Select any general insurance provider currently operating in New Zealand. State the name of your chosen provider and include the link to their website (URL). i. From the range of products offered by the provider, recommend

Question 1: Lending

You are a mortgage adviser. Tom and Rewa contact you for help with a home loan.

Tom and Rewa are in their early 40s and have two children, Cody (8) and Leilani (5). Rewa works full time in the marketing industry. She is paid a salary and receives good pay rises each year. Tom has been working hard over the last few years building up his own fitness training business. Although some years have been better than others, he is excited by the recent increase in corporate clients subsidising membership for their employees. Both Tom and Rewa are incredibly grateful to be able to pursue careers that they love. They intend to continue in these careers until they turn 60, when they plan to retire early and travel extensively.

While Tom tries to save, his spending habits leave a bit to be desired. He tends to spoil the children every chance he gets. He is a born risk-taker. Rewa, however, is highly conservative and likes to protect herself from risk wherever possible.

Tom and Rewa have had an offer accepted on a 1970s bungalow. The deposit came from a combination of KiwiSaver, savings and a small gift from Rewa’s parents. Both Tom and Rewa are very handy and have a great eye for design; they plan to modernise the bungalow over the next few years to make it a home of their own. They have committed to a tight budget
to save for the renovations and reduce their debt quickly to support their early retirement plan.

You agree to undertake some research and email them a recommendation on the most suitable home loan structure for them.

Task

Write an email to Tom and Rewa in which you do the following.

a. Obtain a recent commentary that discusses the outlook for home loan rates (for example, from a bank, economist or news article). In your own words, summarise the commentary and explain the current outlook for home loan rates for Tom and Rewa.

Could you provide the URL to the webpage where you sourced your market commentary?

(10 marks)

b. Go to the website of any home loan provider currently operating in Aotearoa New Zealand. State the name of your chosen provider and provide a link to the provider’s home loan webpage.

From the range of home loan products offered by your chosen provider, recommend a suitable home loan structure for Tom and Rewa. Include specific details of the structure. Justify your recommendation, considering:

• Tom and Rewa’s character, goals and financial situation
• the features of the product(s) offered by your chosen provider.
• The current outlook for home loan rates.

Note: Begin your email ‘Dear Tom and Rewa’.

(Word count guideline: 800 words)

(15 marks)

Question 2: Insurance

You are an insurance adviser. Simon contacts you for help with his insurance needs.

Simon is a 30-year-old solo dad with two young daughters, Julie (7) and Olivia (5), who are the focus of his life. The recent passing of his partner has heightened his personal risk awareness, and he has come to you for insurance advice. You obtain the following financial information from Simon.

• He earns $85,000 per annum working as a planner for Napier District Council.
• He rents a house in Napier, paying $680 per week in rent.
• He estimates his possessions are worth around $140,000.
• He owns a car valued at $25,000, which has $12,000 in financing outstanding.
• He has $16,325 in his KiwiSaver account and no other savings.

You assess his risks and explain the range of products he needs to cover those risks. However, given his tight budget, you point out that he can’t afford to take out the full range of products, and he will need to make some compromises.

You agree to email Simon a recommendation on the most suitable general insurance products for him, and suggestions for prioritising life, disability and health insurance products.

Task

Write an email response to Simon in which you do the following.

a. Select any general insurance provider currently operating in New Zealand.

State the name of your chosen provider and include the link to their website (URL).

i. From the range of products offered by the provider, recommend the specific products and specific cover types for Simon.
ii. Justify your choice, considering:

• the benefits of the product(s)
• Simon’s attitude to risk
• his personal and financial situation.

(10 marks)

At the initial meeting, Simon also requested your help on which life, disability and health insurance products he should prioritise. The products you discussed are:

• term life
• income protection
• trauma
• total and permanent disablement (TPD)
• health.

b. Select any life, disability and health provider currently operating in Aotearoa New Zealand.
State the name of your chosen provider and include the link to their website (URL). From the list of life, disability and health products above:

I recommend the specific products and specific cover types that Simon should give priority to. Justify your choices, considering:

• the benefits of the product(s) identified
• Simon’s attitude to risk
• Simon’s personal and financial situation.

ii. Identify any product(s) Simon does not need to prioritise. Give reasons for your choices.

