financial anylysis

Financial Planning Challenge 2023 Phase 1: Written Financial Planning Case Study

The first phase of the competition consists of a financial planning case study for a hypothetical client. Students must assess the client’s needs and prepare a comprehensive financial plan for the client based on the data provided. Use of commercially available financial planning software is prohibited. The written plan should include the following:

• A client welcome letter. • One-page summary outline. • Assess the client’s current financial condition. • Identify the major Strengths, Weaknesses, Opportunities, and Threats (SWOT). • Identify and disclose specific assumptions used in analyzing each goal and need. • Discuss the resolution of any conflicts between the client’s goals and needs, and the

ability to satisfy them due to financial or other constraints. • Identify the extent to which other professionals are required to implement any

recommendations. • Note: Teams are encouraged to make assumptions where details are not provided - be

creative. Submission:

• Each team should submit their financial plan as one (1) compiled document in PDF format.

• Important: Please DO NOT include your school’s name, location, or team member names on any pages of your case submission.

• Submit the online registration from and comprehensive financial plan by Midnight May 30, 2023. Case submissions should be submitted HERE. If there are any issues in the upload process, please email a copy of the plan to learning@onefpa.org

Judging:

• A panel of judges representing each presenting organization will review the submissions based on a standardized grading rubric to maintain consistency.

• Please reference the Phase 1 Grading Rubric online • Each submission will be assigned a point value based on the quality of their

submission. The phase 1 score has a weighted score of 30%.

PRESENTING ORGANIZATIONS:

AMERIPRISE FINANCIAL, FOUNDING CORPORATE PARTNER CERTIFIED FINANCIAL PLANNER BOARD OF STANDARDS, INC.

FINANCIAL PLANNING ASSOCIATION

The Rogers Retire

Meet your new clients, James (58) and Pamela (55) Rogers. James and Pamlea have worked with several planners over the last 15 years. They have received conflicting, and sometimes incorrect, advice. They are looking to settle in with someone they can trust and who can offer thorough and consistent direction to help them achieve their goals.

The Rogers have lived in Katy, Texas since 1992. Both born and raised in Colorado, the Rogers met in college while attending University of Colorado Boulder. Following graduation, they married and moved to Texas to pursue a job opportunity for James. They’ve resided in Katy, Texas ever since.

The Rogers have two children, Emily (30) and Tyler (26). Emily followed in her mother’s footsteps and became a teacher. She is married, has a two year old son, and is expecting her second. She and her family live in Boulder, Colorado. Tyler just earned an MBA. He is married and his wife is expecting their first child later this summer. They live in Dallas, Texas.

James is a Senior Pharmacist at Frank’s Specialty Pharmacy and receives an annual salary of $142,000. He would like to retire in the next few years. Pamela recently retired from teaching third grade at the local elementary school. Pamela worked in high school as a barista, but since then, her only career has been in education, specifically at her current school. Her yearly retirement income from the Texas Teacher Retirement (TRS) fund will be $36,000 when Pamela turns 67. James thought Pamela might be eligible for social security on his benefits, but he doesn’t know how that works. On James’ latest social security statement, it said he would receive $3,167/month if he were to start drawing social security at age 67. James and Pam aren’t sure of what Pam’s social security benefit will be, if anything. Their primary concern is to have a strong retirement. James and Pamela are worried about inflation, given the recent high inflation numbers. Pamela is also concerned as she’s heard that her TRS won’t increase with inflation.

Pamela is also worried about what would happen if something happened to James. Relocating is something they are seriously considering upon James’ retirement as they want to be available to help aging parents and spend time with grandkids. If they were to relocate, they would relocate to the Denver, Colorado area.

James assumes he’ll retire between ages 65 and 67, but with his current workload doesn’t know if it will be possible for him to work until then. His work is stressful and his dream would be to retire by the time he is 60. He has seen how much Pamela has enjoyed retirement and wants to join her!

James and Pamela’s current expenses are between $8,000-$10,000 per month, including their mortgage. The extra $2,000 is discretionary spending where James and Pamela will visit their grandchildren or take a vacation. They want to keep this same level of spending throughout retirement. In preparation for their conversation with you, they pulled a summary of how they

spend money last month for you to see. That month didn’t include any of their extra travel expenses that sometimes occur.

