Case 1 Final PFP

FIN 3330-OU1

Royce Widjaja

Gary Booth

Brian Garay

Tatiya Chattanapanich

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Table of Contents

About us……………………………………………………………………………...........3

Engagement Letter………………………………………………………………………...4

Statement of Financial Position.…………………………………………………………..6

Statement of Income and Expenses……………………………………………………….7

Asset & Liabilities and Net Worth……………………………………………………...…8

Annual Living Expenses……….………………………..………………………………..9

Financial Ratios Explained………………………………………………………………10

Fees & Important documents…………………………………………………………….11

Refinance Mortgage & Investment………………………………………………………12

Insurance and Inheritance………………………………………………………………..13

Works Cited……………………………………………………………………………...14

ThinkTEAM personal financial planning has been here for you since 2001. We are committed to serving you, our client, with a personal touch. We value your business and we know you will be able to see the difference at ThinkTEAM as soon as you walk through our door.

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We focus on meeting the financial needs of our clients, offering financial suggestions that best fit your needs. Excellent service to our clients has enabled ThinkTEAM to become the highest rated personal financial planning firm in Texas.

ThinkTEAM is a member company of Security Financial Group. We are proud to be owned by one of America’s largest providers of financial security to individuals, yet ThinkTEAM’s continued success is based on earning our customers’ business through our local branches, every day.

We are ready to help make a difference in your life. Let us be a part of your successful future.

Contact us: 2367 Dallas AveDallas, TX 74099Tel: (972) 879-3276 Fax: (972) 567-2278

Royce Widjaja President Phone: 215-909-8909 [email protected]

Gary BoothVice President & Director of PerformancePhone: [email protected]

Brian Garay Managing Director & CFOPhone: [email protected]

Tatiya Chattanapanich Analyst & CPA Phone: 214-655-9999

[email protected]

Financial Planning Group, Inc. dbaThinkTEAM

2367 Dallas AveDallas, TX 74099

(972) 879-3276 -- Fax: (972) 567-2278

Dear Mr. & Mrs. Sanchez,

This letter will confirm the terms of our agreement regarding the financial planning services we will provide for you.

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mailto:[email protected]




Engagement Objectives

The primary objective of our engagement is to review and analyze your personal financial situation and make recommendations for your financial plan. This review will identify your personal financial goals and objectives, and will include possible strategies to achieve them. Our analysis and recommendations are based on information provided by you that will be relied upon for representations.

Activities

The initial phase involves accumulating and organizing facts about your current financial status, identifying specific goals and objectives, and agreeing upon planning assumptions. This information will be obtained during an initial meeting or conversation with you and/or from the use of a financial planning data questionnaire. We will also review copies of pertinent documents, such as wills, company-provided fringe benefit booklets, prior tax returns, investment account statements, and insurance documents.

After the information has been received, the data will be analyzed and a projection will be made. A subsequent meeting will be held to verify the accuracy of the data and will allow you to validate the assumptions used. Alternative courses of action to meet goals and address any issues will be comprehensively discussed.

The projections will then be updated for any required changes and a comprehensive financial planning report containing recommendations in all relevant areas of your financial situation will be presented. We will work with you to finalize the choice of strategies, to set time goals, and to establish responsibilities for your implementation of the plan.

The methods that you choose to follow in executing the financial planning recommendations are at your discretion. You will be responsible for all decisions regarding execution of the recommendations.

We are available, via a separate engagement, to assist you with implementation of your chosen strategies or to coordinate implementation with other financial professionals of your choosing. As part of this separate engagement, we can answer questions, monitor activities, or make new recommendations regarding your financial matters as circumstances change. Please note that we do not offer legal services such as will or trust preparation; however, we will be happy to refer you to a legal professional.

Your plan should be reviewed with us informally on a semiannual basis and more formally on an annual basis. These update sessions are essential so that adjustments can be made for changes in circumstances, economic conditions, and income, gift, or estate tax law revisions.

Fees

The fee for your Comprehensive Financial Plan has been determined by our mutual agreement and is $1289, which is due and payable upon return of this Engagement Letter. Please note that this fee is for the written financial plan alone and the plan shall contain all of our recommendations to you through the date of its delivery.

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This agreement and fee does not provide for any product sales that may be offered at no obligation to you. This is a separate service that may be considered a conflict of interest because commissions and/or additional fees may be paid in connection with products purchased. WE will inform you if there is any conflict of interest.

If additional conferences and interactions are beyond the scope of the services stated above, our fee for this service is based upon the time necessary to complete the additional agreed upon tasks. The agreed time allocated to accomplish additional tasks will be billed at the rate of $50 per hour.

We reserve the right to discontinue services if billings are not paid when due.

