Assessment 3 – Portfolio & Advice
Assessment 3 – Portfolio & Advice
Assessment 3 – Portfolio & AdviceQualification: 10597NAT Graduate Diploma of Financial Planning & AdviceUnit of Competence: GDFIPM803 Provide Investment AdvicePlease complete this form and attach it with the Assessment Summary Student Name :Date : AIBT Student ID No :Assessor Name :Assessment Task and Assessment ChecklistYou must complete the assessment to demonstrate the skills and knowledge required toanalyse a client’s financial data, use portfolio management techniques, recommend investmentssuitable for the client and produce an effective advice document.This assessment must be completed and submitted to AIBT within 3 weeks after completing theclass (or deadline set by your trainer / assessor). You can submit it via either• Email to your assessor, OR• Email to info@aibt.sa.edu.auPlease make sure you have a backup copy or hard copy before submitting this assessment.• The results of this assessment will be available within 4 weeks after submission.The Report must be word processedIf you believe you require support or flexible adjustment to successfully complete thisassessment, you should speak with the Trainer/Assessor before you start.In case of RPL (Recognition of Prior Learning), this assessment tool can be in conjunction witha third party report and / or a portfolio of evidence to confirm /support competence in this unit.Late assessments may result in a Not Yet Competent outcome and you will have to negotiatethe completion of another assessment with your Trainer/Assessor.Special Support or Flexible AdjustmentAssessor discretion is used in relation to adjustment for assessment for students withspecial needsThe methodology used for this assessment was :Assessor Signature❑ Student written response only❑ Written response with clarifying questions, documented byAssessor❑ Oral response only, documented by Assessor Version 1.1Created: 12/03/2017Page | 2Assessment 3 – Portfolio & Advice Assessment Format & Plagiarism Policy• Plagiarism is defined as the copying of sections of any published work withoutacknowledgement of the source.• Cheating is defined as handing in someone else’s work as your own or allowingsomeone else to hand up your work, several people writing one computer copy andhandling up multiple copies, all represented as individual work and using any part ofsomeone else’s work without proper acknowledgement• AIBT maintains Zero Tolerance in relation to plagiarism and / or cheating. Any studentfound to have plagiarised work or cheated or assisted another person to plagiarise orcheat will automatically be disqualified from the assessment, receive a Not YetCompetent result and may be subject to expulsion from the course / program.I confirm that I am prepared to undertake this assessment, and I understand the abovepolicy and declare the attached assessment is all my own original work.Student Signature : __________________________ Date : _________________________I confirm that the Assessment was conducted as per the minimum standards required byRTO, AQF and ESOS, that no favouritism or special dispensation has been applied, thatsupport and flexible adjustment has been applied rationally and that feedback has beenprovided to the student.Assessor FeedbackAssessor SignatureDate :AssessmentOutcome❑ Competent Achieved❑ Not Yet Competent❑ Re – Assessment Required • This assessment is 50% of the total marks for overall unit assessment• Total marks for this assessment is 100 and you must achieve 50 marks to beassessed as competentVersion 1.1Created: 12/03/2017Page | 3Assessment 3 – Portfolio & Advice• Portfolio & AdviceSubmission Details: Candidate’s NamePhone NoAssessor’s NamePhone NoAssessment SitesAssessment Date/sTime/s The assessment task is due on the date specified by your assessor. Any variations to thisarrangement must be approved in writing by your assessor.Submit this document with any required evidence attached. See specifications below for details.Performance objectiveFor this task you are required to demonstrate the skills and knowledge required to analyse aclient’s financial data, use portfolio management techniques, recommend investments suitable forthe client and produce an effective advice document.Assessment descriptionFor this simulated financial advice scenario, you are required to assume the role of a financialadvisor who has just been asked for some investment recommendations from your client, Sam.Sam has inherited $200,000 and would like you to advise him on the best way to invest this moneyconsidering his current portfolio and objectives.There are three stages to this assessment: (1) analyse and measure, (2) analyse and develop, and(3) communicate advice.Version 1.1Created: 12/03/2017Page | 4Assessment 3 – Portfolio & AdvicePart 1
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This project is in three parts, with Part 1 as follows: For this assessment task, you will need to review Sam’s current financial situation using the case study material in the Appendix. Once you have gathered this information, you are to use portfoliomanagement techniques to measure the performance of his current investments. You willformulate a simulated dialogue between the client Sam, and yourself, to gather any furtherinformation you may need. Then, you will develop an outline of Sam’s investment needs.Procedure1. Review Sam’s current portfolio in the Appendix2. Complete the table (greyed data will need to be sourced online)a. Historical share prices can be found at Yahoo Finance for each stock(1) When setting the start date, use the date from one year ago andselect monthly results(2) Locate the adjusted close price from one year ago(3) Add this to your current portfolio tableb. Annual dividends per share can be found on the company website or from theASX website http://www.asx.com.au/asx/markets/dividends.do(1) If you use the ASX website, you can search for all stocks at once(2) In the search box, list your stocks using the ASX code