Join our investing community

RM: Case Study 1: Discussion

Discussion in 'Financial Planning Study Group' started by CJ. Wentworth, 11th Mar, 2009.

  1. CJ. Wentworth

    CJ. Wentworth Well-Known Member

    Joined:
    9th Mar, 2008
    Posts:
    92
    Location:
    Cairns, QLD
    To anyone willing/wanting to discuss the assignment for Kaplan RM: Case 1.

    Note: I am not looking for the answer to the question/case. But I do have a few questions / issues I would like to discuss.

    1: There is no mention of her husbands income. Are we to assume that he does not work (just study and child care).

    2: There is no mention of the value of the unit that they live in. I'm assuming that the value is irrelevant to the answer they are looking for (hence selling is not an option).

    3: There is no mention of how muh the loan on her shares are costing her. Unless this is included in the 280,000 mortgage on her investment property (as she owes nothing on the unit they live in).

    4: In determining the amount of life insurance required, the workbook tells us to calculate what is required to send the CHILD through to university, however her husband is also studying. Am I to assume that should she fall ill/die that the insurance should not cover his educational expenses?


    Case study 1

    Simone is 35 years old, married, and lives with her husband and one year-old child in their three bedroom inner-city unit. There is no mortgage on the unit; it is fully paid off. Her husband is studying part-time, and when not studying he looks after their child.

    Simone’s 65 year-old mother looks after the child when the husband is at uni.

    Simone is employed as a senior accountant earning $145,000 p.a. plus an annual bonus, which is dependant on the revenue she brings into her firm. Last year she received a $20,000 bonus and the previous year $23,000. Last year she was offered a 10% equity stake in the business for $300,000; she borrowed the full amount to buy the shares. These shares are currently valued at $450,000, however she still owes $250,000 of her original loan.

    Her employer provides her with basic term life and TPD cover at 1.5 times her base salary. This is provided through the employer-funded superannuation fund.

    Simone gives her mother an allowance of $400 per month and plans to continue to assist her mother in this way until her mother’s 85th birthday, or she is put into a nursing home, or she passes away.

    Simone leases a Mercedes Benz sports coupe, for which she pays $1,100 per month. Her other main expenses are commitments on a two-bedroom unit in the inner city and household expenses of $3,000 per month. She has a mortgage of $280,000 and monthly repayments are $2,500. She currently rents out the unit for $1,200 per month. Rates and body corporate fees are $4,200 per annum. Her annual household expenses are $36,000. Simone has no other debts.

    As Simone’s adviser, outline the recommendations you would make to her regarding life insurance and general insurance needs. Provide a brief explanation of each insurance you recommend, the amount of cover and your reasons for these recommendations. For income protection you must provide waiting and benefit periods and your reasons for recommending those particular periods.
     
  2. anneee11

    anneee11 Member

    Joined:
    16th Feb, 2009
    Posts:
    5
    Location:
    Melbourne, VIC
    Hi CJ. The best way to start is to work off the example case studies in the modules - they're pretty much exactly how they want you to set out your solutions/workings. And alot of the time, the only thing that differs are the numbers.

    It looks like you're making the assignment out to be alot harder than it is. Chances are that if they haven't given you the info you're looking for - then you don't need to use it.

    1. Husband's income is irrelevant.

    2. The unit is fully paid off so don't worry about it.

    3. Don't worry about the interest on her share loan. Use the $250,000 debt as is. But if it really bugs you - i guess you can put some reasonable interest in your assumptions. But I suggest not to make it too hard on yourself.

    4. You can put in your assumptions how much you think the childs education expenses will be and whether Simone wishes to support it till it's 18 or till it graduates etc. You can also include the husband. Just make sure your assumptions are specific and reasonable.

    I completed this last year. My case study was almost the same. Hope this helps! Good Luck!
     
  3. johnluo721

    johnluo721 Active Member

    Joined:
    9th Feb, 2009
    Posts:
    28
    Location:
    sydney
    regarding case study 1

    just finished my ELC assignment. compare to ELC, RM assignment looks tooo easy. and I really doubt I am on the right track. SECTION 1 is basicly copy answers from text book. For those definitions, do I have to define in my own words or it is ok to use text book definition?

    and for case study 1
    According information provided, I calculate appropriate sum insure for life, trauma and income protection, and then compare to sum insured, and gives recommondation base on calculation.
    For general insurance, just mention home and content insurance and car insurance
    whatelse should i mention and discuss in detail? did i miss anything?

    For those already complete this course, please give me some idea, and point out my mistake.
    thanks very much
     
  4. anneee11

    anneee11 Member

    Joined:
    16th Feb, 2009
    Posts:
    5
    Location:
    Melbourne, VIC
    When i did RM, I just followed exactly what they did in their example case studies, step by step. I think that's the way they want you to structure your answer, so use them as a guide.

    As for the definitions, I pretty much used the definitions given in the modules and changed the wording a little bit.
     
  5. Kellie

    Kellie Member

    Joined:
    19th Apr, 2009
    Posts:
    5
    Location:
    Sydney
    Hello all,

    I am also currently doing my RM assingment. I'm just a bit confused with Q5and would much appreciated if anyone who've completed RM give me a few pointers.

    The range of trauma conditions(and the definitions of those conditions) caries from one insurance company to anoher. List four typical conditions that are normally covered under a trauma policy. Identify two policies that are avaliable to the market and discuss how the definitions of these conditions vary across the two policies. Attach copies of the policy definitions.

    Are the "two policies" referring to "policy components" in module 4:12, ie conditions covered, repurchase option etc?

    Or are we to collect definitions off Trauma PDSs from outside insurance company such as ING, AXA ?
     