If at any time you are dissatisfied with our services, you may terminate this agreement. If you do so within three business days of your acceptance, you will receive a full refund. Subsequently, any fees that you have paid to us in advance will be charged for the time and effort that has been devoted, up to that termination time, to prepare your written report and any remaining balance will be refunded.

We anticipate beginning the engagement immediately. If this letter meets with your approval, please sign the enclosed copy in the space provided and return it to us in the enclosed envelope.

We thank you for the opportunity to be of service, and we welcome you as a valued client.

Sincerely,

Financial Planner

I/We agree to the above terms & conditions:

Client Signature: ______________________________ Date: ____________

Client Signature: ______________________________ Date: ____________

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Statement of Financial PositionMr. and Mrs. Sanchez

Balance Sheet as of 12/31/13Assets Liabilities and Net Worth

Current Assets Current LiabilitiesJT Cash & Checking $2,000 JT BB National CC $2,340JT Savings Account $2,300 JT Sears CC $2,400JT CD Maturing in 6 months $2,000 JT Mortgage Payment $21,324Total Current Assets $6,300 JT Jeep Payment $3,360

JT Harley Payment $2,100Investment Assets JT Infiniti Payment $5,376H 401k $94,657 Total Current Liabilities $36,900W 401k $65,581H IRA $4,295 Long-Term LiabilitiesJT Brokerage Account $3,700 JT Infiniti Auto Loan $36,624Total Investment Assets $168,233 H Student Loan $37,380

JT Jeep Auto Loan $5,140JT BB National CC $2,897JT Sears CC $7,800

Personal Use Assets JT Harley Auto Loan $15,900JT Primary Residence $271,980 JT Personal Residence $158,676JT Furniture $12,300 Total Long-Term Liabilities $264,417W Jewelry $3,500JT Auto#1, Harley Davidson $21,000 Total Liabilities $301,317JT Auto#2, 2010 Infiniti E35 $38,500JT Boat $12,000 Total Net Worth $241,496JT Auto#3, 2007 Jeep Patriot $9,000Total Personal Use Assets $368,280

Total Assets: $542,813 Total Liabilities and Net Worth: $542,813

JT - Joint OwnH - Husband OwnsW - Wife Owns

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7%

49%

44%

Liabilities & Net WorthCurrent Liabilities Long-Term Liabilities Net Worth

This is an illustration showing your Liabilities & Net Worth and the percentages of your total assets they represent.

1%

31%

68%

AssetsCurrent Assets Investment Assets Personal Use Assets

This is an illustration showing your Total Assets and the percentages that each type of asset represents.

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This graph shows your total living expenses and the percentages of the total they represent. Child care represents 27% or $14,400 of the total amount of living expenses you have per year. This is by far the highest percentage of your expenses and can benefit you greatly should you find a way to reduce it. If you can cut this expense in half, reducing it to $7,200, you can save the remaining $7,200 and increase your total yearly savings from $15,360 to $22,560, an increase of 47%. You can also use the extra $7,200 to pay down debt payments and reduce your monthly obligations.

Dining out, entertainment, and maid services equal 27% of your total amount of living expenses per year. Reducing either of these three will allow you to free up more money to use to pay off debts and become closer to being debt free, or simply contribute to you r savings and take advantage of compounding interest.

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Current Ratio 17% GoodHousing Ratio 1 15% Very goodHousing Ratio 2 25% Very goodDebt to Total Assets Ratio 56% WeakNet Worth to Total Assets Ratio 44% Good

Current Ratio – Current Assets divided by Current Liabilitieso 17% - Good

Having a current ratio of 17% is good in that you currently have in cash or its equivalent, enough funds to cover 17% of your total debt payments due within the next 12 months

Increasing this ratio involves paying off debt and holding cash in your accounts

Housing Ratio 1 – P.I.T.I (Mortgage principal, interest, taxes, and insurance) divided by Monthly Gross Income

o 15% - Very Good Banks use this number to determine whether or not to loan money

to purchase a home Anything less than 28% is acceptable

Housing Ratio 2 – (P.I.T.I + Other Debt Payments) divided by Monthly Gross Income

o 25% - Very Good Should an individual pass the first housing ratio test they can move

on to the next test Anything less than 36% is acceptable

Debt to Total Assets Ratio – (Current Liabilities + Long-Term Liabilities) divided by Total Assets

o 56% - Weak This represents the total amount owed in relation to the amount of

Total Assets Liabilities equal 56% of Total Assets

Net Worth to Total Assets Ratio – Total Net Worth divided by Total Assetso 44% - Good

This represents the total Net Worth in relation to the amount of Total Assets.