James does not have a pension, but has a 401k that he has contributed to since he started working. He is at the point where he is maxing out his 401k and getting a 3% company match. James has picked the investments inside of his 401k and will ask various people for what types of investments he should use and would then add them to his 401k.

James and Pamela have a savings account with $75,000 in it. They don’t know if it is wise to have this in cash right now or what they should be doing. This account is at their local bank in a checking account not gaining any interest. Pamela inherited some money, including several investments from her grandmother, which are in James and Pamela’s joint investment account.

James currently has short-term disability with his company, but elected to not pay for the long-term disability. James reasoned he is close enough to retirement, so the cost was not worth the value. James and Pamela have a high deductible health insurance plan through Frank’s Speciality Pharmacy. They have been healthy so far and haven’t had any big claims, so they have appreciated the lower premiums. They are worried about what would happen to their budget if they started needing health care with their deductible and maximum out of pocket at $13,900 for both of them. Their plan has an HSA, but they were advised years ago to avoid that. They don’t remember the reason why, but they haven’t looked into it any further.

James and Pamela have been in the same house since 2002. They owe $190,623 on their mortgage, interest rate of 6.54%. James and Pamela’s original mortgage was a 30 year mortgage for $350,000. Their parents encouraged them to not pay extra on their mortgage payment and spoke of the dangers of refinancing their loan, so James and Pamela have the original loan, which will be paid off in 2032. The couple’s cars are paid in full, however, they will need to replace one car in the next five years and anticipate needing roughly $30,000 for that expense and expect to buy a new car every five years with a similar expenses.

Five years ago, James and Pamela attended a live recording of The Price is Right. James was over the moon to be selected as a contestant. He did really well on the show and won an RV! The Rogers have loved traveling in their RV. Quick weekend trips or longer cross country vacations allows them freedom, spontaneity, and flexibility. The RV is valued at $65,000.

James currently has an individual term life insurance policy of $1,000,000 with $1,100/year premiums through age 65. Every year he debates whether or not he should stop paying the premium because the $1,100 seems like a lot for him to pay. James also has a 1.5x salary life insurance policy through his employer. Pamela does not have any life insurance policy.

One of Pamela’s regrets has been that they did not help pay for their children’s college education. It was difficult to watch their kids struggle to cover tuition, room and board, and all the other expenses that come with college. Because of this, she would really like to be able to fund their grandchildren’s college education. In talking through this, Pamela would want to focus on paying for a public school in Texas and wants to plan to pay for their public school tuition,

leaving the room and board to their grandchildren to cover. Pamela doesn’t know what school they would want to attend, but suggested using the University of Houston as an example.

Both James’ mother and Pamela’s father are both living in Colorado. James’ mother is 82 years old and lives with her daughter (James’ sister). If James’ mother were to need an assisted living facility, there would likely be a $3,500 per month gap in her expenses. While James and his sister haven’t explicitly discussed this yet, James expects he and his sister would split the monthly cost to be sure his mother is taken care of. Pamela’s father is 81 years old and lives in an assisted living facility. His social security and military retirement covers the majority of his expenses. Being able to help care for and financially support their parents is a top priority for the Rogers.

Knowing both James’ mother and Pamela’s father have needed assisted living, James and Pamela are concerned that they may be in a similar situation. They know they have more resources than their parents, but don’t have a good understanding of what their potential needs would be or how to plan and do not want their children to worry about them as they age.

An additional concern for James is the fact that their will was never finalized. A draft was put together in 2010, but probably needs to be revisited. They both agree that estate planning needs to be addressed in the near future. While the majority of their assets will go to their two children, Pamela volunteers through an elementary age literacy program, which is a 501(c)(3) and saw someone recently bequest $100,000 to this program upon their death. She was struck by the impact this money had on the children they served and would like to do something similar.

