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Identify the clients complex broking needs
Course:- Financial Management
Length: 4796 Words
Reference No.:- EM13846252




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Case study A- Tom and Steve Broad

Background

Congratulations, you have just been appointed by George and Mildred as the new consultant to handle the extra work. Whilst your major focus is to build the strategic relationships you are also expected to build your own client base using your own connections and networks.

Two brothers, Tom and Steve Broad have approached you with their desire to jointly purchase two apartments in the same building. They want to purchase them as rental properties. The building has 12 apartments. The units have 80% permanent tenants in place and the remaining 20% are used for holiday rentals. The location is a highly sought after area and all holiday periods are fully booked.

The brothers have invested together before and have experience in buying and selling property. They have sold all their other investment properties and the units will be their only investment until they can identify another opportunity. The cash at bank is mostly from the sales of other investments.

The property

Address:

Unit 1, 92 Seaside Lane, Coastville, <Your State>

Unit 9, 92 Seaside Lane, Coastville, <Your State>

Purchase price:

$350,000

$385,000

Description:

2 bedroom strata title unit on the ground floor

2 bedroom strata title unit on the ground floor

Body corporate fee

$2,500 per annum

$2,500 per annum

Proposed income

Permanent rental at $450 per week

Holiday rental at $45,000 per annum

Agent details:

Steven Allstone

Steven Allstone

Phone:

8282 1113

8282 1113

Mobile:

0412 880 088

0412 880 088

The clients

Client

Tom Broad

Steve Broad

Current address:

Unit 12, 22 Wentworth Lane, Highville, and has lived there for eight years

23 Dury Lane Pennant Tops and has lived there with Marie for six years. Property owned in joint names.

Value

$650,000

$450,000

Home phone:

9001 2121

9002 1212

Status

Tom is single, no dependents

Steve is married to Marie with no children

Employment

PAYG and has been with the same employer for 10 years

Self-employed tradesman operating as a sole trader for 12 years

Income

$85,000 per annum

$65,000 per annum for Steve

$30,000 per annum for Marie

Cash at bank

$250,000

$150,000

Superannuation

$150,000

$150,000 (Steve), $20,000 (Marie)

Contents

$100,000

$130,000

Motor vehicle

$60,000

$30,000 (Steve), $15,000 (Marie)

Liabilities - home loan

$300,000 @ 7.2 % P & I, term 25 years

$100,000 @ 7.2 % P & I, term 25 years

Liabilities - credit cards

$5,000 limit cleared monthly 3% min payment

$15,000 limit, $5,000 debt 3% min payment

Task 1a - Identify the clients' complex broking needs

Prepare a list of questions that you would need to ask Tom and Steve about their history and experience, and the unit purchase.

In preparing your list of questions you should ensure that you cover the following:

• The complex features of Tom's and Steve's situation and objectives.

• Potential risks and Tom's and Steve's tolerance of risk. In considering risk you should consider:

- how you would identify the risks and the criteria you used to evaluate these risks

- how you would assess their current exposure, the tools you would use in terms of probability, impact and the consequences.

Task 2a -Develop complex broking options

You are required to prepare a full report for Tom and Steve by outlining the process and the risks (potential and real) of which Tom and Steve should be aware.

In a suitable format, document the process that is required for them to purchase the two units as their investment properties, establishing a joint loan in the brother's names. You should also include a selection of lenders that will consider this style of borrowing.

In developing your report you should cover the following:

1. The parties to the loan including any opportunities or constraints that could impact on their application

2. The different options available and your recommendation of the best loan structure with the lender - are they using their own property as cross security or the cash at bank as deposit?

3. What various forms of titles could an apartment be registered in

4. A list of the lenders that are able to lend

5. The procedure to commence a loan for a property like this

6. The steps that will need to be in place

7. The client responsibilities, so Tom and Steve fully understand the loan

8. An outline as to the process and what the client needs to arrange

9. The documentation needed to commence the borrowing

10. The name in which the client will sign the contract/purchase/offer and acceptance. If a Family trust is involved what name would the title of the property be registered in, and advise what state you are using to base your answer on

11. The state revenue requirements

12. Which lenders may also require a personal guarantee from Steve'sspouse

13. The maximum LVR to the consumer

14. A summary of all fees and charges - including those for setup and those of the lender.

Task 3a - Implement complex loan structures

Tom and Steve have accepted your recommendations and have given you authority to proceed with their application.

As part of implementing their loan application you are required to prepare a formal written loan submission to the lender for pre-approval. Your loan submission must include the following:

• serviceability calculations

• the proposed structure of the loan given there are two brothers and there is a variance in income

• the loan amount

• the property style, size, use

• any other information that is relevant to the lenders requirements.

In additional to these requirements you should also include:

• your obligations under the NCCP (if any)

• maximum loan amount

• maximum loan terms

• any ATO consideration to be made

• your state legislation and OSR requirements

• your general advice restrictions

• property purchase requirements.

Task 4 - Developing and nurturing relationships with clients, other professionals and third party referrers

George and Mildred now require you to write a plan to assist in developing and nurturing relationships with clients, other professionals and third party referrers.

Your plan should address the following:

1. How CCF & MB's policies and procedures and legislative, regulatory and professional codes of practice impact on developing and nurturing relationships

2. How you would use CCF & MB's social, business and ethical standards to develop and maintain positive relationships

3. The importance of confidentiality and how you would maintain it in your dealings with colleagues, clients and other parties

4. How you would adjust your Interpersonal style to the needs and situation of other parties

5. How you would go about developing and maintaining business and professional networks and other relationships to benefit the organisation, and how you would use them to identify and cultivate relationships in order to promote and market the organisation

6. How you could use and cooperate with other professionals and third parties to expand and enhance the reputation of the organisation, and to identify new and improved business practices

7. How you would build referral business through appropriate communication channels to find and secure new business relationships

8. How you would identify referral needs and provide information p about CCF & MB's relevant products and services

9. How you would secure interviews with referral business so that then needs of clients can be met.

When completing this task, assumptions are permitted although they must not be in conflict with the information provided in the background information.

Task 5 -Growing the business

Having considered how you would go about building and nurturing relationships, George and Mildred now require you to turn your attention to marketing and promoting CCF & MB's business. This requires you to develop a marketing plan for the business.

In developing your marketing plan you should consider the following:

1. Your plan should be developed in line with CCF & MB's vision statement

2. The identification of target markets using a combination of research and your own personal experience

3. The identification of your major competitors (at least two) with a competitor analysis developed for each competitor

4. The identification of CCF & MB's market position based on your research findings and analysis

5. How you would promote CCF & MB's brand and the tools you would use to achieve this

6. The provision of options for increasing yield per existing client

7. How you would implement your plan and monitor it to ensure objectives/goals/performance indicators are being met

8. How you would adjust your plan if required.

When completing this task, assumptions are permitted although they must not be in conflict with the information provided in the background information.

Answered:-

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About:

Tom and Steve, two brothers wanted to acquire two apartment in a same building. They want to purchase the property for renting purpose. Being appointed as a financial adviser ort a consultant it is necessary on my part to know the clients in a detail way, their financial position and obligation, their past experience on acquiring the property, their other loan commitments and details of the property proposed to be acquired.

Before providing any opinion or advice it is first of all necessary to analyze whether their proposal are viable or not from financial prospective, whether they could meet their loan obligation in time or not, all this require to clearly understanding the client by asking necessary question, the risk that can be borne by the client, i.e. their risk appetite.




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