Case Study – The Zara Family
George Zara (aged 65) is married to Tina (aged 62). They are living in a lovely beach
side suburb North of Sydney, they have two children, Lisa (32) and David (28).
Lisa is married to John, they have 2 children, Alexander age 6 and Sophia age 2. John
works full time and Lisa is currently working part time.
David has recently become engaged to Emma and they are planning to get married in
February next year. George and Tina are very excited about this and they are looking
forward to the big day. They would like to assist David financially with the wedding.
They are also thinking to assist David and Emma buy their own house as they are
concerned the property prices in Sydney are becoming less affordable.
George is a partner in an accounting firm specialising in information technology (IT).
George works very long hours and travels frequently. He can’t wait for the opportunity
to slow down so he can have more time to see his wife and spend time with his grand
children.
George is considering to possibly stay involved in retirement by potentially taking on a
company board position considering his extensive experience and possibly
independently undertaking consultation projects in areas he feels passionate about
such as Artificial Intelligence.
Tina works as a teacher. She is currently working part time after she reduced her
working hours 3 years ago. She has commenced a Transition To Retirement pension
(TTRP) in a form of an Account Based Pension (ABP) to supplement her income. She
is currently drawing the maximum allowable annual pension payment from the TTRP.
Tina looks after Lisa’s children for the 2 days she stays at home.
George and Tina have been discussing for a while the need for them to see a financial
adviser to help them put in place a plan for retirement in light of the latest
superannuation changes impacting them and their retirement plan. They would also like
a plan to manage some upcoming expenses including their son David’s wedding, their
planned holiday, buying a new car and house renovations.
George and Tina have a very strong desire to remain close to their children and grand
children and assist them in every way possible. They are also realistic with regards to
the fact they need to look after themselves and recognise the fact they need to be able
to meet their expenses in retirement.
Both George and Tina have reasonable experience when it comes to investment and
management of their financial affairs. Although in recent times George and Tina have
been too busy to pay attention to their financial affairs, they feel this will be different in
retirement where he would have ample time to manage their financial affairs and take
control of their finances and investments as they both feel this is important for them.

George and Tina have decided to come and see you. Tina made an appointment for
both George and herself for an initial consultation with you.
George and Tina have left you with the information below after the first interview.
4 of 10
The Zara family personal and financial information
George Tina
Income salary & wages *
(excludes employer SG
contribution)
$650,000 $70,000
(part-time work. exclude TTR
pension payment)
Home (principal residence)
Unencumbered $4,000,000 (Joint tenancy)
Residential Investment
property
Current rent is $700 Per week.
total Expenses Excluding
interest $10,000 p.a)
$1,250,000
Rental property loan
@4.8% variable (current
repayments $2,500 per month) $200,000
Home contents
$400,000
Car $65,000
Bank Account (at call) $70,000 (Joint)
Term deposit @ 3.2% matures
in 1 Sep 2018
$250,000
Share portfolio*** held in a
discretionary family trust
(George and Tina are joint
trustees, with George also the
appointor)
$400,000
Invested equally in the
following shares Telstra,
Rio Tinto, CBA and ANZ
Employer superannuation
(retail funds)
$1,780,000
(Insurance $500K life and
TPD included)
Investment: Growth (80%
Growth, 20% Defensive
$750,000
($500K life and TPD
Investment: Conservative (30
% Growth, 70% Defensive
Transition to retirement
pension (max pension
payments taken)
$400,000 ABP
Investment: Conservative (30
% Growth, 70% Defensive
Income requirement **
Exclude loan repayments
$85,000 p.a
Notes to the supplied information:
* The employer makes only the mandated employer contribution (SGC) to their
superannuation nominated superannuation fund.
** George and Tina’s total current income requirement will continue until retirement.
*** The share portfolio was recently acquired by George after he received a cash
inheritance.
5 of 10
You need to clearly address the following issues:
 Their goals, objectives, needs, and concerns and whether they can achieve their
objectives including their retirement objectives and how (attempt to present
them with more than one option where applicable).
 They also ask you to address and take into account the following specific
issues:
o George and Tina would like to retire once George reaches age 67. However,
they are happy to postpone retirement for a few more years if this would
help them achieve a more comfortable retirement as George is happy to
scale down his workload and stay working on a consultancy basis for a few
more years. They think that they need an after tax income of $80,000 in
today’s dollars during their retirement as by then the mortgages will be paid
out (assume that this income can be produced tax free at retirement).
o George and Tina would like to pay off their debt as soon as possible.
o They would like to save and invest.
o They are happy to consider the concept of borrowing to invest if they feel it
can help them achieve their retirement objectives.
o George and Tina would also like to assist their daughter Lisa in providing for
their grandchildren’s high school education. They would like to provide
$20,000 pa per child for the 6 high school years.
o George and Tina would like to help David with her wedding. They would like
to put aside $30,000 in today’s dollars and be made available to David. They
would also like to do what they can to help their son David save to buy a
home with his future wife Emma.
o Tina would like to do some renovations on the house after they have both
retired. The expected cost is approximately $300,000 in today’s dollars.
o George and Tina would also like to go on a trip around Europe for which the
expected cost is approximately $45,000 in today’s dollars.
o They would also like to replace their car for which the expected cost is
approximately $130,000 in today’s dollars.
o George and Tina have been considering to establish an SMSF as they are
getting close to start their life in retirement. They wanted to know the key
relevant issues they need to be aware of including their roles and
responsibilities as trustees as well as the key risks and benefits related to
their specific circumstances. At present George and Tina’s superannuation
contribution goes to an employer nominated retail fund.
o George and Tina wanted to also explore the concept of borrowing to
purchase a property by using a Limited Recourse Borrowing Arrangement.
