1. Executive Summary
- brief summary of the result, recommendation and action plan for the cash-flow management, risk/insurance, education, retirement, investment, estate, tax and special need planning.
2. Goals and Objectives
- goal and objective of a client in cash-flow management, risk/insurance, education, retirement, investment, estate, tax and special need planning.
3. Personal data
personal data include financial institute (bank, investment bank, estate agency, insurance company etc), dependence (official and non official if there is)
4. Current Financial Situation
- current analysis of the net worth and cash flow management by using the personal finance ratio e.g. liquidity ratio, liquid asset to net worth ratio, solvency ratio, debt to asset ratio, saving ratio, debt serving ratio etc.
5. Assumptions
- Mutual agreement between client and CFP about the assumption to be used within the agreed time frame e.g. salary increment, retirement age, share dividend increment, inflation (government official figure), inflation (personal life style figure), bank rate (fixed deposit rate, current, saving, BLR+/- rate, hire purchase rate), equity return rate, property investment ROI, rental increment rate, investment-linked return/unit trust (bond, equity, balance, index, money market etc), traditional insurance cash value rate, endowment rate, market value of a property (car, house, office etc), tax bracket based on current year income forecast, pre-retirement portfolio rate of return, post-retirement rate of return, average EPF rate of return, Amanah saham rate of return, etc.
- reference source quoted(Bank Negara Malaysia, Department of Statistic, EPF/CPF etc.)
6. Cash-Flow Management
- solution is provided after analysis (pareto on the outflow, asset distribution, liability distribution, etc)
- base line objective: reduce outflow, increase inflow, reduce liability and increase asset, depends on client willing to adjust the current life style.
- reduce outflow: pareto analysis on the high expenses, seeking the solution to minimize/optimize/reduce outflow;
- increase inflow: mutli income stream e.g. dividend income, royalty, Adsense etc.
- increase asset: asset distribution/segregation - liquid asset (e.g. equity, bond, UT, cash etc) and non liquid asset (e.g. real estate, car, collectibles etc).
- decrease liability: rule of 78 for hire purchase, car loan, credit card outstanding balance, personal loan, housing loan etc.
- Finally, improvement of the net worth and cash flow management by using the personal finance ratio e.g. liquidity ratio, liquid asset to net worth ratio, solvency ratio, debt to asset ratio, saving ratio, debt serving ratio etc, to be evaluated
- tracking: year end tracking for total inflow, total outflow, net cash flow, total liquid asset, total non liquid asset, total asset, total liability and net worth are tracked and documented.
- Millionaire Next Door method: WAQ, UAW, AAW and PAW analysis
7. Risk Management/Insurance Planning
- personal insurance need analysis (life, surgical and hospitalization and personal accident) : Human life Value and Expense Method
- property insurance: house owner, house holder (MRTA) and car insurance
- Liability insurance: professional liability
- Current existing plan matrix: all information of the insurance such as insured, agent contact, sum assured, maturity, H&S overall and annual limit, premium, term and condition, limitation etc.
8. Education Planning
- time frame: kid time frame, retirement time frame.
- education expenses forecast in today value
- overall expenses: using the XIRR/XNPV
9. Retirement Planning
- method: target replacement ratio and expense method, principal liquidation and principal intact
- life expectancy: Malays, Chinese and Indian have different life expectancy
- shortfall/excess analysis: NIA>required, NIA=required and NIA
- approaches: sufficient retirement fund (NIA>required), financial freedom age (NIA=required, fixed ROI) and desire rate of return (NIA=required, fixed retirement age), insufficient retirement fund (NIA
- Excel Solver is used to calculate retirement age and required rate of return.
10. Investment Planning
- based on the desire return from the combined education plan, retirement plan and insurance plan, portfolio optimization is engineered accordingly to client's need.
- portfolio optimization will work on the asset allocation with the lowest risk that can offered to the client.
- Excel Solver: a) lowest risk: required ROI = expected return, seek the lowest portfolio standard deviation, b) optimize portfolio: required ROI/expected return, seek the optimize sharpe ratio
11. Estate Planning
- Will/trust/power of attorney for the asset distribution
- cost of the estate planning (charges from trust company, documentation, executor fees etc)
- nomination of the statutory asset (EPF Act and Insurance Act)
12. Tax Planning
- fully utilize the rebate and relive from the tax planning in order to save payable tax
- Tax Act section 108/110 - dividend
13. Special Needs
- financial aids for handicap child, second family, divorce etc.
14. Business Continuation
- life insurance - buy sell agreement
15. Recommendations/Implementation/Action Plan
- Time frame tracking: action plan with PIC
- Result review after a period
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