Financial Planning Case Study

You have been looking after the Chiang for several years now; since well before Ah Gao’s first
wife died. Ah Gao is now 78 years old, and is enjoying retirement life. He and his wife invested
some money through you several years ago, and of this, he wants to pass on $186,000 to his two
children. When it was invested he and his wife had the grandchildren’s education in mind with
this part of their portfolio, but most of the grandchildren are well through their education now,
and they don’t really need help. So Ah Gao asks you to draft a letter of this money each, to do
what they like with. He is happy for you to offer your services to them at the same time.

His 41 year old daughter, Ah Miao, asks you to visit her and her husband, Ah Zhu. Ah Zhu is an
ex-banker, 47 years old and not currently in paid employment. Ah Miao is a secondary school
teacher earning $4,500 per month before tax. They have two young boys (9 and 14), and they
typically spend $6,400 per month. They own a debt-free HDB at Toa Payoh, with a current
market value of $550k and have $560k currently invested in their joint names through a
competitor of yours.

They are not happy with their current investment adviser, having formed the impression that he
is indifferent to them. They want a comprehensive financial planning relationship, and they ask
you to prepare a comprehensive financial plan for them.

They current portfolio is invested through a range of bank deposit (10%), bonds (30%), direct
Singapore equities (35%) and International funds (25%). They also have about $45,000 (cash
value) in an education fund. Ah Miao has a whole life insurance policy that provides her with
total life cover of $450,000 ($50,000 plus bonuses) and costs $1,200 a year. They have no other
personal insurances.

Ah Gao would like to return to work someday, but not as a banker. Ah Miao enjoys teaching, but
she and Ah Gao would like to plan for her full retirement 10 years from now. Current living costs
are $4,500 per month in retirement they would like to be able to spend 6,000 per month
initially, including $30,000 a year on overseas travel for the first seven years, with travel
spending reducing to $5,000 a year from then on.

They ask you certain specific questions:

1. How risk profiling works, how you approach it, and what system if any that you use.
2. They ask about ‘alternative assets’. They heard that the Ivy League University endowment
fund was increasing its exposure to this asset class and they want to understand how it
works, whether they should have an exposure, and if so how this should be achieved.

Prepare a comprehensive plan for Ah Miao and Ah Zhu, including advice on financial
management, risk management, investment, retirement and estate and tax planning needs. You
will need to make up reasonable ‘current’ and ‘fully retired’ budgets based on the totals above,
and make a lot of other assumptions. Please make these clear.

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