AFF3111 2008 Sem 1 Solutions

AFF3111 2008 Sem 1 Solutions - Semester 1, 2008 Solutions...

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1 Semester 1, 2008 Solutions – Final Examination AFF3111 Personal Financial Planning Question One (70 marks) (b) (i) A FSG discloses the services of the adviser to the client. It must provide sufficient information about the business, principal(s), remuneration, internal and external dispute resolution systems, etc, to enable the client to evaluate whether or not to use the services of the adviser. (ii) A PS sets out the manner in which the firm offering FP will collect, use, keep secure, and disclose the necessary personal and sensitive information provided by clients in the course of their interaction with advisers, according to the National Privacy Principles emanating from the Privacy Act 1988 . (iii) General advice is given when the adviser does not consider any of the objectives, financial situation or needs of the person, and a reasonable person would not expect the adviser to have considered such matters. When general advice is given, it should be accompanied by a warning that this was the case, and that further information should be obtained prior to making any decisions. (iv) Personal advice is given when reasonable inquiries have been made about the client’s relevant personal circumstances, such information is taken into consideration in determining any advice, and that the advice given to the client is appropriate for their circumstances. ( v ) A u n i t t r u s t i s a n i n v e s t m e n t v e h i c l e which is designed to pool an investor’s (unit holder’s) money with other investors, in which a fund manager undertake investments in various securities, and makes periodic distributions on behalf of unit holders. Unit trusts are run according to rules established in a trust deed. (vi) There are a number of different types of trustee (MIS, superannuation, discretionary trust, etc.), but in general their role is in prudential supervision as a protection to investors. Trustees are in control of the fund, and are required to act honestly with due care, acting in the best interests of members of the fund, as well as providing access to reasonable amounts of information concerning fund activities. (6 x 3 = 18 marks) (c) Recovery - expansion period - unemployment decreasing, interest rate declining, economic growth, upward movement. Boom - peak period - low unemployment, low interest rates, high economic growth, normally buoyant property market. Contraction - downswing - unemployment rates begin to increase, interest rates rise. Recession - trough or depression - high unemployment, high interest rates, negative economic growth for more than two successive periods. Depending on where in the cycle we are will affect the types of investments to be recommended. Additionally, the adviser needs to be aware of the effect of the
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2 business cycle on an individual’s circumstances, such as high interest rates, therefore lower disposable income; instability in employment, hence possible redundancy; higher cost of living etc. (8 marks)
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This note was uploaded on 07/19/2011 for the course BUS 3111 at Monash.

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AFF3111 2008 Sem 1 Solutions - Semester 1, 2008 Solutions...

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