Finance

Gonzales Family,
We are pleased that you have allowed us to assess your needs and that you have trusted us with your personal information and situation.  Enclosed you will find an assessment of your needs based upon this information.  All assessments are categorized for your reading ease and can be adjusted if any of your family’s situations have changed.

One of the main problems facing families and individuals today is a lack of planning and coming to us for help was the first step in this process.  We are here to help you make easy transitions in ever changing life issues and to hold your hand if necessary to assist you in making things as easy as possible.

It is recommended that you read over the information as a family and that you call us with any questions that you may have.  We are happy to answer any questions you may have and we will do so free of charge.  Any adjustments to your assessment will be carried out as soon as possible if there are any changes to be made.  My business card is included as well as my personal telephone number, please use my contact information at any time.  We have enjoyed preparing this information for you and we wish you all the success in the world.

Sincerely Yours
Executive Summary
Purpose: To assess the needs of the Gonzales family and to make financial recommendations based on their needs and current situation.

Key Recommendations:
The family must obtain life and disability insurance to alleviate the risk of losing an adult member of the family.
The family must use the current assets of Mr. Gonzales’ mother towards investing to make sure there is money to take care of her in the near future.
The family must stick to a budget to ensure that all of their financial goals are met.
The family can make plans to repay the loan but in the event that Mr. Gonzales’ mother’s health deteriorates, they will instead use this money towards the family’s immediate needs.

Goals and Objectives
Based on the information given in the interview, your goals and objectives are defined below:
    Save enough money to comfortably retire.
    Pay for the education of your 2 children.
    Expand the business of Mrs. Gonzales.
    Take care of Mr. Gonzales’ mother.
    Buy a bigger home or expand the current one to suit their needs.
    Pay off the credit cards.
    Replace the old car with a newer one.
    Provide for the family in the event of death.
    Pay back loan from Mr. Gonzales’ mother.

Risk Profiling
The children are daughter, Lillian aged 14 and son, Matthew aged 16 therefore there are 2 years before money needs to be spent on university for Matthew.  There would need to be enough in the account to pay for the first year of Matthew’s university and then enough going into the account to pay for his second year.  After his second year, there would then need to be enough to pay for Lillian’s university.

This means that for 2 years in the beginning there would need to be enough money to cover Matthew’s university and then for 2 years it would cover both children’s university.  The last 2 years will only be for Lillian’s university.  For the schooling of the kids, you would have a high risk tolerance since you need money in short period of time for Matthew.

Since Mr. Gonzales is currently 47 he has another 18 years before he retires.  Mrs. Gonzales has another 25 years to reach retirement since she is currently 40 years old.   There are 18 years left for the retirement of Mr. Gonzales therefore there is enough time to generate enough in retirement savings.  The risk here would be moderate.

Mrs. Gonzales’ business will require funds in the beginning to expand it so that it can begin to generate a minimum of $50,000 of yearly income.  The business should have insurance to cover any unforeseen occurrences and to cover risk.  If the business fails, the family loses any potential income from the business as well as the money used to invest in the business.  The risk of a business failing is high.

The family has no life insurance on the mother, father, or grandparent this means a very high risk if one of them should pass away.   If either parent dies, the grandparent will then become a big burden on the remaining spouse causing them to possibly quit working and stay home to take care of them.  This is a loss of income that can be used to help sustain the family.  The risk is high since there is absolutely no life insurance on any adult in the family.

The housing market isn’t as bad in Australia as it is in other countries therefore the value of the home should be reasonable and the risk of its value falling is low.

Current Financial Situation
According to the statement of cash flows (see Appendices) the family has a positive cash flow of $344.17.  According to the balance sheet the family has a net worth of $847,300.  Debt to equity ratio is .569.  The current ratio is .656.

Tax Planning
Income taxes need to be paid per annum therefore there should be quarterly payments made.  After each month Mr. and Mrs. Gonzales should add their incomes together and make sure to put aside the correct amount of income tax aside into a different account.  This money will gain a small amount of interest over a 3 month period.  Mr. and Mrs. Gonzales should invest into a superannuation to make sure they can take advantage of the tax deduction.  Each year the family should itemize their deductions to see if they would be more than the standard deductions given.  College or university expenses can also be a source of tax deductions so the couple should make sure to take advantage of this.  The businesses can be incorporate so that the tax rates will not be as high as the individual rates.