Note: You should write ONE email to Simon with your answers to parts a. and b.

Begin your email with ‘Dear Simon’.

(Word count guideline: 800 words)

(15 marks)

Question 3: Investments

You are an investment adviser.

After completing her PhD in marine biology two years ago, Veda joined NIWA as a microbial ecologist and signed up for KiwiSaver. The role required her and her partner to relocate to Wellington, where they purchased a two-bedroom townhouse.

Last week, Veda received an email from her KiwiSaver default fund provider. The email included the latest fund update. It also invited her to use their investor profile tool to check if she is in the right fund. She used the tool, which tells her she is a ‘growth’ investor and suggests she contact one of their advisers.

You are one of those advisers, and Veda emails you, asking what this all means. She says: ‘I know lots about marine biology, but nothing about investments!’

Task

Respond to Veda so that she can make informed decisions about her KiwiSaver. Include the following.

a.

i. Identify and briefly explain what type of investment KiwiSaver is.

ii. Describe two benefits that are unique to KiwiSaver that Veda will currently be receiving.

(5 marks)

b.

i. Go to the website of a current default KiwiSaver provider and obtain their latest default fund update. State the name of your chosen default KiwiSaver provider.

Include the link to the latest fund update.

ii. Identify the asset classes the default fund invests in, and the target percentage of the fund that is invested in each asset class.

iii. Explain why a fund manager invests in different asset classes and the differences between each asset class in terms of risk and return.
(10 marks)

c.

i. Explain why the default fund does not match Veda’s investor profile.

ii. Recommend the KiwiSaver fund that best suits Veda’s investor profile using the same provider. Include the link to the latest fund update.

iii. Identify the asset classes the fund invests in, and the target percentage of the fund that is invested in each asset class. Point out how the mix differs from the default fund.

iv. Explain the potential long-term impact on her investment of switching to this fund.

(Word count guideline: 800 words)
(10 marks)

Question 4: Estate planning

You are a financial planner.

Ari (37), a client of yours for many years, phones you to advise that he has resigned from his position with Mainland Bikes Limited to set up a cycle tours business in partnership with Kathi, one of his work colleagues. He says:

‘Kathi mentioned I should set up a discretionary family trust. Is this something I should do?’

While you advise he must seek legal advice, you agree to help him understand trusts before he does that.

Key information you already know about Ari’s personal and financial situation is as follows.

• Ari has been in a relationship with Molly for seven years. They have two children together, twins Maia and Noa (5). Molly also has a daughter, Ella (12), from a previous relationship.
• Ari owns two properties (he has sole ownership of both): a three-bedroom house where he, Molly and the three children live, and a seaside bach (holiday house), which Ari inherited from his parents. The Bach has been in Ari’s family for generations, and he wants to honour his father’s wishes that it remains so.
• Ari has built a share portfolio currently valued at $52,000. He also has $22,000 in a KiwiSaver account.
• Ari and Molly jointly own a hybrid vehicle valued at $30,000.
• Ari and Molly operate separate transactional bank accounts.

Task

a. Answer Ari’s question to help him understand trusts. To do this:

I. Outline how a discretionary family trust operates. Explain the roles involved
ii. Explain two advantages for Ari in setting up a trust
iii. Explain two disadvantages for Ari in setting up a trust.

(12.5 marks)

b. Two days later, Ari calls again:

I’ve arranged a meeting with a lawyer. She says when we meet, I should also set up a Will and Enduring Power of Attorney. What is the purpose of each, and are these necessary if I set up a trust?’

Answer Ari’s question in your own words.

i. Explain the purpose of a Will. Is a Will still necessary if he sets up a trust? Give reasons for your answer.
ii. Explain the purpose of an Enduring Power of Attorney. Is an Enduring Power of Attorney still necessary if he sets up a trust? Give reasons for your answer.
(Word count guideline: 800 words)
(12.5 marks)