  6. anneee11

    anneee11 Member

    Joined:
    16th Feb, 2009
    Posts:
    5
    Location:
    Melbourne, VIC
    Hi Kellie,

    The 4 typical conditions are cancer, heart attack, stroke and open heart surgery. I found two insurance PDS's that are currently on the market and put their definitions of each condition in a table format.

    When they refer to 'policies', i think they mean insurance products e.g. Asteron Income protection/trauma/tpd etc.

    If you want me to send you what I've got, let me know in a PM and i'll email it to you.
     
  7. Kellie

    Kellie Member

    Joined:
    19th Apr, 2009
    Posts:
    5
    Location:
    Sydney
  8. SteelMonkey

    SteelMonkey Member

    Joined:
    11th Feb, 2009
    Posts:
    17
    Location:
    Perth, WA
    Slowly Does it

    Hi All

    Im slowly working my way through the RM assignment and just have a couple of questions which were brushed on in a previous post.

    Im going through Simone's assets and liabilities at the moment and am wondering if we are to include the value of the inner city unit in which they live, i know they dont have a mortgage but shouldnt that be included as an asset, it doesnt say how much it is worth. Also it doesnt state how much the unit they have a mortgage on is worth, should i Just assume it will exhaust the debt owing on it of 280000 ?. And has everyone else included the bonus simone gets every year in her gross income ?

    Im also a little confused as all the case studies were for the two people but the husband is virtually taken out of the picture on this so im assuming we disregard him and his future earning capacity once he finishes uni ?

    Sorry for all the questions im just hoping to get this clear in my head!

    Any help would be appreciated

    Thanks
     
  9. study

    study Member

    Joined:
    3rd May, 2009
    Posts:
    11
    Location:
    Adelaide
    steelmonkey.
    I am with you i on that one. I have assumed that we do need to include the value of the unit where they currently live, but the assignment does not give a value on it. and a value of the investment unit.
    I wish i could help but I am in the same boat as you.
    I might just hand in my assignment and wait for the notes they give me for the resub.
    One thing I think Kaplan is looking for is the justification of the insurances we suggest. As long as that i ok your assignment should be ok. I do not know this for certain however, so take that advice with a pinch of salt if you like :)
     
  10. SteelMonkey

    SteelMonkey Member

    Joined:
    11th Feb, 2009
    Posts:
    17
    Location:
    Perth, WA
    I guess that is all we can do, it is a bit ambiguous and quite frustrating.

    I will be submitting mine in a couple of weeks, just finishing off a few things so it will be interesting to see what they come back with, even better if i actually passed first go(fingers crossed)!
     
  11. Jennylichen

    Jennylichen Member

    Joined:
    14th Mar, 2009
    Posts:
    20
    Location:
    Sydney, NSW
    Hi guys, we only need make recommendations to Simone, not including her husband, right?
     
  12. SteelMonkey

    SteelMonkey Member

    Joined:
    11th Feb, 2009
    Posts:
    17
    Location:
    Perth, WA
    From what I can tell yes, its just for simone
     
  13. gocats

    gocats Well-Known Member

    Joined:
    13th Apr, 2009
    Posts:
    50
    Location:
    Geelong, Victoria
    Hi guys, Im just starting the assignment now, but not up to the case studies yet. Please let me know how you go with any notes kaplan provide
     
  14. Jennylichen

    Jennylichen Member

    Joined:
    14th Mar, 2009
    Posts:
    20
    Location:
    Sydney, NSW
    Does anyone here start case 2?
    I really want to find someone to discuss it.
     
  15. gocats

    gocats Well-Known Member

    Joined:
    13th Apr, 2009
    Posts:
    50
    Location:
    Geelong, Victoria
    Hi Jenny, I'm up to the case studies now. Am happy to start 2 first and work through it together?
     
  16. Jennylichen

    Jennylichen Member

    Joined:
    14th Mar, 2009
    Posts:
    20
    Location:
    Sydney, NSW
    That will be great. I also put my quesstion there

    http://www.invested.com.au/106/rm-case-study-2-a-36921/

    I also sent an email to kaplan, but their reply didn't really help.

    I will post their reply on website tomorrow and see whether it will help you go through this case study.
     
  17. sonbright

    sonbright New Member

    Joined:
    11th Nov, 2009
    Posts:
    4
    Location:
    nsw
    Hi Jennylichen,

    Would be great to see Kaplan's reply!

    working on case 1 atm and am a bit vague on it atm.

    Looking forward to the reply (it might not be extremely helpful but I welcome any input!)
     
  18. Jennylichen

    Jennylichen Member

    Joined:
    14th Mar, 2009
    Posts:
    20
    Location:
    Sydney, NSW
    Thankyou for your email.

    You are correct. There is no similar case study in your course material as we require you to use your knowledge and understanding of business insurances to formulate an answer. If you use the same principles that you used in Case Study 1 by making recommendations supported by justifications and basic calculations you will be on the right track.

    Kind Regards,

    Risk Technical Services Team
    riskquestions@kaplan.edu.au
    Kaplan Professional | Home

    Hi, I sent an email to Kaplan about case study 2, not 1.
    Hope this will help u
     
  19. sonbright

    sonbright New Member

    Joined:
    11th Nov, 2009
    Posts:
    4
    Location:
    nsw
    Thank you Jennylichen, will be helpful when i get unto case 2.

    did you basically follow the study guide examples for case 1? do you think we need show all the calculations as the question only states to outline and brief explanation?
     
  20. Jennylichen

    Jennylichen Member

    Joined:
    14th Mar, 2009
    Posts:
    20
    Location:
    Sydney, NSW
    I just followed the steps the examples showed in text book.
    You also need to show the calculations to support your answer