George and Tina would like to know more about that and the possibility to
use such a facility through a SMSF to buy an apartment in the city for their
son David and his future wife Emma to live in after they get married at a
subsidised rent to help them save to buy a house.
6 of 10
o George and Tina would also like to explore (once they set up their SMSF)
the ability of transferring their residential rental property they currently own
into their SMSF as they have been told by at a family BBQ that this could
beneficial be for tax purposes. They would like to confirm this with you.
o George and Tina have also heard from one of their friends about a strategy
that was referred to as “using salary sacrifice to superannuation to maximise
retirement income”. They are questioning whether such a strategy would be
suitable to either and/or both of them (provide the relevant calculation/s with
your explanation).
o George and Tina would like to know more about utilising their
superannuation savings to commence a pension or an income stream to
help them maintain their life in retirement. They also would like to know if the
latest superannuation changes impact their retirement plan.
o George would like to get some advice on the share portfolio invested
through the family trust. Advise George if his share portfolio is well
diversified and explain why or why not. Also elaborate on what can be done
to make the share portfolio more diversified. Be specific. Provide George
with a clear illustration/ justification. As part of your justification, comment on
whether the Family Trust is the most appropriate structure for this
investment.
o George and Tina would like to get some advice on their possible eligibility to
obtain the age pension once they are retired. Provide them with a clear
explanation of the reason why or why not. Explain any other social security
issues, if any.
o George and Tina would like to get some advice on the different types of
pensions they can start with their superannuation savings.
o George and Tina would like to ensure they have adequate general and
personal insurance. Be specific in your advice and perform an appropriate
needs analysis as part of your justification
o George and Tina would like you to consider their overall estate planning
needs. Be specific in your advice.
o The term deposit is maturing soon and they would like some advice on what
they should be doing and possible options available for them.
o Projections should be made up to George and Tina’s life expectancy + 8
years.
o Cash flow and asset projections (include projections of cash flows for
George and Tina, presenting both pre-tax and post-tax results).
o Cash flow and net worth tables.
o Provide assumptions used and justifications (cost, risk, suitability, etc.) when
required.
o Use diagrams and charts to assist with your illustrations.
7 of 10
Investment Advice
o Risk Profiling – George and Tina’s attitude to risk:
o George likes owning shares as from his financial background, he
understands that Australian shares and shares in general may have
higher volatility than some other asset classes, however, they tend to
perform well over the long term. George is comfortable with taking risk if
he can understand it and see that there are possible rewards.
o Tina on the other hand was brought up in a very conservative family
where her family had most of their money invested either in government
bonds or term deposits with one of the major banks. Tina’s family have
always talked in front of her that they dislike share investments as they
feel they can’t sleep for worry about market events. However, they have
also said to Tina several times that she could never go wrong with
property investment and have always encouraged her and George to
buy a house when they first got married. Tina therefore is more
conservative than George when it comes to risky investments; however,
as a result of studying finance subjects at university she can see that
sometimes there could be some merit in taking calculated risks to
achieve better returns.
o George and Tina have both indicated they wouldn’t mind taking some
calculated risks to help them achieve their objectives.
You are required to assist George and Tina in identifying their appropriate investment
risk profile based on George and Tina’s attitude to risk, goals, objectives, risk concerns,
time horizon and liquidity needs, etc. You also need to address the following:
 Provide specific asset allocations and how you will address investment
diversification.
 Address the issues for goals based risk profiling (i.e how investments may differ
to meet specific goals with a specific or shorter time horizon). Be specific with
your recommended solutions.
 Specific investment portfolio recommendations providing reasoning and
justifications. In this section, you need to provide your strategic asset allocation
advice followed by specific product investment advice.
Your task now is to prepare a complete Statement of Advice (SOA) for George and
Tina. The information provided in the client scenario is to be used in preparing your
calculations and advice. As the assignment is to be a SOA for clients, it should be in a
suitable format and use appropriate language. Clarity and conciseness are important
but full explanations are required.
As part of your advice to the clients you need to address the following:
 Asset allocations and diversification.
 Investment portfolio recommendations, providing reasoning and justifications.
8 of 10
 Cash flow and asset projections (include projections of cash flows for George
and Tina, presenting both pre-tax and post-tax results).
 Cash flow and net worth tables.
 Provide assumptions used and justifications (cost, risk, suitability, etc.) where
required.
 Use diagrams and charts to assist with your illustrations.
 Clear calculation of projections.
Your SOA should clearly show the structure you recommend for their portfolio, how they
can achieve their goals and where the capital and income will be sourced. Your SOA
should address a long-term plan to provide income and should include projections.
End of the Assignment Question