The Scenario
You have conducted a preliminary interview with a married couple, Katia and Kevin. The following details have been recorded:
• Katia is 43 and Kevin is 45;
• Katia is a primary school teacher earning £35,000 per annum;
• Kevin is construction site project manager earning £80,000 per annum;
• The couple have two children – Tilly is 7 years old and Jemima is 9 years old;
• Katia contributes 7.6% of her gross annual salary to the Teachers’ Pension Scheme;
• Kevin contributes 6% of his gross annual salary to a defined contribution scheme.
Katia and Kevin are seeking bespoke advice in relation to their plans to retire in 17 years time (when Katia is 60). The couple would like to achieve a combined
retirement income of approximately £45,000 in today’s terms.
They have indicated that in addition to the need to save for retirement, they anticipate some additional significant outflows to occur in the next 17 years:
• The couple would like to fund the university fees for both children;
• Katia has indicated that she would like to purchase a holiday home in North Wales in 10 years time – her provisional budget is £100,000.
Kati and Kevin have little experience with investment products, though they do have savings of £30,000 comprising:
• £20,000 in a bank deposit account;
• £10,000 in a stocks and shares Individual Savings Account.
Kevin has identified a range of investments that the couple might consider to help achieve their retirement planning objectives (including index-linked gilts,
corporate bond funds, authorised investment funds and offshore equity funds) but is unsure which option he should choose.
Required
You are to adopt the role of a wealth manager assigned the task of providing advice and guidance to Katia and Kevin.
To complete the assignment, you need to prepare a report that addresses the following two requirements:
1) The report must present a critical evaluation of the relevance and appropriateness of the investments being considered by Kevin, i.e.
• Index-Linked Gilts;
• Corporate Bond funds;
• Authorised investment funds;
• Offshore equity funds.
Note that you can assume that the couple are willing to combine these investments in a portfolio rather than investing all of their savings in just one additional
product.
(40 marks)
2) The report must outline and justify a proposed portfolio of investments that will meet the needs of Katia and Kevin. The portfolio must be capable of meeting
their stated investment objectives. You must select appropriate investment products and provide documentary evidence of the source of the proposed investments. You
should include:
• An estimate of the final value of the portfolio at the date of retirement;
• A computation of the projected retirement income;
• Supporting computations that outline the assumptions you have made in designing the portfolio.
(60 marks)
When evaluating and justifying investment alternatives, the following investment parameters should be considered:
• Risk;
• Potential for growth;
• Taxation;
• Liquidity;
• Charges.
Word limit: 3,000 words (excluding bibliography, references and appendices).
Assessment Weighting and Submission Date
This assignment will contribute 40% of the marks awarded in your final unit score.
The assignment needs to be submitted on 8th August 2014.
All parts of the assignment should be word processed in Times New Roman 12pt font. Submission will be via the Moodle system, and all submissions will be processed
through Turnitin.
Other Assessment Issues
With regard to the specific learning aims of the Wealth Management unit (see page 5 of the learning programme), this assignment is directed at assessing your ability
to:
Skills
5. Construct, monitor and evaluate bespoke portfolio solutions for a range of client needs.
6. Demonstrate the ability to perform independent research, utilise resources effectively, and interpret investment data and other financial information.
Detailed Assessment Criteria for Grading
70+%
? A sound critical evaluation of the proposed investment vehicles and a valid recommended portfolio that identifies the suitability of the investment portfolio
and provides cogent arguments for doing so;
? Evidence of relevant research into potential investments and an assessment of their characteristics in the context of the assigned task;
? Excellent knowledge and critical understanding of portfolio theory and the elements of the portfolio selection process;
? Accurate calculations of expected return and risk based on appropriate, justified assumptions;
? An excellent level of presentation achieved: a clear, focused report structure with appropriate language and style of writing; the report includes full
references and appendices.
60-69%
? A good attempt at critical evaluation of the proposed investment vehicles and a reasonable recommended portfolio that identifies the suitability of the
investment portfolio and provides arguments for doing so, though the arguments may not always be entirely convincing;
? Some evidence of relevant research into potential investments and an assessment of their characteristics in the context of the assigned task;
? Good knowledge and understanding of portfolio theory and the elements of the portfolio selection process;
? Accurate calculations of expected return and risk based on appropriate assumptions;
? A good level of presentation achieved: an appropriate report structure, language and style of writing; the report includes good references and appendices.
50-59%
? A fair attempt to critically evaluate the proposed investments and a portfolio recommendation is made with some evidence of consideration of its suitability;
? Some evidence of research into potential investments and an assessment of their characteristics in the context of the assigned task;
? Some knowledge and understanding of portfolio theory and the elements of the portfolio selection process;
? Reasonably accurate calculations of expected return and risk based on stated assumptions;
? A fair level of presentation achieved: a report structure, language and style of writing; the report includes some references and appendices, but possibly
incomplete.
Fail
? A poor or incomplete consideration of the suitability of the proposed investments and a portfolio recommendation is made with but with only limited
consideration of its suitability;
? Little evidence of research into potential investments and an assessment of their characteristics in the context of the assigned task;
? Limited knowledge and understanding of portfolio theory and the elements of the portfolio selection process;
? Inaccurate or inappropriate calculations of expected return and risk based on stated assumptions;
? A poor level of presentation achieved: no report structure, inappropriate language and style of writing; the report includes little or no references and
appendices.
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