separatedby a space(3) Add up the dividend amounts for each company (where the exdividend date falls in the past year) and add to tablec. Current market prices can be found onlinePart 1Analyse a client’sfinancial data and useportfolio measurementtechniquesPart 3Security analysis anddevelopment of clientportfolio that balancesrisk and returnProduce an advicedocument that meetsregulatory and clientinvestment objectivesPart 2Version 1.1Created: 12/03/2017Page | 5Assessment 3 – Portfolio & Adviced. Current value is the current market price multiplied by number of shares helde. See the Appendix for a guide to completing the managed fund portion of Sam’scurrent holdingsf. You must include references to your information sources3. Measure the portfolio’s performance over the past year by calculating the Holding PeriodReturn (HPR)a. Reference any information obtained from sources other than the Appendix andyour completed current holdings tableb. Compare your HPR with an appropriate market index (use an accumulation indexwhich includes dividends)c. Discuss your results4. Measure the portfolio’s risk characteristics using Betaa. To calculate the portfolio Beta:(1) Use the individual stocks’ Betas from Yahoo Finance(2) Use the individual funds’ Betas from Morningstar(3) Use excel to create a table showing the weight and Beta of eachasset(4) Calculate the portfolio Beta by summing the weighted Betas of allindividual assetsb. Show all calculationsc. Reference any information obtained from sources other than the Appendixd. Compare your results to the markete. Discuss what the portfolio Beta means for your client Sam5. You and Sam have already discussed quite a lot about his current situation, as shown in theAppendix. However, for you to give accurate advice, you will need to be clear on hisinvestment goals. Create a simulated discussion between you and Sam to obtain anynecessary informationa. Use the scaled advice examples in the ASIC Regulatory Guide (RG244) as aguideVersion 1.1Created: 12/03/2017Page | 6Assessment 3 – Portfolio & Adviceb. Present your dialogue in a similar format as advice examples in RG2446. Based on the information in the Appendix and what you have discussed with Sam, developan outline of Sam’s investment goalsa. This can be presented as dot pointsb. See RG 90, page 30, for suggested inclusionsSpecificationsYou must provide: One report discussing the performance and risk characteristics of Sam’s portfolio, a copy ofany dialogue you had with your client and a summary of his investment goals One excel workbook showing your calculations for Sam’s portfolio performance and riskYour assessor will be looking for: A 3 to 6 A4 page report including all information identified in the procedure above A copy of your excel workbook with sheets labelled appropriately and showing all formulaeused in calculations Evidence that you can analyse client financial information Ability to collect client information Evidence that you can form realistic investment objectives with a client Communication skills that include listening and questioning to establish the goals of clients Development of a document that is well-structured, clear and concise and uses tables,figures or diagrams appropriatelyPart 2This project is in three parts, with Part 2 as follows:Part 1Analyse a client’sfinancial data and useportfolio measurementtechniquesPart 3Security analysis anddevelopment of clientportfolio that balancesrisk and returnProduce an advicedocument that meetsregulatory and clientinvestment objectivesPart 2Version 1.1Created: 12/03/2017Page | 7Assessment 3 – Portfolio & AdviceFor this assessment task, you are required to analyse the securities market, macroeconomic andindustry factors that may affect your client Sam’s portfolio. Once you have gathered thisinformation, you are to use security analysis techniques to compare different options for Sam toinvest his $200,000. Then, you will develop a working file that includes your proposed investmentoptions and how these recommendations will maximise portfolio performance. This will form thefoundation for your advice document.Procedure1. Produce a macroeconomic outlooka. Consider important factors both domestically and globally such as:(1) Monetary and fiscal policy(2) Sovereign debt(3) Treasury bonds and the bond market(4) Governments and elections(5) Gross domestic product (GDP)(6) Employment(7) Inflation and interest rates(8) Currencies and commodities(9) Emerging markets2. Review Sam’s current portfolioa. Discuss how factors from your macroeconomic analysis may affect his portfoliob. Explain ways that Sam could adjust his portfolio to minimise these risksc. Discuss potential opportunities3. Review Sam’s current portfolio asset allocationa. Discuss his current portfolio in terms of diversification(1) Consider the holdings within the managed funds alsob. Discuss his current portfolio in terms of asset allocation(1) Decide whether or not to include his house equity as part of hisproperty allocationVersion 1.1Created: 12/03/2017Page | 8Assessment 3 – Portfolio & Advice(2) You must justify your choicec. Discuss the asset allocation that best suits his current risk profiled. Explain any changes that are required to align with his risk profile4. Select at least one equity investment to be added to Sam’s portfolioa. Provide a comparison table with a minimum of five alternate equities forconsiderationb. Use security analysis techniques to compare the alternatives including industry,sector and fundamental analysisc. Explain how your chosen equity or equities will maximise portfolio performanceand balance riskd. Outline how Sam should fund this investment from either:(1) Inheritance money(2) Sale of current holdings(3) Other5. Select at least one managed fund or ETF to be added to Sam’s portfolioa. Provide a comparison table with a minimum of five alternate funds forconsiderationb. Try the Morningstar fund screener to assist with selection athttp://www.morningstar.com.au/Tools/NewFundScreenerc. Use