An analysis of the client’s financial situation and recommendation.

1. Person’s goals and objectives
She has interest in investing in shares and is reflected in her plan just after started
working but due to her lack of skill she has not planned well. She has low risk
appetite hence return is not expected to be high even this strategy should be
followed for investment of after tax inherited amount of £70,000 (assumed the
amount deposited in bank is after deducting the inheritance tax) is kept in bank.
Low risk instruments can be listed here:
Bank deposit
Blue chip shares
Secured and government Bonds
Pension fund
Other options can also be analyzed here as:
Written off the existing loan
Purchase of real estate as she has no investment till date

2. Food 280
Clothes 110
Miscellaneous 1250
Rent & Council Tax 900
Travel, motoring expenses 240
Socialising 130
Gifts, birthdays 500
Holidays 1800
Utilities 80
Gym membership
Total
62
25174
Assets £
Bank 250
Gilts 1500
Prudential plc 3791.52 12.6384
Lloyd Banking Group plc 3936 0.7872
Real Estate 54509.48
total 63987
Liability
total 0
Expenditure report Per year (£)
Note-ex (appendix) 25174
Pension 6000
Total expenditure 31174
savings 550.8
Total expenditure and savings 31724.8

3. Her assets and liabilities
Shares are valued at market price on 2nd September. The price of United
Utilities was £6.7005 on 2nd September and Centrica was priced at
£3.8408. UK Aggressive OEIC managed by Fidelity International is
purchased on (assumption) 2nd September, 2011.
Pricing calculation of OEIC at the time of purchase and now
2013 2011
United Utilities 250 6.7005 1675.125 5.2651 1316.275
Centrica 500 3.8408 1920.4 3.379 1689.5
Total 3595.525 3005.775
Value per Share 4.794033 4.0077
purchase price 4.0077
Holding Price 4.79403
HPR 19.6206
yearly return 9.37119
OEIC has two shares in holding United Utilities and Centrica.
Price of both shares has increased from 2011 to 2013, in last
two years of holding period. Using the method of weighted
average portfolio the price can be determined as shown in
above calculation from £4.008 to £4.794. So the holding period
return is 19.6% and yearly return is 9.37%.

4. Assets £
Bank 74250
Gilts 1500
OEIC 400 1917.613
total 77667.61
Liability
Credit card 3650
NatWest personal loan 5500
NextStore card 780
Car loan 3750
total 13680
Car loan is repaid as 250 per month and will be continuing for next 15 months
Considering the 400 shares of OEIC, total value of share is £1917.613. Here
asset is distributed three types BANK, GILT and FUND those have lower risk
but returns are 9.4%, 8% and bank rate of 1%. Her asset is higher 5.67 times
higher than liability which can be noted as her prospect is believed to be good.
Assets in bank which is kept for last six months but without that inherited
property her total asset is £7668 or nearly 50% of liability.

5. Her existing situation
A brief of present and projection
1. Salary is stable but can be hiked after 24 months after changing company
and can be hiked 10% from now. 5% bonus amount is also to be expected at
that next or by main salary.
£ 2013 2014 2015
Salary 34000 34000 37400
Bonus 1900 1700 1870
Total Income 35900 35700 39270
2. At present other income is fixed to £411 but will increase in future with the
increase in investment of inherited amount.
3. Expenditure is nearly same to earning, that not a good sign but expenditure will
decrease from 2014 onward due to repaying of car loan after 15 months from now
or before from inherited amount.
4.Her invested amount is distributed in three assets Gilts, fund and in bank.
5. Her interest amount paying for loan is increasing the expenditure as its interest
rate is higher.

6. 6. Her risk attitude is cautious
7. She has no insurance investment but she is insured by employer
8. Her fund has return of 9.4% higher than the return of 8% from Gilts. Her
invested amount is higher than the Gilts.
9.Salary may hike after 24m and assumption can be made for projections as
hike is 10%.
10.Expenditure will be reduced due to repayment of car loan and additional
reduction can be estimated by early repayment of car loan from bank balance
11. Inherited amount is parked at bank but needed to investment in right
instruments for better return
12. Price is calculated through weighted average portfolio method, purchased
at £4.008 and now price has increased to £4.794

7. Interest amount paid on loan is monthly 0.806% which 10.108% effective
interest rate of loan.
Monthly interest on loan amount is: 0.008056395
Yearly interest on loan amount is: 10.10776513
Her earning on investment has maximum yearly return of 9.4% that is lower
than the interest payment.

8. Her income and expenditure status
Income Statement Per year (£)
Earned income 35700
Total monetary income 411
Total annual income 36111
Tax allowances 9440
Taxable income 26260
Tax at 20% 5252
Net income after tax 30859
Above income statement shows her income after tax and consideration of
allowance. Tax allowance is £9440 and Lucy’s income is in 20% tax bracket. That
calculation shows her taxable income is £5252+£20+£120=£5392
Here income from deposit is very low of 1% only.
Her expenses for Food, Clothes, Miscellaneous, Rent & Council Tax, Travel, motoring
expenses, Socialising, Gifts, birthdays, Holidays, Utilities and Gym membership are
assumed to be fixed and is independent to savings or planning ( details of this part
is at appendix, Note – ex).

