Description

Nuwan Perera, aged 43 years, having twins Roshan and Geeth of age 14 years, is a software engineer in a company based in Colombo. His spouse passed away recently. Both his children study in the 8th Grade. He has approached you, a financial planner, for preparing a financial plan for his family. He has shared the following financial information with you:

Nuwan’s Assets & Liabilities (As on 31st March, 2019 unless otherwise specified in foot notes)

Assets (Rs.)

Equity MF schemes portfolio: 2,647,000

Balanced MF schemes portfolio: 978,000

Equity shares portfolio[1]: 2,592,000

Gold Jewelry: 217,000

Gold ETF[2]: 321,000

Equity linked savings scheme: 1,570,000

Physical Gold (coins/bars): 1,125,000

Car: 7,500,000

Liquid fund scheme: 525,000

Corporate bonds[3]: 1,500,000

Bank account – Nuwan[4]: 103.25

Liabilities

Car loan[5]: 1,007,705 (end June 2019)

Credit Cards: 72,000

Salary Income per month (Rs.)

Basic Salary: 340,000

Transport Allowance: 90,000

EPF Contribution 12%

ETF Contribution 3%

Regular Outgoings Monthly (Rs.)

Household Expenses: 140,000

Car Loan EMI: 117,400

Other cash outflows Annual

Term Plan Insurance premium: 20,516 (Total Cover Rs. 80 lakh)

Endowment Insurance premium8: 80,333 (Sum assured Rs. 2,000,000)

Health Insurance Premium: 27,631 (Annual – 2 policies/ Total cover Rs. 2,000,000)

You, in consultation with Nuwan, have crystallized the following financial goals for his family and the preliminary Roadmap to achieve them:

1.       Send both the children to a Boarding School immediately – Outlay Rs. 515,000 per child per annum – for 4 years – To be met year on year basis by investing a suitable plan today.

2.       Buy a house – within one year – Outlay of Rs. 75 lakh – Take a loan for 15-year term.

3.       Send Roshan for Higher Education abroad. The estimated outlay is Rs. 13,000,000 then for 5 years. To send Geeth for a 4-year course in fashion technology. The current cost is Rs. 1000,000 per year.

4.       Retirement Corpus – To be accumulated in 17 years – Corpus to sustain inflation adjusted annuity for 25 years post-retirement.

5.       Undertake a trip abroad with both kids on his attaining 53 years of age. The current cost of such trip is Rs. 10 Lakh.

6.       To accumulate funds for Geeth’s marriage at her age of 25.

7.       Suitable Estate Planning to cover all his physical and financial assets.

Life Parameters

Nuwan’s expected life: 85 years

Assumptions regarding long-term pre-tax returns on various asset classes

1. Equity & Equity MF schemes/ Index ETFs: 11.00% p.a.

2. Balanced MF schemes: 9.00% p.a.

3. Bonds/Govt. Securities/ Debt MF schemes: 7.00% p.a.

4. Liquid MF schemes: 5.50% p.a.

5. Gold & Gold ETF: 7.50% p.a.

Assumptions regarding economic factors:

1. Inflation: 5.50% p.a.

2. Expected return in Risk free instruments: 6.50% p.a.

3. Real Estate appreciation: 8.00% p.a.

Assignment Task

The above client has approached you seeking assistance with regard to preparing a financial plan. You as professional financial planners draw a plan to meet the said goals. You will,

1)      Submit a report communicating your plan (word count = 2,000 +/- 10%)

2)      Submit spread sheet supporting your calculations

3)      Deliver a presentation on the same report (10 minutes) – you may use PowerPoint presentation and spread sheet.