoing living expenses. Thus, the insurance will assist you with maximum sum of $200,000 for David and $190,000 for Brenda in case you fall into the disability that will make you unable to walk again.

On the other hand, the income protection insurance will assist you in case you and your family fall into a financial hardship. For example, if you are unable to work for some reasons, income protection will assist you to replace your lost income.

Projected Cash Flow

The table below reveals your projected cash flow. Your projected cash flow is calculated based on the money you can easily cash in the short run. Based on the results of the projected cash flow, you will not be able to meet all your goals and objectives in the first year after your retirement because your expenses will be higher than your income. You will still need the total of $238,474 to meet all your goals and objectives.

Projected Cash Flow

First Year

Income

Amount

Return from Shares

$20,000

Return from Superannuation

$211,145.7

Saving Accounts

$20,000

Saving Accounts

$40,000

Total

$291,146

Expenses

Gift to 4 Grand Children ($5,000*4)

$20 000

Seattle Craigs Debts

$20 000

Living Expenses per year

$40 000

Kitchen & Bathroom Renovation

$35 000

Holiday to Europe

$50 000

Travel Around Australia

$30 000

Emergence Account

$15 000

Tax on Superannuation (15% * 270000)

$40,500

Total Expenses for David

Total Expenses for Brenda

$279 120

Total Expenses

$529,620

Net Income

($238,474)

Your risk profile

Investing involves risks, which may not give the returns envisaged. Almost all investments carry some risks and some have more risks than other. Generally, investments that produce higher returns have higher risks. Since you are balanced investors, your goal of increasing your wealth and double your money within 10 years may carry higher risks.

Based on this basis, my advice for you is as follows:

Invest 60% of your fund in growth assets such as managed funds,

Invest 40% of your fund in bonds such as Australian bonds.

Following this advice, the chance of achieving the negative returns is low, and you are expected to achieve your goal and objective.

Section 2: Investment Recommendations

This section provides the following:

my advice and why it is appropriate,

Risks associated with my advice.

First Advice

My first advice is to sell all the following stocks and use the money to purchase top performing managed funds in Australia:

Harvey Norman- $7,500

Telstra

-$5,500

AXA-$9,500

Westpac - $20,000

You should sell AXA and Westpac stocks since these stocks are jointly owned. You should also sell your owned individual stocks such as Harvey Norman and…