licensee and the financial planner

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Written Assessment 1 (25 marks) Guideline: No executive summary or conclusion will be required. Please include at least some in-text referencing and a bibliography list (perhaps not necessary for Q5) wherever applicable. Question 1 (3 marks) What is ‘scaled advice’ and what are the advantages and risks for a client? Discuss this in the context of the latest development in FoFA. Question 2 (3 marks) There is often a disagreement between the licensee and the financial planner about who ‘owns’ the client. Why does this happen? Who do you think owns the client? Discuss your answer from the view of the licence holder, the financial planner and the client. Question 3 (3 marks) An SOA should be developed to accommodate a client’s aims and goals. On the basis that these goals are likely to change over a client’s lifetime, by what means can a financial planner ensure the goals continue to be achieved? Question 4 (10 marks) The trustees of Best Bet Superannuation Fund, a self-managed superannuation fund with 5 members, have made the following investment decisions. As Auditor of the Best Bet Superannuation Fund, advise the trustees as to whether you believe the decisions comply with the investment restrictions outlined Superannuation Industry (Supervision) Act 1993 and its associated regulations in relation to the following issues: (a) The trustees of the Fund have bought a beach house for the exclusive use of members. (b) The trustees have acquired shares in Best Bet Cleaning Services Pty Ltd which amount to 40% of the total assets of the Best Bet Superannuation Fund. Best Bet Cleaning Services Pty Ltd is owned by two of the members of the Best Bet Superannuation Fund. (c) In order to fund a payout to a recently retired member the Fund has borrowed $100,000 for a period of two years. (d) The Fund has loaned Kita, who is a member of the Fund, $200,000 to help fund a new business venture. The loan has been offered on commercial terms. (e) Masami, who is a member of the Fund, has sold a parcel of vacant land to the Fund at a price which is considerably below its market value. Question 5 (6 marks) Betty has purchased a newly built rental property for $350,000 and paid stamp duty of $15,000. She has borrowed $300,000 for the purchase at an interest rate of 7.0% p.a. on an interest-only basis. In the first year of the investment she gives you the following additional information: gross rent $25,000 per annum and managed by a real estate agent at a cost of 5.0% plus GST; property costs (rates, insurance, minor repairs, agent fees, etc.) $4,000 per annum; depreciation of building at 2.5% (assume cost of building to be $180,000); depreciation of fittings $5,800 per annum; and borrowing costs $1,500 per annum. Betty’s marginal tax rate is 45%. a) Prepare a table to show the after-tax cash flow that Betty may expect to receive on the investment. b) Assume Betty sells the property for $485,000 after 4 years. Her selling costs are 3.0% of the selling price. Prepare a table to show Betty the proceeds available to her on the sale of the property after tax and after repayment of the loan.

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