Net worth represents 44% of Total Assets

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1. Fees

The following lists the different types of fees that a planner can charge. No fee for financial planning means there is no fee for the plan. The purpose of

the plan was to either sell product or take assets under management. Fee-complexity of plan- the fee charged was determined by the complexity of the

plan Flat fee Fee based on hourly rate Plans are fee based per module Fee to planner passed on to client

Based on your needs, the service of the plan is $1289. If you would like to arrange a meeting time other than the agreed upon time, the rate is $50 per hour.

Fiduciary responsibility is to act on behalf of the client which requires great trust, honesty, and loyalty and also to act in the best interest of the client. It is very important because client information is very confidential. It is also important to act in the best interest of the client so the client will meet their financial goals.

2. Important documents

It is very important to have good system for storing and managing your important papers.

Reduce your pile of documents Get rid of bills and credit card and banking statements that are more than one year

old, only keep the ones that you need for tax purposes Throw out any expired warranties Your tax return is very important. Keep your tax return and any supporting

documents for seven years; you might need it in the future.

Create a storage system Put any important documents in a lockable, fire-proof, and water-proof box,

including:o Birth and marriage certificateso Passportso Social Security cardso Wills, deedso Vehicle titles, copy of any current insuranceo Photocopy of your driver’s license

Separate files for each type of current paperwork Put the newest documents in the front Separate tax materials and keep another folder for anything needed for next year’s

tax return as well as one for the older returns separated by year. Prepare a backup using an online solution such as IDrive or MozyHome Consider a safe deposit box and use it for items that you wouldn’t need to access

frequently such as executed wills.

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3. Refinancing Mortgage (refinance costs are $5,500)

1 st option-4.2% rate on a 15 year

(Zillow, 2014)

Pros: With this option you will save much more over time. With this option you will save $196,088. There is also lower interest paid when compared to the 2nd option.

Cons: This will require an extra $72 per month for the next 30 years.

2 nd option- 4.6% rate on a 30 years

(Zillow, 2014)

Pro: With this plan you will saved $355 per month throughout the refinance time giving you the option to use that money to invest in your child’s education fund.

Con: In the long term, you miss out on $89,274 in savings. You also pay higher interest.

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4. Mario and Meredith are insured by a $50k/$100k/$50k policy with a $500 deductible. What this means is that they currently have a $50,000 overall limit for each person for bodily damage, $100,000 total for all individuals making a claim, and $50,000 for property damage caused during an accident, with the first $500 due by the insured per claim.

5. In order to make sure that the FDIC protects $80,000, they would need to put that money into a Revocable Trust Account. The FDIC would protect their money if they named their two children as equal beneficiaries. Since Mario and Meredith are interested in investing $200,000, I would recommend that they buy some conservatively managed bond funds as well as high-risk stock funds. By doing so, they are reducing their risk, which is what they want, and also increasing profits. A suggestion that I would recommend in regards to which funds they should invest their money in are in the highlighted area. I would suggest looking into the S&P 500 as it should serve as an example for what return you should expect. An advantage that the chosen funds have is that they will produce the growth potential that Mario and Meredith are looking for over time. However, a disadvantage of these funds is that there is the possibility of losing money, even though the loss would be minimal.

(BMO Retirement Service, 2014)

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Works CitedBMO Retirement Service. (2014, 07 06). Investment basics. Retrieved 07 06, 2014,

from https://www.bmo.com: https://www.bmo.com/mybmoretirement/getting-started/selecting-the-right-investments/investment-basics

Cleaver, J. (2014, 02 18). A Guide to Financial Advisor Fee Structures. Retrieved 07 2, 2014, from http://money.usnews.com/: http://money.usnews.com/money/personal-finance/financial-advisors/articles/2014/02/18/a-guide-to-financial-advisor-fee-structures

Dalton, M. A. (2013). Fundamentals of financial planning. St. Rose, LA: Money Education.

Dill, K. (2014, 06 13). The best and worst states to make a living in 2014. Retrieved 07 06, 2014, from finance.yahoo.com: http://finance.yahoo.com/personal-finance/

Paragon Financial Advisors. (2014, 07 01). What is a Fiduciary And Fiduciary Duty? Retrieved 07 01, 2014, from http://www.paragon-adv.com/: http://www.paragon-adv.com/fiduciary-financial-advisor.html

The Wall Street Journal. (2011, 07 5). How To Manage Important Documents. Retrieved 07 2, 2014, from merketwatch.com: http://www.marketwatch.com/story/how-to-manage-important-documents-1307549338283

Zillow. (2014, 07 06). Mortgage Marketplace. Retrieved 07 06, 2014, from zillow.com: http://www.zillow.com/mortgage/calculator/refinance/Advanced.htm?currentamount=200000&currentrate=6.6&currentterminmonths=360&originationyear=2013&newamount=180000&newrate=4.2&newterminmonths=180&fees=5500&rollfees=false&cashout=0

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Case 1 Final PFP

Documents

Transcript of Case 1 Final PFP