Investment Fundamentals – Financial Planning Project Question help?

Wealth Review News — Sat, 17 Apr 2010 22:30:56 +0000

I have a project question which asked for an implementation schedule for the products i recommended outlining the actions required by the clients and adviser in order to implement the recommendations?

The recommendations by me are:

Michael and Anna have a good financial condition. They have a decent amount of net worth of ,892,000 (Total Assets – ,102,000 less Total Liabilities – 0,000). Michael and Anna are aged 39 and 37 respectively, this indicates that they are still young and have more time for retirement and as a result more time to work and earn before retirement. They are likely to have a Growth risk profile. They are more suitable to invest in growth assets. For example around 85% in property and shares and 15% in fixed interest and cash
It has been established that Michael and Anna were both quite inexperienced when it came to investing. A managed fund provides exposure to the market without requiring serious research. In essence, the responsibility of the investor making the profit is removed. Michael has a demanding job as well as a family. The direct market may well require more time and knowledge than he currently posses. Involvement in this type of investment will also provide access to professional fund managers.
Another luxury of managed funds compared to direct investment is diversification. Michael has expressed an element regarding investments. A managed fund can satisfy this curiosity. This may encourage the use of a regular savings plan.
With two young children, heavy involvement in an investment would be difficult and stressful. Michael and Anna have indicated that they wish to pay off their existing mortgage with the proceeds of inherited property as soon as possible. With this in mind direct property investment may not be suitable. Indirect property investments should also be considered. It may be more suitable for Michael and Anna to invest into a managed fund, such as a property securities trust. These investments include listed and unlisted property trusts, as well as property security funds. The above mentioned investments will provide a higher level of liquidity, especially the listed property trusts, and also remove the burden of managing a direct property. Michael and Anna may even like to become involved in a property syndicate.
A commitment to the children’s education has been made and a property trust may be the vehicle to drive that investment. This strategy would appear to be much more suitable and indeed manageable. A property securities fund also has beneficial tax implications as well. The transparent structure passes tax advantaged incomes back to them. This may also be of particular interest to them’ as taxation was listed as a high priority on their list of concerns. A listed property trust may also be suitable and income from such could be used for their needs like their children’s visit to Disneyland. To complete a variety of alternatives, a private syndicate should also be discussed.
Pooling funds with others dramatically reduces the financial strain of the investment. As such they can also invest in pooled development funds which offer tax advantages as well. They are like venture capitalists. The main attraction of such funds is that there is no capital gains tax or income tax on pooled development funds. Given the nature of the couple’s employment one could assume they are associated with potentially interested parties who could provide stable and substantial capital.

I don’t expect an answer directly, but just guideline to start the answer, if anyone can help please???

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