QUESTION

Assessments

Assessment #1 – Quantitative Assessment 1

Assessment 1 principally covers topics included in the earlier weeks of the course and is designed to assess

students abilities to show a sound understanding of the core financial planning principles covered in the course

and apply these in a practical context.

This assessment consists of a number of practical exercises and discussion questions covering the earlier topics

included in this course. As the exercises / questions are not related, there is no need for students to prepare an

introduction or executive summary for either assessment task.

There is also no necessity to spend time in submitting the actual assessment questions provided to students by

the Course Coordinator – all that is required in this course is for students to respond to the assessment questions,

not merely rewrite them!

All students are expected to be able to articulate and communicate such knowledge and skills of the relevant

topics by applying logical, critical and creative thinking for effective problem solving in the context of the topics

covered.

Please note that students are expected to be able to prepare and submit all parts of this assessment component

by the due date regardless whether or not there are topics scheduled in the Course Calendar to be covered after

the relevant assessment is due for submission.

The aim of each of this assessment is to encourage students to think laterally and read widely in the area of

financial planning and personal finance. Personal finance is a rapidly developing area in business and it is

important for students to be able to apply some of the ‘textbook theory’ to a practical context. To this end it is

expected that the principal resources that students will use to complete their assessments in this course will be

sourced from outside of the textbook and provided course materials (topic summaries, lecture notes etc.).

Students have the opportunity to research and compile relevant information, which can then be summarised and

presented as their assessment submission. It should be noted that there is generally no right or wrong answers to

any discussion questions included in the assessment, however, students should be able to justify their points of

discussion.

BANK2008/CI-EX/01/2012 Version 1 (20 January 2012) 6

The objectives of providing the assessment questions in the form of short answer questions and exercises is to

encourage students to develop their analytical and research skills in this course beyond merely extracting

information directly from the textbook or other provided materials for this course. Hence, students will need to

provide themselves sufficient time to analyse the questions given and to seek out particular resources to assist in

the development of a suitable written response – importantly, expressed in the students own words.

This assessment can be completed on an individual basis or on a group basis. Students may prepare this

assessment component in a group of up to a maximum size of 4 members. Thus a group may consist of 2, 3 or 4

members which are selected by the students enrolled in the course. Note that the course coordinator will not be

involved in the process of group selection. Students are welcome to use the online student discussion forum if

seeking to form a group with class colleagues. As the internal and external assessment for this course is different,

a group can only consist of students enrolled externally in this intake of the course.

Where course assessment is prepared in a group, only one assessment document should be submitted. In the

situation of a group submission, all group member details (names and student ID numbers listed in alphabetical

order; family name / other names) needs to be included on the assignment cover sheet of each assessment

component.

Group assessment will only be accepted on the understanding that an equal allocation of marks is to be made to

each group member. Thus, it is of vital importance that regular meetings / contact between group members

(perhaps via phone / online) are carried out and work delegated between members to ensure smooth progress

towards the submission of a group assessment that all members are equally satisfied with.

The submission of group assessment is actively encouraged as it can greatly enhance the learning process if all

group members work cohesively towards their objective. In addition, a group assessment potentially allows for

tasks to be allocated to individual group members who then are able to report back during regular scheduled

meetings / contact.

No allowances will be made to extend the assessment submission dates where groups encounter difficulties with

individual group members. It is expected that students will be able to deal with such issues in an appropriate

manner (however note the variation to student mark allocation form discussed above). Please also note that no

differentiation in assessment marking will be made between individual and group submissions as the selection of

submitting individually or in a group is entirely at the discretion of the student.

It may be expected however, that group assessment would be likely to include reference to a greater number of

resources than individual assessment. Such resources will of course need to be used in the submitted

assessments, not merely quoted in a bibliography. Nevertheless, the focus of all students should be on the content

of the assessment rather than simply the inclusion of additional references.

The relevant assessment questions for this assessment component will be made available from the learnonline

website before the end of week 2 of the study period.

SOLUTION

1. Role of the ASIC ATO and APRA

1.1 Role of the ASIC

The Australian Securities and Investments Commission Act 2001 are a corporate, financial markets and financial services regulator. The role of the ASIC is to ensure the smooth functioning of the financial services sector in particular. The main aim of the commission is to ensure the enforcement of the law thereby protecting consumer and investor interests. The act ensures transparency in the financial services systems by providing key information to investors, consumers and companies to enable effective decision making. The ASIC regulates 3 aspects namely

1. As a Credit regulator it protects interests of all parties associated with providing credit in the sector including banks, financial companies’ private creditors etc.
2. As a Market regulator the aim is to ensure the free and transparent working of the financial markets.
3. As financial services regulator to ensure the fair and honest provision of the financial services to consumers.

(ASIC.gov- accessed on 30/3/2012)

1.2 Role of ATO

The Australian Tax Office (ATO) is aimed to resolve all issues related to taxation for both consumers as well as large corporations. The office provides an efficient and consumer friendly system to file tax returns online and multifaceted manner (www.ato.gov.au/ – accessed on 30/3/2012).