Net Worth Statement | As of February 17, 2023

ASSETS James Pamela Joint Total

NON-QUALIFIED ASSETS

Cash Alternatives

Savings Account — — $75,000 $75,000

Taxable Investments

Joint Account — — $234,189 $234,189

Total Non-Qualified Assets — — $309,189 $309,189

RETIREMENT ASSETS

Qualified Retirement

James’ 401(k) $1,004,971 — — $1,004,971

Pamela's 403(b) — $321,750 — $321,750

Total Retirement Assets $1,004,971 $321,750 — $1,326,721

Total Liquid Assets $1,004,971 $321,750 $309,189 $1,635,910

REAL ESTATE ASSETS

Home — — $650,000 $650,000

Total Real Estate Assets — — $650,000 $650,000

PERSONAL ASSETS

James' Car — — $25,000 $25,000

Pamela's Car — — $10,000 $10,000

RV — — $65,000 $65,000

Total Personal Assets — — $100,000 $100,000

Total Assets $1,004,971 $321,750 $1,059,189 $2,385,910

LIABILITIES James Pamela Joint Total LONG TERM LIABILITIES

Mortgage — — ($190,623) ($190,623)

Total Long Term Liabilities $0 $0 ($190,623) ($190,623)

Total Liabilities $0 $0 ($190,623) ($190,623)

Total Net Worth $1,004,971 $321,750 $868,566 $2,195,287

Total Net Worth $2,195,287

Holdings Gain/Loss The Holdings Gain/Loss report provides the basis and gain or loss for your holdings, as well as the total basis and total gain or loss for your holdings as of the last update. Accounts Included: All Assets Name Ticker Units Unit Basis Basis Price Market Value Gain/Loss % of Portfolio

James' 401(k)

Vanguard Diversified Equity Fund Investor Shares VDEQX 3,548.000 $39.54 $140,287.92 39.54 $140,287.92 $0.00 8.99%

Vanguard Energy Fund Admiral Shares VGELX 503.000 $86.82 $43,670.46 86.82 $43,670.46 $0.00 2.80%

Vanguard Inflation Protected Securities Fd Insti Shs VIPIX 9,584.000 $9.51 $91,143.84 9.51 $91,143.84 $0.00 5.84%

Vanguard Market Neutral Fund Investor Shs VMNFX 4,594.000 $12.29 $56,460.26 12.29 $56,460.26 $0.00 3.62%

Vanguard Specialized Portfolios Health Care Fund VGHCX 459.000 $209.69 $96,247.71 209.69 $96,247.71 $0.00 6.17%

Vanguard STAR Fund VGSTX 4,392.000 $25.68 $112,786.56 25.68 $112,786.56 $0.00 7.23%

Vanguard Strategic Small-Cap Equity Fund Investor Shares VSTCX 4,758.000 $35.25 $167,719.50 35.25 $167,719.50 $0.00 10.74%

Vanguard Target Retirement 2035 Fund VTTHX 4,953.000 $20.41 $101,090.73 20.41 $101,090.73 $0.00 6.48%

Vanguard Target Retirement 2060 Fund VTTSX 2,739.000 $41.40 $113,394.60 41.40 $113,394.60 $0.00 7.26%

Vanguard Whitehall Funds, Selected Value Fund VASVX 2,975.000 $27.62 $82,169.50 27.62 $82,169.50 $0.00 5.26%

Joint Account

Apple Inc. AAPL 250.000 $45.90 $11,475.00 153.71 $38,427.50 $26,952.50 2.46%

Coca-Cola Company KO 1,000.000 $37.40 $37,398.00 59.22 $59,220.00 $21,822.00 3.79%

CVS Health Corporation CVS 500.000 $43.69 $21,845.00 87.97 $43,985.00 $22,140.00 2.82%

Vanguard Total Stock Market ETF VTI 450.000 $188.89 $85,000.00 205.68 $92,556.00 $7,556.00 5.93%

Pamela's 403(b)

Fidelity Contrafund FCNTX 25,000.000 $12.87 $321,750.00 12.87 $321,750.00 $0.00 20.61%

Total Holdings — — — $1,482,439.08 — $1,560,909.58 $78,470.50 100.00%

Insurance Details The Insurance Details report lists your insurance policies including life, long term care, disability income, business disability, property/casualty, and medical. Insurance, Life Life Insurance

