Sample financial planning recommendation from citidell
- 1. FINANCIAL PLANNING RECOMMENDATION Basis Date : Joint Financial Planning Recommendation : 20-Jan-2018 John J Sample & Mary M Sample
- 2. Disclaimer Figures stated in the attached report are based on assumptions and information provided by you, the client. These assumptions and information will change over time. Some of the information presented is based on current tax and legislation which are subject to change. Hence, it is imperative that you review your financial plan regularly to ensure it is up-to-date and addresses your current needs. This report is accurate to the extent of the information that you have provided. Information provided in the attached report is general in nature and should not be construed as providing legal, accounting and/or tax advice. Should you have any specific questions and/or issues in these areas, please consult your legal, tax and/or accounting advisor. I
- 3. Contents Section One : Personal Data Disposable Monthly Income Net Worth Summary of your Existing Provision Your Monthly Income Allocation Value of Your Financial Investments and Insurance Your Financial Planning Priorities General Findings Section Two : Contingency Funds Retirement Savings Life Cover Health Insurance Personal Accident Insurance Regular Savings & Investments Lump Sum Indemnity Domestic Insurance Estate Planning Conclusion : Conclusion II
- 4. SECTION ONE: PERSONAL DATA Age Next Birthday :39 Marital Status :Married Number of Children :2 Occupation :Marketing Manager @ XYZ Ltd John J Sample, P.O.Box 1234-00200, Nairobi. Dear John, RE: YOUR FINANCIAL PLANNING RECOMMENDATION Thank you for choosing Citidell as your private financial planning adviser. Citidell offers comprehensive private financial planning advice to individual and corporate clients. Our expert advice and partnership with leading local and international financial services providers ensures that our clients experience world class financial planning services. Citidell is licensed and regulated by CMA and IRA. We look forward to delivering great service and a long term relationship with you. 1
- 5. Your Disposable Monthly Income Monthly Income Principal Net Salary Spouse Net Salary Other Regular Income Total Monthly Income Monthly Cash Flow Housing Expenses Living Expenses Loan Repayments Savings Investsment and Insurance Total Monthly Cash Flow Disposable Monthly Income Your Net Worth Assets Owned Cash Financial Investments Real Estate Motor Vehicle(s) Total Assets Liabilities Mortgage Outstanding Loans Total Liabilities Net Worth 286,000.00 0.00 0.00 92,000.00 89,000.00 48,000.00 37,000.00 4,120,000.00 5,870,000.00 17,000,000.00 3,300,000.00 Painting 110,000.00 5,600,000.00 1,200,000.00 286,000.00 20,000.00 30,400,000.00 23,600,000.00 (266,000.00) (6,800,000.00) 2
- 6. Summary of Your Existing Provision Existing Provision Institution Contingency Funds BBK, Britam, NIC Retirement Savings XYZ Ltd Life Insurance ICEA, UAP AARHealth Insurance Personal Accident Insurance AAR, ICEA, UAP Regular Savings & Investements XYZ SACCO Lump Sum Investments Kengen, Safaricom Domestic Insurance Nil NilEstate Planning Your Monthly Income Allocation Monthly Income Allocation Recommended You (%) Action Required Housing Expenses Debts Living Expenses Savings Investment & Insurance Retirement Savings Total 30% 20% 30% 10% 10% 100% 32.17 16.78 31.12 5.94 6.99 100.00 Reduce to 30% None Reduce to 30% Increase to 10% Increase to 10% Disposable Income 6.99 Invest this amount. 3
- 7. Your Financial Investments & Insurance Value to DateCritical Illness Cover Personal Accident Cover Last ExpenseSum AssuredLump Sum Investments InstitutionPlan Name Bank Account BBK - - - - - 3,000,000Current Account NIC - - - - - 120,000Savings Account Health Insurance AAR - - 100,000 - - -Group Health Life Cover ICEA - 3,000,000 50,000 - - 480,000Life Cover UAP - 9,600,000 75,000 - 500,000 -Group Life Cover Lump Sum Investments Safaricom 170,000 - - - - 170,000Shares Kengen 120,000 - - - - 120,000Shares Personal Accident Cover UAP - - 75,000 4,800,000 - -Group Personal Accident Retirement Savings XYZ Ltd - - - - - 4,500,000Pension SACCO XYZ SACCO - - - - - 600,000 Unit Trust & Mutual Funds Britam - - - - - 1,000,000Money Market Fund 290,000 12,600,000 300,000 4,800,000 500,000 9,990,000Total 4
- 8. Financial Planning Priorities þ Save and Invest for your retirement ¨ Financial security for your family ¨ Make additional savings and investments for future financial independence þ Save and Invest for your children’s education ¨ Raise business capital ¨ Buy or build your own house General Findings From my assessment of your existing provision, I find that you have made good effort in providing financial security for your family. However, your existing provision is still limited may not be sufficient for meeting your family's future financial needs. 5
