SCHOOL OF BUSINESS

DIPLOMA IN BANKING AND FINANCIAL SERVICES

FINANCIAL PLANNING - CONTINUAL ASSESSMENT 2 (2014/2015)
GROUP REPORT A case study on Don and Connie
Don and Connie have come to you to seek help in developing a comprehensive financial plan.
Their immediate concern is to have sufficient liquidity to meet emergency needs and to
manage their risk through insurance. Their long-term concerns include asset accumulation
and enhancement and retirement planning.
You had a meeting with them about 1 week ago and had gathered the following information:
Family Situation
Don and Connie are both 50 years old respectively and have been married for 10 years. They
have no children.
Employment Situation
Don works as an Engineer in an MNC while Connie is a homemaker.
Other Financial Information See Attachment 1
As their newly appointed financial planner, you are required to advice them on the following
matters:
Required
1

Analysis of financial condition & goals

a)

Assess their current financial standing. You should use the Excel
program to prepare the relevant joint financial statements and financial ratios per
Attachment 1.
(20 marks)

b)

The couple has stated two (2) specific goals which they would like to achieve.
i)

To set aside an emergency fund to cover at least 3 months of current

expenses, and thereafter to commit to a regular saving plan to prepare for
retirement.
(5 marks)

ii)

To buy a 500 square feet 1-bedroom condominium unit at RiverTrees

Residences, a residential development in Sengkang that is still under
construction. They are currently staying in a 3-room HDB flat in Holland
Close, which Don bought about 15 years ago. This flat is fully paid up.
Should they proceed with the purchase, they intend to hold the condominium
to generate rental income while continuing to stay in their 3-room flat.
After several rounds of property curbs imposed by the government, the
developer has offered substantial discounts to their original prices. The 1bedroom unit that they are eyeing is now selling at $500,000, compared to
$580,000 previously. If they proceed with the purchase, they intend to take up
a 15-year loan, subject to the constraints of the property curbs. The developer
has assured them that the purchase price is equivalent to the valuation of the
property.
Don plans to withdraw $130,000 from his CPF Ordinary Account. Of this,
$60,000 will be used for legal fees and stamp duty, with the balance used as
partial payment for the property. Any shortfall in down-payment, plus any
other legal fees and stamp duty, will be covered by his remaining CPF savings
and other financial assets. The property will be jointly owned by the couple,
but Connie will not be contributing financially towards the purchase.
They hope to make the investment in 6 months time.
(15 marks)

For each of these goals,

Determine the lumpsum or annual savings that they would need to achieve the
goals; and

Evaluate if these goals are achievable and if so, suggest ways in which they can
achieve them.

Do note that these goals are very important to them and if you are not able to help
them to fulfill the goals, you must be able to explain your reasons clearly.

Investment Planning
Based on the risk profile analysis done by Don and Connie, they were both classified as
having low risk tolerance.
Based on the original portfolio (per Attachment 1), describe the steps that you would take
over the next 5 years in order to achieve a better performing and/or a better balanced
portfolio. Substantiate your recommendations with sound investment principles.
(15 marks)

Insurance Planning
a)

Based on the financial information as given in Attachment 1 (i.e. current financial

position without considering the above goals), analyse the adequacy of Dons and
Connies insurance cover individually. Attach the worksheets used in making your
calculations.
(10 marks)

b)

Recommend to the couple three (3) most appropriate insurance policies that are
currently available in the market. Explain the rationale for your recommendations.
(10 marks)

Executive Summary
Based on your analysis of the earlier segments and the inter-relatedness of these
segments, summarise your recommendations. Among other things, you need to consider
the feasibility of their goals, the means of achieving them and any other important risk
factors which you would like to highlight to the couple.
(5 marks)

Presentation of report
The presentations will be held during the tutorial sessions in Term 2 Week 4 (i.e. week
beginning 21 July 2014). Each CA group will have a maximum of 15 minutes to present
the key findings / recommendations for the case. You should not read the report in its
entirety but should only highlight the salient points.
There will be a question and answer session at the end of each presentation. Every
member must be assigned a section of the report and is responsible for taking any
questions relating to that part.
(20 marks)

Assumptions
Inflation
Investment rate of return
- Expected after-tax yield (for insurance estimation)
- Equities
- Fixed income

4% pa
5% pa
8% pa
4% pa

Death expenses
$20,000 per person
Except for CPF savings, all other assets are jointly owned by the couple
With reference to Attachment 1, all assets/liabilities were valued as at
31/3/14 and all income/expenses were reflected for the year ended 31/3/14
Don plans to retire in 15 years time.
Expected lifespan assume 85 years for both.
You may make any other reasonable assumptions to support your recommendations
but these assumptions must be clearly stated and explained.
3

Structure of Report
The report should meet the following guidelines:
a)

The standard of English must be good.

b)

The different parts of the report must be logically linked.

c)

The length of the report should not be more than 15 pages, and appendices should
not exceed 15 pages.

d)

The report must be typed with double spacing, with font size of 12,
and a 3-cm margin on all sides of the page. Attention must also be paid to proper
paragraphing and sub-headings, and pages must be properly numbered.

e)

All members are expected to contribute towards this assignment and any
complaints of free riders will be severely dealt with, including the possibility of
being given zero for the assignment.
Administration
a)

Names of group members and their admission numbers are to be shown on the
cover page.

b)

The report must be submitted by 5 pm on Wednesday, 9 July 2014.

c)

The assignment will constitute 40% of your final grade.

Attachment 1
Item
Cash
Savings Deposit
Shares

Remarks
5,000 They do not have the habit of making
10,000 regular savings on a monthly basis. Their
interest income was negligible.
182,800 The shares held as at 31/3/14 were:
10 lots of SGX
10 lots of SingTel
10 lots of OSIM
20 lots of Noble Group
20 lots of Genting SP
Dividend income was about $3,000 for the
year.

Real estate

450,000

Car

80,000 The couple had bought a car 5 years ago,

and the outstanding loan is currently
$58,000.

Other personal property

10,000

CPF Savings
Don
CPF Ordinary A/c
CPF Special A/c
Medisave A/c

130,000
88,000
42,000

Connie
CPF Ordinary A/c
CPF Special A/c
Medisave A/c

12,000
9,000
9,000

Salary
Don
Net salary
CPF - Employee
CPF - Employer
Insurance Policies

71,050
12,950
9,800
Sum Assured ($)

Premiums ($)

Cash Value ($)

Don
NTUC VivoLife
Safra Essential Term
Dependants Protection Scheme

300,000
150,000
46,000

9,200 pa
600 pa
200 pa

183,000
0
0
5

Sum Assured ($)

Premiums ($)

Cash Value ($)

Connie
NTUC VivoLife
Dependants Protection Scheme

150,000
46,000

3,400 pa
200 pa

76,000
0

*The couple has not bought any medical insurance as Dons employer has provided sufficient
medical benefits for both Connie and himself.
Car loan installments
Household
Food
Transportation
Tax
Personal expenses Don
Personal expenses Connie
Vacation expenses
Miscellaneous

14,000
5,000
12,000
12,000
2,500
5,000
3,000
10,000
3,000