John and Elsbeth Smyth are a Young Married Couple with One Child: Financial Planning Assignment, KU, Australia

The case study

The first phone call

John and Elsbeth Smyth are a young married couple with one child. Recently Chris, a business associate of Elsbeth, who also has a young family, was seriously injured in a vehicle accident that has resulted in uncertainty about his ability to return to work. John and Elsbeth have also learned that, due to inadequate insurance cover, the family of the injured work colleague is now under financial stress. They do have some insurance cover themselves but are now unsure if it is adequate or suitable for their needs. Recalling a positive experience, she had with you a few years ago on another financial matter, John and Elsbeth call to see if you can help them with their insurance needs.

Over the phone, you explain to John and Elsbeth the financial planning process and why you will need to ask the couple for certain types of financial information. You stress that any information they give you will be treated confidentially and will only be used to help you recommend an appropriate course of action that the Smyths should consider to ultimately meet their needs. You give them information concerning privacy and you and your firm’s capability, and mention that other disclosure issues are in the firm’s financial services guide (FSG) that you will send to them.

You go on to explain that part of the information gathering will include the need to complete a financial profile. This means that they will need to tell you what they own, what they owe, what they earn, and their living expenses. All this information will be recorded in a factfinder form which you will compile.

You arrange a date and time for them to come to your office. You ask them to bring along as much financial information as they can to the meeting, including income details, expenses, insurance details, superannuation, and investments. You also ask them to think about what specific financial goals they want to achieve and any issues they wish to discuss at the meeting.

When you have concluded the call, you make a file note about the conversation including the date, the potential clients’ names, and any other items that were discussed. This is the start of your paper trail. You also complete some of the initial details in the data collection form as shown in Table 1. Finally, you write to Elsbeth and John, as promised during your initial conversation, and include the FSG and a checklist of the information they need to bring to the meeting.

Table 1: Personal details

1. The cost of trauma policies seems very high. Do we really need to pay off the mortgage if we experience a short-term traumatic illness or accident?
2. Are there any super funds that offer trauma insurance?
3. Why did you recommend a personal income protection policy for John when his super fund offers that cover?
4. Is there any way we can reduce the cost of income protection policies whilst retaining the same benefit?
5. Why does John need more life/TPD cover than me?
6. Why can’t John switch to the same super fund as me and take out $2m life/TPD cover?