security analysis techniques to compare the alternativesd. Possible selection criteria could include:(1) Asset value > $20 million(2) Trading volume(3) Year of inception(4) Tracking error(5) Annual holdings turnover(6) Derivative holding(7) Number of holdingsVersion 1.1Created: 12/03/2017Page | 9Assessment 3 – Portfolio & Advice(8) Beta(9) Alpha(10) Ratings(11) Yields(12) Price(13) Operating expense ratio(14) Minimum initial investment(15) Bid/Ask spread(16) Risk measures such as Sharpe and Treynore. Explain how your chosen managed fund or ETF will maximise portfolioperformance and balance riskf. Outline how Sam should fund this investment from either:(1) Inheritance money(2) Sale of current holdings(3) Other6. Select at least one fixed income security such as a Government or corporate bond to beadded to Sam’s portfolioa. Provide a comparison table with a minimum of five alternate fixed incomesecurities for considerationb. Use security analysis techniques to compare the alternativesc. Possible Government security selection criteria could include:(1) Yield curves(2) Monetary policy(3) Yields and spreads(4) Supply and demand(5) Government security auction results(6) Credit ratingsVersion 1.1Created: 12/03/2017Page | 10Assessment 3 – Portfolio & Advice(7) Risk and return characteristicsd. Possible corporate bond selection criteria could include:(1) Bond terms(2) Trading at a premium or discount(3) Company overview(a)Debt and coverage ratios(b)Capital structure(c)Long-term debt(d)Opportunities and threats(e)News that may affect company outlook(4) Credit quality(5) Default riske. Explain how your chosen fixed income investment will maximise portfolioperformance and balance risk(1) Articulate the characteristics of and effective management of bondportfoliosf. Outline how Sam should fund this investment from either:(1) Inheritance money(2) Sale of current holdings(3) Other7. Summarise your recommended changes to Sam’s portfolioSpecificationsYou must provide: One report detailing the current macroeconomic outlook, Sam’s current portfolio and assetallocation as well as a summary of your investment recommendations A working file showing all alternative investments considered and a thorough comparison ofeach alternativeVersion 1.1Created: 12/03/2017Page | 11Assessment 3 – Portfolio & AdviceYour assessor will be looking for: A 10 to 15 A4 page report including all information identified in the procedure above Ability to research and select techniques to measure portfolio risk and performance Skills and knowledge in evaluating the risks associated with recommended investments Evidence that you can compare and contrast possible investments as part of the selectionprocess Ability to identify and recommend a range of investments suitable for the client Ability to perform and evaluate techniques used to value investments Knowledge of the characteristics and effective management of bond portfolios Evidence that you can analyse the securities market, macroeconomic and industry factorsthat affect equity markets and evaluate the repercussions Skills and knowledge to construct portfolios that balance risk and return Ability to communicate your analysis and recommendations to clients in an effective manner Development of a document that is well-structured, clear and concise and uses tables,figures or diagrams appropriatelyPart 3This project is in three parts, with Part 3 as follows:For this assessment task, you are required to communicate your investment recommendations toyour client, Sam, using a Statement of Advice (SOA). You will produce the document using theformat recommended by ASIC, adhering to regulatory requirements. The strategy outlined in youradvice will be unique to Sam and balance risk and return. The SOA must be clear and concise.Part 1Analyse a client’sfinancial data and useportfolio measurementtechniquesPart 3Security analysis anddevelopment of clientportfolio that balancesrisk and returnProduce an advicedocument that meetsregulatory and clientinvestment objectivesPart 2Version 1.1Created: 12/03/2017Page | 12Assessment 3 – Portfolio & AdviceProcedure1. Using the information you have collected and researched in Parts 1 and 2 of this project, youare to create a Statement of Advice (SOA) document2. Include all of the important sections as discussed in lectures, the work book and RG 90 fromASIC3. The structure should be similar to the ASIC example, page 28 of RG 90, including:a. Front coverb. Summary of my advicec. Section 1: Important information about youd. Section 2: My advice to youe. Section 3: What else you need to knowf. Authority to proceed4. As the advisor, you must choose and clearly outline appropriate fees and charges toyour client5. It is important that recommendations are suitable for your client’s risk profile6. Any information about the client that is included in the SOA must be sourced fromeither the Appendix or your simulated conversation with the client in Part 2 of thisproject7. The purpose of this SOA is to provide evidence that you can clearly and conciselyprovide suitable investment recommendations to your client, with a focus on correctasset allocation according to their risk profile. It will not include consideration of thefollowing:a. Tax consequencesb. Superannuationc. Insuranced. Estate planningVersion 1.1Created: 12/03/2017Page | 13Assessment 3 – Portfolio & AdviceSpecificationsYou must provide: One Statement of Advice that provides personal advice to your client, Sam, on how to investthe $200,000 he has just inheritedYour assessor will be looking for: A 10 to 15 A4 page report including all information identified in the procedure above Ability to communicate your analysis and recommendations to clients in an effective manner Evidence that you understand regulatory guidelines for giving personal advice Development of a document that is clear and conciseAdjustment for distance-based learners No variation of the task is required
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