1.3 Role of APRA

Established on 1 July 1998The Australian Prudential Regulation Authority (APRA) supervises banks, credit unions, building societies, general insurance, life insurance, friendly societies the participants of the superannuation industry. APRA is backedby the businesses that it administers (http://www.apra.gov.au – accessed on 30/03/2012)

1.4 Government Regulators

The 3 government regulators ASPA, ATO and APRA have been formulated to protect consumer interests in the financial services sector .But I can be said that the three regulators operate in different sectors of the financial services sectors. Firstly the ASPA ensures consumer and investor protection in the financial markets. It also protects the consumer interests in the credit market and ensures transparency in the credit allocation system. On the other hand the APRA whose operations can said to be closely linked to the ASPA has more specific outlook it ensures protection in the financial services sector like banks, credit unions, building societies, general insurance, life insurance, friendly societies the participants of the superannuation industry.  ATO aimed at providing taxation solutions and ensure tax compliance with ease. It lays down the specific taxation rules applicable to individuals, corporations as well direct and indirect taxes.

Therefore it can be said that the 3 government regulators operate in different sectors of the financial services industry with each having a specific role. It administers different types of investments and regulates different aspects of a large financial system. The presence of the three regulators makes the financial system comprehensive and a protected environment for all participants.

1.5 Role as a Financial Advisor

As a financial advisor the individual would have to deal with all the government regulators depending upon the financial task to be performed. Let us understand the concept with a help on an example suppose the financial advisor intends the float shares of the company in the stock market. Firstly the individual would have to comply with the rules in place by the ASPA to float shares in the financial market. It would also have to ensure tax compliance that would require contact with the ATO. Thus it is evident that a participation in the financial sector requires a healthy working relation with the government regulators.

2.  Professional Application

2.1 RG 175.125

According to RG 175.125 the financial advisor should regard the financial information provided by the investor at the highest level and thereby offer potential products as well as information. The financial advisor should be able to understand the complexity of the advice and the impact it is likely to have on the consumers. For example a financial advisor advises and an individual to invest in a borrowing from the share market without conducting a complete back ground check on the enterprise. The investment company turns to be fraudulent and therefore is unable to return the principal invested. In such a case the financial advice was given without analysing the investor concerns as well as the impact the decision would have on the investor .Therefore legal action can be taken against both the financial advisor and the fraudulent company (ASIC report, 2009)

2.2 Corporations Act

The investors with assets worth $2.5 million can be classified as retail investors. These investors do not have access to the general consumer protection laws but however have specific laws that comply to protect the interests of such investors. Agreeing with the provisions of the Corporations Act 2001 it is important to ensure retail investor protection. The retail investors form a large portion in the financial services sector therefore having laws to ensure the protection of the small investors in vital. As a small retail investor may not be concerned with large investments in the market but a small amount invested from the savings. Thus it is important to provide specific protection to the retail investor giving them easy access to the consumer protection laws (ASIC.com ,Austii.edu – Accessed on 30/3/2012)

3. Case Study

Ted and Alice are considering a reverse mortgage loan and are not completely financially literate. It is important for the financial advisor to absorb all the personal information provided by the client. After a complete understanding of their financial needs formulate an appropriate financial provides. Being unaware of the technicalities of the reverse mortgage system it is important for the financial advisor to explain all technicalities in a simple language. Moreover it is the duty of the financial advisor to educate the investor about the product as well consumer protection offered by the government to safeguard their interests.  As investors it is important firstly to completely understand the product in consideration and be aware of the consumer protection laws in case of occurring fraudulent activities practices. An investor should be completely educated about the product before making the final decision.

4. Role of Financial Advisors

Financial advisors hold a high degree of responsibility while undertaking and providing financial advice to investors. It is highly important for the financial advisor to assume a high degree of responsibility to ensure investor protection. Research has proven that the government and financial industry does not ensure providing complete information of social security products, financial services etc. therefore it becomes the primary role of the financial advisor to educate the investor on such schemes. It is important for the financial advisor firstly to understand the needs of the client and on the basis of that formulate a financial plan that would ensure maximum gains to the client. However it is important that the plan may not be generic but specifically designed to suit the needs of the investor. An ethically sound financial advisor ensures maximum returns to the consumer in the future (Forbes.com – accessed on 30/03/2012)

It is also important for the consumer to conduct a complete background check before choosing a financial advisor. A good financial advisor would be able to provide references from current as well as old clients. It is important to understand the performance of the financial advisor. Thus realising the importance of the role of the financial advisor the government has placed strict laws for financial advisory services. These laws have been placed to protect investor interest and to reduce misguidance in the financial services sector.

5. References

• Australian Securities and Investments Commission – Our role.” Australian Securities and Investments Commission. N.p., n.d. Web. 29 Mar. 2012. <http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Our%20role>.
• “Australian Taxation Office Homepage.” Australian Taxation Office Homepage. N.p., n.d. Web. 29 Mar. 2012. <http://www.ato.gov.au/>.
• “Pages – Australian Prudential Regulation Authority           .” Pages – Australian Prudential Regulation Authority        . N.p., n.d. Web. 29 Mar. 2012. <http://www.apra.gov.au>.
• ASIC. “Licensing: Financial product advisers—Conduct and disclosure .” ASIC 17 (2009): all. Print.
• “CORPORATIONS ACT 2001 – SECT 761GMeaning of retail client and wholesale client.” Australasian Legal Information Institute (AustLII). N.p., n.d. Web. 29 Mar. 2012. <http://www.austlii.edu.au/au/legis/cth/conso
• “How To Select Your First Financial Advisor Page 2 of 2 – Forbes.com.” Information for the World’s Business Leaders – Forbes.com. N.p., n.d. Web. 29 Mar. 2012. <http://www.forbes.com/2011/01/25/how-to-select-your-first-financial-advisor-personal-finance_2.html>.

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