Death Benefit: $213,000 Institution: — Policy Number: —

Purchase Date: 1/1/2023 Type: Group Life Insured: James Rogers

Owner: Frank’s Specialty Pharmacy Premium Payer: James Rogers Annual Premium:

Premium Term (years): While employed Exclusion Amount: — Cash Value: N/A

Primary Beneficiaries

Pamela Rogers (100.00%)

Contingent Beneficiaries

None Listed

Life Insurance

Death Benefit: $1,000,000 Institution: — Policy Number: —

Purchase Date: 2/27/2005 Type: Term Life Insured: James Rogers

Owner: James Rogers Premium Payer: James Rogers Annual Premium: $1,100

Premium Term (years): 20 Term (years): 20

Primary Beneficiaries

Pamela Rogers (100.00%)

Contingent Beneficiaries

None Listed

Insurance, Disability Short Term Disability Policy

Benefit: 50% of James' Salary Institution: — Policy Number: —

Purchase Date: 1/1/2023 Policy Type: Group Short Term Insured: James Rogers

Owner: James Rogers Premium Payer: James Rogers Annual Premium:

COLA: No Growth (0.00%) Benefit is Taxable?: Yes COLA Type: Compound

Maximum Initial Benefit Cap: $6,000/month Maximum Annual Benefit: — Elimination Period: 7 Days

Benefit Period: 5 months Own Occupation?: No Simple COLA Base: —

Insurance, Property and Casualty Homeowner's Insurance

Insured Asset: Home Institution Name: — Property Coverage: $650,000

Owner: James and Pamela (Joint/ROS) Policy Type: Homeowner's Personal Property Coverage: $175,000

Purchase Date: 1/1/2023 Policy Number: — Replacement Value: No

Renewal Date: 1/1/2024 Premium Term (years): 0 Medical To Others Deductible: $1,000

Annual Premium: Property Deductible: $6,500 Medical To Others Coverage: $2,500

Indexed At: No Growth (0.00%) Personal Property Deductible: $500 Liability Limit: $250,000

James' Car Insurance

Insured Asset: James' Car Institution Name: — Collision Coverage: $1,000

Owner: James and Pamela (Joint/ROS) Policy Type: Auto Property Liability Limit: $50,000

Purchase Date: 1/1/2023 Policy Number: — Liability Limit Per Person: $50,000

Renewal Date: 1/1/2024 Premium Term (years): Liability Limit Per Accident: $150,000

Annual Premium: $0 Comprehensive Deductible: $1,000 Uninsured Motorist Property Coverage: $50,000

Indexed At: No Growth (0.00%) Collision Deductible: $1,000 Uninsured Motorist Bodily Injury Coverage: $50,000

Pamela's Car Insurance

Insured Asset: Pamela's Car Institution Name: — Collision Coverage: $500

Owner: James and Pamela (Joint/ROS) Policy Type: Auto Property Liability Limit: $50,000

Purchase Date: 1/1/2023 Policy Number: — Liability Limit Per Person: $50,000

Renewal Date: 1/1/2024 Premium Term (years): Liability Limit Per Accident: $100,000

Annual Premium: $0 Comprehensive Deductible: $500 Uninsured Motorist Property Coverage: $50,000

Indexed At: No Growth (0.00%) Collision Deductible: $500 Uninsured Motorist Bodily Injury Coverage: $50,000

RV Insurance

Insured Asset: RV Institution Name: — Policy Amount: $50,000

Owner: James and Pamela (Joint/ROS) Policy Type: Other Annual Premium: $0

Purchase Date: 1/1/2023 Policy Number: — Indexed At: No Growth (0.00%)

Renewal Date: 1/1/2024 Premium Term (years): 0

Monthly Spending Report

Description Monthly Spending Mortgage $2,721

Shopping 1,725

Food 1,325

Bills & Utilities 720

Car Repairs 450

Insurance 426

Home 325

Pets 258

Housecleaner 250

Entertainment 155

Medical 257

Totals: 8,612