125.179 Assignment 1

Assignment 1 Research and referencing (5 marks)

You are required to research beyond the subject notes in answering the questions in this assignment. Reference and cite all your sources when quoting or using material from external sources. Include a reference list at the end of your assignment.

You are required to:

• use appropriate presentation and format for your assignment
• demonstrate independent research and analysis
• demonstrate appropriate use of relevant references
• follow the Harvard referencing style as recommended in Kaplan Australia: Harvard Referencing Guide
• include a reference list at the end of your assignment following the recommended referencing style
• adhere with the assignment word limit.

Independent research

For some or all questions in this assignment, you will be required to complete independent research beyond the provided materials. You will also be expected to analyse this research and use it to support your own reasoned conclusions.

This includes:

• consideration of multiple sources beyond topic notes or other provided resources
• sources included are academically sound and credible
• analysing and understanding the argument or information the source presents
• using the material appropriately to directly support your conclusions.

Where significant independent research is required for a given question, it will be clearly indicated in the question instructions and the Criteria-Based Marking Guide.

Criteria-Based Marking Guide for research and referencing

The Criteria-Based Marking Guide (CBMG) provided at the end of each question is designed to assist you to understand what is expected of you in each question and to let you know how your performance will be judged. It provides advice about the criteria used in the marking of the question and what discriminates between an excellent, satisfactory and unsatisfactory answer.

The below CBMG outlines the expectations for research and referencing in this assignment.

Section A (15 marks)

Question 1 NZ Financial Markets and Systems (5 marks | Word limit: 200 words)

Topic 1, PC1.1: Describe financial markets and systems and explain their roles.

A financial system is a connected group of financial institutions, financial markets, financial services providers and financial products. The financial sector is comprised of financial intermediaries that specialise in transferring funds between lenders and borrowers.

Provide two (2) examples of New Zealand financial markets currently operating and explain their purpose, function and key characteristics. Students may include comparisons to other international markets to support their explanation.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 1 — NZ financial markets and systems

Insert your answers to Section A: Question 1 below this line

End of answers to Section A: Question 1

Question 2   Regulatory framework (5 marks | Word limit: 300 words)

Topic 1, PC2.1: Describe common types of financial products and services used by retail and wholesale customers.

Julie and Damian are brother and sister. Julie is a lawyer and works for a large investment fund manager advising on legal entities and ownership structures. During her career she has built up a portfolio of shares ($1.5 million) and property ($3.2 million). Her current debt is $1.3 million and she earns $260,000 per year. Damian is an artist who works on large installations. His income is varied and lumpy with large commissions taking him up to three years to finalise and to receive payment. Five years ago, he was commissioned for a $2 million large trout gateway to a seaside location, which is yet to be fully installed. He rents his seaside home but moves to wherever the work is required.

Their aunt Grace has left her estate to them. It consists of a house valued at $620,000 and shares valued at $5 million.

Julie and Damian have agreed that rather than sell the house and incur the associated costs, Damian will move into the house rent free with a lifetime tenancy. They have updated their wills so that if Damian should die the house will become Julie’s; and if Julie were to die the house will become Damian’s.

In return, Julie is going to manage the share portfolio of $5 million. For income tax purposes the share portfolio will be placed into a trust with Julie and Damian trustees as well as beneficiaries. They have an investment plan which states that the income will be distributed to Damian during his lean years, and re-invested into the portfolio during his good times. Their long-term plan is to repay Julie’s debt when she is ready to retire. They have named the trust: The Aunt Grace Trust.

(a)       Identify one (1) of the parties — Julie, Damian or the Aunt Grace Trust — who qualifies as a wholesale investor. Support your answer by referencing the relevant criteria which qualifies them as a wholesale investor. (1 mark)

(b)       Briefly explain the warnings a financial product offeror must provide to a wholesale investor. (1 mark)

(c)       Describe the type of conduct expected from a financial adviser when dealing with a wholesale investor. (1 mark)

(d)       What two (2) types of certification does a financial adviser need to provide to the product offeror in order to confirm the wholesale investor’s status? (1 mark)

(e)       Briefly describe the consequences of certifying that an individual is an eligible investor when they do not meet the criteria of a wholesale investor. (1 mark)

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 2 — Regulatory framework

Insert your answers to Section A: Question 2(a)–(e) below this line

End of answers to Section A: Question 2(a)–(e)

Question 3   Financial Products and Services (5 marks | Word limit: 200 words)

Topic 1, PC2.1: Describe common types of financial products and services used by retail and wholesale customers.