- 9. Contingency Funds This is your personal emergency fund. Sometimes life presents us with situations that require substantial sums of money to be raised within a very short time. Sudden job losses, house fires, theft of your valuables, accidents and police bonds are some examples. It is advisable that you keep three to six months of your monthly income within easy access like in a savings account or a money market fund. A contingency fund is important for the following reasons: a) You will be able to handle and manage emergencies that may arise in the course of your life. b) You will be able to mitigate the overwhelming effects of an emergency. c) You will have peace of mind. SECTION TWO: RECOMMENDATIONS You have 2,747,200.00 excess funds in your contingency fund. You should consider investing these funds in proper financial investments that will yield better returns for you. Retirement Savings A pension plan is a savings plan which provides retirement income. You have to contribute to your pension fund during your working years before retirement for your pension fund to provide income in your retirement. It is wise to contribute to towards your pension whether it is through your employer’s pension scheme or through your private arrangement. The earlier you start the better as your pension fund will benefit from the power of compounding which can deliver some awesome growth to your retirement savings. The main benefits of having a pension plan are as follows: a) You will be assured of receiving an income in your retirement. b) You will have peace of mind in your retirement. c) You will have a better chance of living a long life. You are currently contributing 6.99% of your regular income into your retirement plan which is below your recommended rate of contribution. The recommended proportion of your regular income that you should be contributing towards your retirement plan is 10 – 15 %. 6
- 10. It is not easy to discuss death. Nevertheless, it is the destiny of all mankind. A life Insurance cover will provide replacement income for your family in the event that you are not able to physiologically meet your financial obligations. It gives you an opportunity to plan and meet your financial obligations to your family when you are gone. Usually, a sum assured, which is the cash value that will be paid out to your beneficiaries in the event of your early demise, is determined. Your recommended sum assured is that amount which is sufficient to clear all your outstanding debts and provide for your family’s future financial needs, at the current living standards, until that time when your youngest dependent is expected to be financially independent. Your life insurance company should advice you on your monthly, quarterly, half yearly or annual cost of your life insurance cover. The following benefits can be added to your life cover as enhancements § Critical Illness Cover: It will pay a lump sum (portion of the sum assured) should you be diagnosed with a covered terminal illness. § Disability Cover: Will pay a lump sum in the event of your permanent and total disability. § Accidental Death Benefit: It will increase your life cover proceeds to your next of kin by the value of the accidental death benefit cover in the event of your accidental death. The following are the main benefits of having a life cover: a) A life cover will alleviate the financial strain that may befall your family in the event that you are not physiologically able to meet your financial obligations. b) Your family’s living standard will be maintained even when you are gone. c) You will be able to protect your family from the burden of your debts when you are gone. d) You will be able to give your children a fair chance at life. Life Insurance The sum assured of your life insurance cover is 12,600,000.00 which is not adequate provision for your family’s future financial needs. It has a short fall of 37,796,000.00. You need to purchase more life insurance cover to bridge the short fall. 7
- 11. Health Insurance A health Insurance cover will provide insurance for hospital inpatient and outpatient bills that either you or any of your family members may incur in the event of illness or accident hospitalization. This is a very important cover to have as it will protect the assets that you have accumulated over the years from adverse medical bills. You should ensure that your health cover is in place, whether it is through your employer or through your private arrangement. It is also advisable to ensure that you contribute to your national hospital insurance fund as most private health Insurance providers will settle your hospital bills less any national hospital insurance rebate. The main benefits of having a health cover for yourself and your family are: a) Protect assets that you have used years to accumulate from adverse medical bills. b) Provide quality healthcare to yourself and your family. c) You will have peace of mind. You currently have health Insurance from AAR which should be sufficient insurance for your family's hospital bills. Personal Accident Cover A personal accident insurance cover will provide cash compensation and to some extent cover your medical bills in the event of temporary or permanent disability or permanent and total disability or death arising out of an accident. The limit of cover can be a multiple of your annual income or can be determined by some arbitrary method that can be justified. Once your limit of cover has been determined, your insurance company will advise you on your annual premium. This cover is important for you and your family as an accident can render you or any member of your family incapable of engaging in your normal occupation or any other economic activity. It is therefore advisable that you ensure that you have a personal accident insurance cover for yourself and family whether it is through your employer or through your private arrangement. The main benefits of having a personal accident cover are: a) In the event you become permanently disabled as a result of an accident, a scale of benefits relative to the extent of disability is payable, while in the event of death, the maximum benefit under the policy will be paid out to your next of kin. b) You will receive replacement income for those days that you will not able to work because of injuries sustained in an accident. c) You will be able to alleviate the financial strain caused by personal accidents or accidents involving any member of your family. d) You will get cover for some medical expenses following an accident. You currently have personal accident insurance cover that should take care of your financial and some medical expenses in the event of an accident. 8
