The paper "Fundamentals of Personal Financial Planning" is a wonderful example of an assignment on finance and accounting. Outline of the process by which FPA members are expected to seek to resolve client complaints and disputes. The steps taken by the FPA member in resolving a complaint about a client require the member to: The member first tries to get a solution and solve the complaint early within three days If the dispute is not solved within three days the client forwards the complaint in written form to the complaint’ s officer The FPA member then forwards a written response on the claim to the complaint’ s officer together with the client file The complaints officer then reads all documentation thoroughly The officer seeks further clarification from the client and the FPA member In some cases, the officer may confirm what the client’ s actual complaint and come up with ideal resolution this is where the client failed to articulate properly the advice from the FPA Advisor The next step involves liaising with technical teams, fund managers, and product suppliers to gather information about the product calculations, technical calculations among other attributes Write a response with reference to the evidence and try resolving the complaint In the event of compensation to the client liaise with the appropriate internal accounts or insurers Some of the reasons why FPA and other relevant regulatory bodies have placed considerable focus on the full disclosure of all charges, fees, and benefits received by financial planners because of providing client service are: The first reason is that it is a requirement by law for advisers and their licensees to ensure they disclose conflicts of interest to their clients.
These relevant conflicts include fees, commissions, and benefits.
With this disclosure, the client is on the alert and is able to make a clear decision on whether to accept or decline the advice considering the conflicts. The second reason is that the requirement of legal disclosure help to ensure that the clients can clearly account for how much they are paying for the advice both direct and indirect costs. These costs include direct advice fees, benefits (mostly referred to as soft dollar benefits), and commission payments. Finally, a clear disclosure is one way of increasing economic efficiency.
This can be through the improvement of financial decisions and boosting market forces through the cost of advice. The growth inefficiency can lead to benefits for both financial systems as a whole and individual consumers. Question Two The Personal financial planning process involves six stages as follows; Gather financial information Identify goals Identify financial issues Prepare a Statement of Advice (financial plan) Implement the recommendations of the financial plan Review and revise the plan The six stages are an effective way of carrying out personal financial planning. This is because they are broad and cover the entire process of planning.
The gathering of the to the last stage of reviewing the plan ensures that there are no elements left out that may present conflict in the financial plan. The steps are also effective in that they have higher chances of minimizing risks any risks that usually occur in financial planning such as inflation and market risk. The identification of goals and financial issues helps an individual to cater to future risks and financial stability especially after retirement. They are especially important in ensuring that finances are not wasted in things that do not yield good returns and making sure that the proposed plans are strategically set to meet the needs.
The last step, which reviews and revises the plan, is important in ensuring that everything has been done correctly. This is an effective technique. Question three To get the expected value of total investment portfolio after 5 years, we calculate the future values of each investment within the next five years. We will use the future value formulae [FV=PV (1+s)n]. FV=PV (1+s)n Where: FV=Future Value PV=Present Value n=Number of years s=Interest/ Expected return Therefore: Fixed Interest= FV=PV (1+s)n =40,000 (1+0.06)5 =40,000 (1.3382) =53529.0231 Property Securities: FV=PV (1+s)n =20,000(1+0.08)5 =20,000 (1.4693) =29,386.5615 Australian Shares: FV=PV (1+s)n =15,000 (1+0.1)5 =15000 (1.6105) =24157.65 International Shares: FV=PV (1+s)n =10,000 (1+0.12)5 =10,000 (1.7623) =17,623.4168 To get the total investment portfolio, we add all the future values, i.e: Total Investment Portfolio=53529.0231+29,386.5615+24157.65+17,623.4168 =124,696.651 Question Four First, we calculate the future price/value of his dream home: FV=PV (1+s)n PV=330,000 s=50% n=15years FV=330,000(1+0.05) 330,000(1.05)n 330,000(2.0789) 686046.2992 His dream home, after 15 years, will cost 68646.2992 In order to calculate how much Brad is supposed to invest annually in the next fifteen years, we first require the present value of his dream home. Investment each year will be: PV= FV/(1+s)n 15th year=686046.2991/ (1+0.12) =612541.3385612541.3385 14th year=612541.3385/ (1+0.12) =546,911.9094 13th year=612541.3385/ (1+0.12) =488,314.2044 12th year=546,911.9094/ (1+0.12) =435,994.8257 11th year=488,314.2044/ (1+0.12) =389,281.0944 10th year=435,994.8257/ (1+0.12) =347,572.4057 9th year=389,281.0944/ (1+0.12) =310,332.5051 8th year=347,572.4057/ (1+0.12) =277082.5938 7th year=310,332.5051/ (1+0.12) =247,395.1731 6th year=277082.5938/ (1+0.12) =220,888.5474 5th year=247,395.1731/ (1+0.12) =247,395.1731 4rd year=220,888.5474/ (1+0.12) =157,224.105 3nd year=176,090.9976/ (1+0.12) =140,378.6652 2st year=157,224.105/ (1+0.12) =125338.0939 1st year=140,378.6652/ (1+0.12) =125338.0939 Brad Pitt will be required to invest 125,339.5997 in the first year, at his investment, which will yield him a 12% return, I order to buy his dream house. Question Five We calculate the future value of investing 10,000 for 10 years at an investment rate of 2.5% per annum and then compare it with the future value of investing 5000 at an annual interest rate of 5% for 10 years. Using the FV formulae, FV=PV(1+s)n Plan A PV=10,000, s=2.5%, n=10 years FV=10,000(1+2.5/100)10 =10,000(1.025)10 =10,000(1.2801) =12800.8454 Plan B PV=5000, s=5%, n=10 years FV=5000(1+5/100)10 =5000(1.05)10 =5000(1.6289) =8144.4731 Return on Plan A: =FV-PV =12,800.8454-10,000 =2800.8454 Return on Plan B: =FV-PV =8,144.4731-5,000 =3,144.4731 Return on Plan B is greater than the Return on Plan A.
Therefore, I will advise my client to adopt Plan B.
Australian Securities & Investments Commission, 2004. Disclosure of soft dollar benefits, Victoria: Australian Securities & Investments Commission,.
Financial Planning Association, 2008. Dispute resolution – review of RG139 and RG165. ASIC review of RG139 and RG165 submission,, November, pp. 3-26.