Liquidity Management and Personal Financing
Liquidity management is extremely essential due to the various goals that the family wants to accomplish.  The family needs a budget drafted and they have to learn to stick to the budget if they want to fulfill their goals and objectives.  Investments should be long term and short term to cover any intermittent needs.

Personal Investing
Paying for university for the children is a form of personal investing.  The children will learn skills that will enable them to obtain better careers and jobs to sustain high living standards.

Housing and Home Ownership
The taxes paid on the interest of a home loan are tax deductible and the home in itself is an investment since it normally appreciates in value.  This can be a good investment as long as the market is stable.  Home ownership is an asset.

Wealth Protection – Risk and Insurance
One thing that is guaranteed in this world is death.  The main way to prepare for death would be to obtain insurance for that purpose.  All adults in the family should have some form of life insurance.  Also the last thing a family needs is to either lose an income producing member through death or accident.  Therefore accident and/or disability insurance can become important as well.

Superannuation
At some point in everyone’s life, they must retire from working due to old age, health reasons, etc.  The family must foresee the need to retire and know that the government has provided superannuation includes pensions that will assist them in their retirement years.

Social Security
In Australia, social security payments will be available if they are truly needed after undergoing a means test to determine needs.  If the family invests wisely enough they will not need any social security payments.

Estate Planning
The family does not have any means by which to divide up their assets should something happen to one or both of them.  Estate planning is essential so that assets are not ceased by the government and divided according to their standards.

Conclusion and Recommendations
It is our recommendation that the family do the following:
    Purchase life and disability insurance.
    Purchase homeowner’s insurance that includes flood insurance.
    Stick to their budget.
    Use the money that the grandparent has to invest along with the $130,000 loan.  We recommend they have a diversified portfolio that includes bonds, mutual funds, insurance, certificates of deposit, and annuities.
    Pay down their credit card debt using any extra money on a monthly basis.
    Sell the home and purchase a cheaper one that includes the space they need.  Use the proceeds from the home sale to pay off the car.
    Sell the old car of Mrs. Gonzales and use the proceeds to purchase a newer car along with money from their personal account.
    The family needs to use the money of the grandmother to pay for the business expenses.  This is an investment on that money and should be used as such.
    The family needs to draw up a will.

The stock portfolio will be used to make sure their children have money to pay for their university expenses.  Stocks are aggressive and since their children have 2 years before they will be in university they need to act now.  The bonds are for a long term investment that is guaranteed to pay out at maturity.  Floods occur in the area more frequently than not and this risk needs to be minimized, this can be done by purchasing flood insurance.  The grandparent is a member of the home and therefore, her assets are the assets of the family and should be invested to assist the family with any expenses or goals.  A good investment will lead to having enough money to care for the elderly grandparent when the time comes.

Financial Services Guide
General Information
We offer securities, mutual funds, and bonds to our clients.
We offer life insurance, disability insurance, and homeowner’s insurance to our clients.
We provide an assessment of your needs based on your information and we recommend the financial steps you should take.
We receive a commission for every policy, security, etc that you purchase per our recommendation.
We do not have any third party agreements that will conflict with the needs of our clients.  We are free to represent any company that sells any of the products that we offer and we are not influenced by any of the companies we sell for.
We do not own any interest in any of the companies we represent and therefore are not going to influence you to purchase any products that do not suit your needs.
We make sure that all the companies we represent carry a license from the ASIC and we are authorized representatives of said companies.

Customer Complaints
We strive to make sure that our clients are satisfied but in the event they are not we make sure that we address each complaint internally.
If a client isn’t satisfied, please call our customer service number and they will instruct you to send a formal letter indicating your dissatisfaction in detail to the address given.  This will create a complaint file for you and begin the process.
Once the letter is received, we will contact you if we need more information if not, we will begin to investigate your complaint.
We will keep constant contact with you to make sure that you are completely satisfied with the way that your complaint is being handled.
Unfortunately due to market fluctuations, we are not able to refund any money on the purchase of any products that are dependent on the market.  We will however switch you over to a new product or liquidate your position at no cost or additional commission.

Products
We can develop an investment plan for you.
We can also sell you certain products within the investment plan or find the proper products for you.
We offer a prospectus for any mutual fund and we can also provide you with a history of stock prices ranging from 1 day to 3 years.
We are not attorneys but we have a law firm that takes care of all our legal needs including drawing up wills for our clients.  We also provide our clients with a list of available law firms.

Affiliation
We are not affiliated with any banks or similar financial institutions.