BFBL622 Coursework Assignment

The coursework for this module can be undertaken in pairs (maximum word count 2500) or individually (maximum word count 2000). (Abstract, References and Tables not included in the word count.

Write a report for a hypothetical client, Alan Green considering the one of the two possible developments in Alan’s life as listed below.

15 years ago:

Alan Green was 20, he was studying architecture at the University of Westminster in London. Alan hoped to graduate after 2 years and be able to start working shortly after turning 23.

15 years on… today:

You are a financial advisor who works for an independent institution and Alan is one of your clients, you have to advise him on how best to manage his finances (property, investment and pension) according to one of the two circumstances below:

A. Alan is now 35 and works as an architect for a construction firm in London. He is satisfied with the way his career has progressed, although he started working later than expected, when he was 25. His job is now relatively safe. His annual salary is £55,000, he currently rents a flat in Fulham for which he pays £1400 a month in rent.

Alan is considering buying his own place.

Alan is in a Defined Contribution pension scheme, however, given that he has only started contributing to the scheme at the age of 30 he is wondering whether he will be able to live comfortably once he retires.

Alan has a credit card on which he pays 28% APR and which he rarely uses. He also has £15,000 in a saving account from which he receives 0.2% annual interest rate and £40,000 invested in Government premium bonds. He would like to earn more interest on his savings, but does not know how, he is willing to take more risk. Alan will be getting married within the year.

B. Alan is now a well-known architect, he has been working hard since graduating and he has now worked at many UK projects. His annual salary is £70,000, but he is not in any pension scheme.

He owns and live in a small property in Wimbledon, however he now needs to move into a bigger place as his two children are 7 and 9 and need more space. He hopes that both his children will go to University.

All his savings (£80,000) are in a savings account which provides him with 0.5% interest a year. He is now quite risk averse but would also like higher interest on his savings as he is becoming concerned about how to pay for his sons’ education.

Alan also owns an expensive sport car he rarely uses and would be willing to sell.

Alan is also still paying a mortgage (£700 a month), he has an interest-only mortgage and does not realise that in 4 years time he will also have to pay back the capital he borrowed which amounts to £120,000.

Required:

Choose one of the two scenarios above (A or B) and advise Alan on how best to manage his savings, property and pension contributions in order to maximise his wealth in the long term (next 10 to 15 years).

Please take into consideration his personal circumstances as well as his attitude to risk.

Marking guide:

30 marks will be awarded for complete answers to each section of the report.

The three sections of the report must include management of: 1) property, 2) savings and investments and 3) pensions.

For full marks students must provide:

Realistic additional assumptions on Alan’s future (i.e. future earnings), real-life examples of mortgage and interest rates, expected rates of return on specific investments, expected pension contributions and incomes.

A structured financial plan that matches the client’s profile and objectives

The strategy should quantify the extent of improvement in the client’s finances following your advice, the report should analytically examine the recommended products in terms of risk and return

Another 10 marks will be awarded for presentation.

Marking Criteria

a) Address the client’s financial needs.

b) State and justify all assumptions.

c) Demonstrate familiarity with the relevant literature and products.

d) Attempt to apply concepts and theory to the case history

e) Demonstrate evidence of wide reading (at least 10 references required)

f) Endeavour to high quality presentation with good use of punctuation, spelling and grammar.