Question

Question C1 You just graduate from University of Hong Kong, major in Management. You are employed by Standard Chartered Bank as wealth management associate. During your training, you are given the situation for practice.

Mary and Eddie, ages 43 and 47, have a daughter who is completing her first year of university and a son three years younger. Currently, they have $200,000 in savings and investment funds set aside for their children’s education. With increasing education costs, they are concerned whether this amount is adequate. In recent months, Mary’s mother has required extensive medical attention and personal care assistance. Unable to live alone, she is now a resident of a long-term care facility. The cost of this service is $6,750 a month, with annual increases of about 5 percent. While a major portion of the cost is covered by Social Security and her savings, Mary’s mother is unable to cover the entire cost. In addition, Mary and Eddie are concerned about saving for their own retirement. While they have consistently made annual deposits to a retirement fund, current financial demands may force them to access some of that money

Required:

a. Identify the main financial planning issues that need to be addressed.

b. Suggest any TWO additional information, one in quantitative and one in qualitative you need before making recommendation.

c. Based on the information provided and your assessment of the situation, recommend TWO most appropriate actions. (Total 25 marks)

Answer 1

a. The financial planning issues here are

1. Financial planning for Education of the children

2. Financial aid to Mary's mother

3.Retirement planning for Mary & Eddie.

b. Before suggesting a financial plan, we need to know more about the immediate education funds requirement.

1.Which educational stream do they want for their kids?

2. What is the current cost of education that they want for the kids?

3. How much are there monthly expenses and how long do they want to plan for post retirement life?

c. The immediate concern is their children's education and some financial aid to Mary's mother. They don't have much time left for retirement, but there still is time for it.

1. They can draw some money from their retirement savings for their Children's education, if they fall short of current savings.

2. They need to then quickly 'refill' the drawn amount in the next few years and save more for retirement fund, after having a quantifiable plan for retirement