Sisters Emily and Kate (first introduced in the analysis task case study) have had a successful 12 months. They have implemented their new software at Kate’s hospital, and it has been adopted throughout the network of hospitals in Australia, New Zealand, Singapore and Hong Kong. They have made sufficient profit to buy out their Uncle Tom through fully franked distributions from their company to each other as shareholders. Kate now has $350,000 in her mortgage offset account. Emily has contributed $110,000 to her superannuation with the view to accessing it to purchase her first home. (Note: A maximum of $50,000 can be accessed from Emily’s superannuation.) The business structure they established was a trust with a corporate trustee of which both Emily and Kate are directors. Emily and Kate are the beneficiaries of the trust. Kate has established a trust, and that trust will be the beneficiary from the business trust, and Emily is a sole beneficiary of the business trust. The sisters want to expand and realise that they need to employ more people to do that. They have found an empty former grocery store in a neighbourhood centre shopping strip. There is car parking underneath for staff and other shops and services in the centre that would make coming to the office a one-stop place for new staff. You are a fully qualified financial adviser with 10 years’ experience. Kate sends you an email asking if you could provide them with advice. She has cc’d Emily into the message. You reply to Kate and Emily that you would be happy to provide them with advice. You are already aware of some of their financial situation, and you customise your email response in the following way: ‘Hi Emily and Kate, I’d be happy to discuss your financial situation and options with you. I will need to gather some more information from you both about your current financial circumstances. Knowing your current corporate structure, would you consider setting up a self-managed superannuation fund (SMSF) and using your existing superannuation balances as a deposit for the new office, then borrowing the balance via the SMSF? In any event, let’s arrange a time for a Zoom meeting and we will get started.’ Notes: • You are required to undertake independent research to answer the following questions. • Take care to ensure you answer these questions using your own words. Where applicable, your response should relate to the case study details provided and for parts where you utilise other resources to support your answer, ensure you cite and reference these.
(a) Given the content of the email, what two (2) disclosure documents should you provide to Emily and Kate at this early stage of the advice process and state the legislative source of these disclosures. (5 marks)
(b) Explain the purpose of each disclosure document, with support from the relevant ASIC Regulatory Guide(s). (5 marks)
(c) What methods can you use to make those disclosures to Emily and Kate? (2 marks)
Hi Emily and Kate,
I hope this email finds you well. Thank you for reaching out regarding your plans to expand your business and discussing potential financial strategies to achieve your goals. I’m excited to provide you with guidance and advice to navigate this important step for your company.
Given the complexity of your financial situation and the proposed expansion, it’s crucial that we proceed with a thorough understanding of your current circumstances. To initiate the advice process, I’d like to provide you with two key disclosure documents, as required by relevant legislation, to ensure transparency and clarity throughout our discussions.
The first document I’ll be sharing with you is the Financial Services Guide (FSG). This document is mandated by the Australian Securities and Investments Commission (ASIC) and is intended to provide you with an overview of my services, qualifications, and the nature of our professional relationship. The FSG outlines the services I offer, how I am remunerated, and any potential conflicts of interest that may arise during our engagement. This document is designed to help you make informed decisions about whether to proceed with my advice and services.
The second document, the Statement of Advice (SOA), is a comprehensive written report that will detail the specific advice I’ll be providing based on your unique financial situation and goals. The SOA will outline the recommended strategies we discussed in our meetings, including the possibility of setting up a self-managed superannuation fund (SMSF) to facilitate the expansion of your business. The SOA will break down the advantages, risks, and potential costs associated with this approach, ensuring that you have a clear understanding of the proposed strategy.
Financial Services Guide (FSG): The FSG serves to enhance transparency by ensuring you have a clear understanding of my role as your financial adviser. It outlines the services I am qualified to provide, my professional background, how I am remunerated, and any potential conflicts of interest that might arise. This document is crucial in building trust and maintaining open communication throughout our advisory relationship. It ensures that you are fully informed about my services and the parameters within which I operate.
Statement of Advice (SOA): The SOA is a personalized document that presents the advice and strategies we’ve discussed, tailored to your specific needs and objectives. It explains the reasoning behind the proposed strategies, their potential benefits, associated risks, and any fees or charges that may apply. By receiving an SOA, you gain a comprehensive understanding of the recommendations I’m making and can make informed decisions about how to proceed with your business expansion plans.
I can provide these disclosure documents to you through various methods:
Email: I can send the documents as attachments to an email, ensuring you have digital copies for your records.
Secure Online Portal: I can set up a secure online portal where you can access and download the documents at your convenience.
Physical Copies: If you prefer, I can also provide physical copies of the documents for your review.
Once you’ve had a chance to review the disclosure documents, we can proceed to schedule a Zoom meeting to discuss your financial situation, potential strategies, and next steps. Please let me know your preferred method for receiving the documents and your availability for a Zoom meeting.
Looking forward to our upcoming discussions and assisting you in achieving your business expansion goals.
Best regards,
[Your Name] [Your Contact Information]
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