(a)       Explain the purpose of KiwiSaver. (1 mark)

(b)       What contributions can an employee make to a KiwiSaver account and at what percentages? (3 marks)

(c)       Explain one (1) advantage for an employee of having a KiwiSaver account. (1 mark)

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 3 — Financial products and services

Insert your answers to Section A: Question 3(a)–(c) below this line

End of answers to Section A: Question 3(a)–(c)

Section B (25 marks)

Question 1   Case Study: Estate Planning (15 marks | Word limit: 500 words)

Topic 1, PC2.2: Outline key aspects of the creation, operation, and uses of common estate planning tools and applicable law.

Jim is age 56 and is about to marry for the second time. His first relationship ended 10 years ago, and he has two daughters age 20 and 25. His fiancé, Claire (aged 36) has a child of her own, a 10-year old daughter. Jim and Claire have been living together for five years.

Jim won $1 million through the bonus bond scheme and the money was paid into an ANZ savings account in his name. He had previously paid maintenance for his children and once the girls turned age 18, he re‑directed the maintenance payments to help his first wife pay off the home mortgage. She now owns the house outright. Jim was renting but has now decided to buy a new home with his winnings that will be big enough for the three of them, plus allow room for his daughters should they need to return home for any reason. He has decided to keep his win a secret and surprise Claire with her new home as a wedding present. To do this, he needs to buy the home in his own name, otherwise Claire will find out about the surprise before the wedding. Jim has adopted Claire’s daughter. Jim’s only other asset is his KiwiSaver account valued at $238,000.

Jim has never made a will.

Explain the following issues to Jim with reference to how this might affect his circumstances:

(a)       What is estate planning? (3 marks)

(b)       What assets would (or would not) be included in an estate? (3 marks)

(c)       What a will is, and what the requirements are for a will to be valid? (3 marks)

(d)       If Jim dies without a valid will, what will happen to his assets? (3 marks)

(e)       If Jim dies with a valid will in place, what can Jim’s children from his first marriage do, if they believe that they have not been appropriately provided for by Jim’s will after his death? (3 marks)

Note to students: Provide appropriate legislative references in your answers. Ensure that each part of your answer is clearly labelled and do not merge parts of your answer.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 1 — Case study: Estate planning

Note: To obtain full marks, answers to all parts of this question should demonstrate ample evidence of wider research (beyond the notes) that has been well integrated into the answer.

Insert your answers to Section B: Question 1(a)–(e) below this line

End of answers to Section B: Question 1(a)–(e)

Question 2   Case Study: Investment Taxes (10 marks | Word limit: 400 words)

Topic 1, PC2.3: Outline key aspects of the applicability of taxation relevant to financial services.

Ben and Jane are married homeowners and they believe they are paying too much tax on their annual earnings and seek your advice on restructuring their income and assets to help reduce their tax. As a financial adviser you can provide taxation guidance. However, you need to recommend they seek specialist taxation advice from their accountant. Ben is a ‘trust fund baby’ and is paid an income of $52,000 p.a. from his grandparents’ family trust (which is a PIE cash trust). Ben’s PIR is 28%. Jane is a part-time radiographer and her income varies from $32,000 to $45,000 each year depending on how much overtime she works on the weekend. Jane has a direct share investment portfolio that earns $16,000, all of which is paid to her directly. Jane has a KiwiSaver with the widely held ANZ KiwiSaver account but Ben has never been employed and has not opened a KiwiSaver account. Jane states she has never given her KiwiSaver provider her PIR.

(a)       What taxes do you expect Ben to pay and at what rate? (2 marks)

(b)       Calculate the taxes and levies you expect Jane to pay and at what rate, assume she earns $45,000 total income this year. Use current rates and show all workings. (3 marks)

(c)       If Jane receives a full imputation tax credit for her share investment income of $16,000, what deduction would she receive on her other income taxes? Show all workings. (4 marks)

(d)       What is Jane’s effective tax rate for the year if she earns $45,000 total income (excluding the ACC earner’s levy)? (1 mark)

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 2 — Case study: Investment taxes

Note: To obtain full marks, answers to all parts of this question should demonstrate assumptions (if any) that are relevant to the circumstances provided.

Insert your answers to Section B: Question 2(a)–(d) below this line

End of answers to Section B: Question 2(a)–(d)

Insert your reference list below this line