- 12. Regular Savings & Investments Great accomplishments begin with a dream and a journey of many miles is covered step by step. A regular savings and investment plan is a sure way of achieving your medium term and long term goals. Goals like: § Retirement planning § Additional savings § Planning for your children’s education § Raising business capital § Buying or building your own house § Vacation or holiday planning can easily be achieved through a regular savings and investment plan. Offshore investments are particularly superior because of their flexibility, diversity, stringent regulatory environment and they give you the opportunity to invest in the fastest growing economies of the world. You stand to benefit from the following by having a regular savings and investment plan: a) It will instill and enhance the discipline of saving money in you. b) You will earn returns on your invested savings. c) You will set yourself on the path to achieving your goals. You have regular disposable income of 20,000.00 per month which you can commit to an additional regular savings investment plan. Lump Sum Investments Fund managers have experience in financial markets which can benefit your investment. They also have various investments which are tailored to meet different investor’s objectives like capital preservation, capital growth, a mix of capital growth and capital preservation or income generation. Offshore investments are particularly superior because of their diversity, stringent regulatory environment and they give you the opportunity to invest in the fastest growing economies of the world. You stand to benefit from the following by investing your surplus funds with a professional fund manager. a) You will get professional and experienced investment management service. b) You will easily diversify your portfolio without necessarily going through the hustles of performing several individual transactions. c) You will benefit from low cost of investment. d) Potential high returns from your investment. You have 2,060,800.00 excess funds in your contingency fund which you can apply to more lump sum investments. 9
- 13. Domestic Insurance This insurance cover is designed especially for your residence. It is arranged to cater for almost everything you have worked hard for in your household including the buildings, furniture, clothing, kitchen equipment, cutlery, electronics, domestic servants (indoor and outdoor) sports equipment among others. The policy extends to include your personal liability either as an owner or an occupier of the premises to third parties, for damage to third party property, bodily injury or death to third parties arising out your use of the premise. Scope of cover includes; fire, theft, accidental damage, liability to third parties and occupational accidents to servants including your liability as an employer. Cover can be arranged on buildings only, contents only or for both buildings and contents. The main benefits of having domestic insurance include: a) Protect your existing provision from uninsured risks in your household. b) You will be able to mitigate overwhelming effects of accidents or other unfortunate incidents that occur in your house. c) You will be compensated for losses arising out of insured risks in your household. You need to purchase a domestic insurance cover to protect your household assets from uninsured risks. Estate Planning A person’s estate consists of all the personal belongings, assets, business holdings, and financial resources an individual owns. An estate can include real property, chattel, possessions, investments, interests in a corporation, rites from a law suit or structured settlement, or funds in the person’s name, held in partnerships or joint ventures, through a trust, or joint ownership arrangement. Estate planning is the process of accounting for the accumulated assets of your estate and arranging for the distribution of those assets in order to achieve your wishes - writing your will. The main benefits of having a will include: a) Having a will is important because it enables you to distribute your estate to your desired beneficiaries when you are gone. Otherwise, some of your assets may remain unclaimed and your estate will be distributed as per someone else’s wishes not to mention the potential for conflict amongst your next of Kin. b) It will facilitate an orderly succession by your next generation. c) You will be able to choose the following important people who will be involved in your estate: executor, trustee, administrators, guardian, beneficiaries and delegate financial power of attorney and medical power of attorney. It is prudent that you write your will otherwise your assets will be distributed as per someone else’s wishes or some of your assets may even go unclaimed. 10
- 14. Conclusion Implementing these financial planning recommendations will set you firmly on the path to achieving your goals in life. I trust that you will find this financial planning recommendation insightful and I look forward to having further discussions with you. Please do not hesitate to get in touch with me in case you need further clarification. Financial Planning Adviser Citidell Co. Ltd 11