Reference no: EM133176448

Question - Steve (aged 45) and Terri (38) are married and have 3 young children aged 7, 5 and 2. Their accountant has referred them to your financial planning practice. They want you to think of some ways to do things better and make their finances easier and more relevant. Steve used to work for Telstra as a regional manager. After 20 years of employment, he accepted a redundancy. Three years ago, he purchased and now runs a bakery franchise. Terri used to work as a Physiotherapist however she has not returned to work since having their third child.

The bakery is continuing to generate more profit each year and has enabled them to take gross earnings of $200,000 per annum between them. They admit they can live comfortably on a combined income of $75,000 net pa. They own the majority of their home thanks to Steve's redundancy; however, they had to draw down $150,000 against their home equity to set up the bakery. They are both co-guarantors for the loan and also the franchise ownership.

They want to investigate how best to own the business as they did not receive advice when they purchased the franchise.

Steve and Terri want to review their super, insurances and set up a strategy for saving for private secondary school education for each of their children. Neither Steve or Terri have any personal insurance policies. They have general insurance cover for the bakery and their house.

Steve or Terri do not have a Will. Steve has $190,000 in super, thanks to his length of service with Telstra. Terri has $45,000 in super from when she was a Physio. Steve and Terri have $32,000 in cash, the remains of his redundancy money. They want to retire in 15 years.

You have asked your associate financial adviser, to analyse the personal and financial information collected from Steve and Terri. Then identify issues resulting from the analysis, together with those that you have identified below and address them in a written report to you.

Required -

1. What issues should be raised with Steve and Terri from the initial meeting, that may or may not have been addressed?

2. What additional information should you gather before you decide upon a strategy?

3. How will you develop your professional relationship with Steve and Terri as they have been referred to you and want ongoing financial advice?

4. What risks should they consider? These can include business risks, estate planning, investment risks, structuring risks (i.e., super or non-super investments)

5. What lump will Steve and Terri need in today's dollars to fund their retirement assuming 60% of their final salary and debt free. Assume an interest rate of 5% on accumulation funds and inflation rate of 2%.