Page 240 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 13: Strategies of putting together a Complete Financial Plan

The investment strategy you recommend will influence the income flow, both in terms of rupee Notes
amounts and the timing of that income. Income requirements will impact on the desirable
balance between growth and income in the investments chosen.
For persons approaching retirement, the income stream options such as annuities and pensions
must be considered carefully, particularly in terms of their taxation implications.

On the basis of projected income and expenses, you are now in a position to establish the
person’s future savings capacity and put forward recommendations on how any resultant savings
can be utilised (e.g., in debt reduction and in appropriate investments)

Asset Protection and Estate Planning Objectives

In Step 2 we mentioned the need to protect the person ‘s financial position in terms of assets,
income, health (hospital /medical) and life insurance. We now need to look forward and consider
that protection in the light of the person’s overall financial objectives, particularly in regard to
estate matters.
The first step is to determine whether or not there is adequate protection for assets and their
estate planning objectives. As we know insurance is probably the most cost-effective method of
providing that protection. Having stated that insurance is cost effective, one needs to be conscious
of the costs of providing that cover and whether or not that cost is beneficial relative to the
protection offered. You need to ensure that all tangible assets are adequately protected Make
sure that home building, contents and motor vehicle insurances, for example, are in place.
Next, make sure that adequate life insurance has been provided to meet the immediate liabilities
and the estate objectives of your person. Initially, this might be done through the employee’s
retirement fund and then through retail life insurance products.

Task Discuss with a financial planner how the strategy development process and
explain it.

Investment Objectives

We now need to meet the person’s short-, medium-, and long-term investment objectives.

Questions you should address include:
What investment sector (fixed interest and cash, shares, property) allocation will enhance
the opportunity to achieve the person’s financial goals?

What alternative investment strategies are available to the person and what are the relevant
advantages and disadvantages of each?

Does the recommended asset allocation align with the person’s stated tolerance of
investment risk?
If not, can the financial planner justify/substantiate the deviation from the person’s
investment preferences?
What is the status of investment markets and will this affect the deployment of the
investment strategy?
You know how the economic climate can have a bearing on the type and class of investments
recommended. We identified that some investments will perform well in certain stages of the
economic cycle, while others will not. You discovered how the underlying investment class mix

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