9. Expenditure report Per month (£) Per year (£)
Note-ex (appendix) 25174
Car loan repayment 250
Loan interest 80
Total expenditure 29134
Her income after personal allowance and tax is reduced to £30859 from
£35700. And her expense is £29134.
So her savings per annum is £1725.
Notes: (e.g. anticipated changes or major expenditures) Car loan will be
repaid fully in 15 months
Specific recommendations
Here investment in OEIC fund has investment in two different shares which
are not growth stocks even the sector is not good from return prospect.

10. Present Stocks
The operation of United Utilities Group PLC is related to water and
wastewater assets in the North West of England. It is a holding company.
About seven million people and organizations situated in the North West of
England are benefitted from United Utilities Water PLC (UUW) which is
wholly owned subsidiary of United Utilities Group PLC. UUW possesses
licenses to supply water and wastewater services to aforementioned
population. It provides in the area of the cities of Manchester and Liverpool
and widens up to the Cumbrian-Scottish border and Crewe which remain in
north and south respectively (Google Finance, 2013a). Centrica plc is a mixed
energy company having its operation in four sections as Centrica Energy,
Direct Energy British Gas, and Centrica Storage. In Europe, Trinidad and
Tobago and North America it owns rough and ready liquids reserves and
proven and probable (2P) gas. The main fields of Centrica Energy remain in
the Statfjord, Kvitebjorn, Valemon, South Morecambe, Chiswick, Cygnus,
NCMA Maria, Poinsettia, Rhyl York, and Grove fields. The chief field of
Centrica Storage remains in the Rough field (Google Finance, 2013b).

11. Prospective sector
Economists forecast for a fall to 59.8 is proved wrong as services purchasing
managers' index (PMI) jumped 220 basis points from September's 60.3. Economic
growth is also improved by 50 basis points from previous 0.8 percent between July
and September for combined improvement of service, manufacturing and
construction, according to PMI surveys and this recovery is again moved up
according to Chris Williamson, chief economist at Markit in October (Milliken,
David., 2013).
A recession was felt in early 2013 in Britain after five years but it was surprisingly a
different result in index of Markit's composite PMI. Even this index is in the best
territory since its records started in 1996. This is in contrast with the weak Euro
zone. In euro zone inflation is tumbling, unemployment is hitting is record high and
extending to rate cut in European Central Bank. In addition the positive result is
also from the European Commission that has reduced the forecast of euro zone to
1.1 percent and increased the same for UK to 2.2 percent next year. But the output
level is still below in UK comparing 2008’s peak level and service sector in lading
position to contribute here as per the Markit's survey. In service sector the
employment rate is fastest since 1997. According to National Institute of Economic
and Social Research, house price rate and consumer spending may raise result in
BoE’s raise of rate in early 2016 (Milliken, David., 2013)

12. Prospective stocks
From the above graph, it can be noted that the further holding of OEIC is not acceptable
as their overall performance is not good comparing the index. And in contrast the
selected stocks (prudential plc and Lloyd Banking group are performing well and their
presence in service sector will hopefully very prospective.
Lloyds Banking Group plc, a holding company is founded on financial service which
offers an array of banking and financial services to corporate customers as well as
individual customers mainly in the UK. It works on four sections namely Retail,
Commercial Banking, Wealth, Asset Finance and International and Insurance. In the UK,
Retail offers personal customers banking, mortgages and other financial services.
Commercial Banking provides business clients, from minor firm to heavy corporate,
banking and connected assistance. In the UK and abroad, private banking and asset
management and asset finance is provided by Wealth, Asset Finance and International.
That segment also looks after international retail businesses (Google Finance, 2013).

13. Prudential plc (Prudential) is s global financial service provider which is
present in the UK, Asia and the US. In Hong Kong, Malaysia, Indonesia,
Singapore and other Asian countries Prudential Corporation Asia operates.
The company focuses on the insurance, health, protection, connected to a life
policy or on a separate entity and mutual funds. It also offers institutional
fund management, particular personal lines property and casualty insurance,
group insurance, and consumer finance. (Google Finance, 2013)
So, first recommendation is to switch the fund to growth sector, i.e. financial
sector or information technology sector.
Most promising sectors:
Secondly the investment should be more diversified after including share and
pension fund.
Thirdly the huge amount of inherited and kept in bank can be used to write
off the loan as the interest payment is costlier than present invested assets.

14. Cash on hand:
Bank deposit: £74000
Sailing of OEIC: £1917.6
Total amount £75917
Total loan amount £13680
Total investable amount £62237
Her asset and liability on 3rd September
Earning is fixed as earlier but there is difference under the head of monetary income as
her portfolio has no monthly income except the previous investment in Gilt. Her income is
taxable, so minimization of other income is tax avoiding. Previously tax benefit was only
from allowance but now investing in pension can help her to get tax benefit of £1224.
-10000
-5000
0
5000
10000
15000
20000
25000
30000
35000
40000

15. Income Statement Per year (£) is like Earned income (35700), Other monetary
income(96), Pension(-6000), Taxable benefits(1224),Total annual income(35796), Tax
allowances(9440),Taxable income(20356),Tax at 20%(-4071.2) can show that her net
income after tax is 31724.8.
Her expenditure report will be changed by considering the writing off of loan amount.
The interest payment and payment for car loan was a costlier burden but other
expenditures are
Her expenditure per year (£) for Note-ex (25174), Pension (6000), Total expenditure
(31174) and savings (550.8) are better understandable in graph below (details in
Note-ER).
0
5000
10000
15000
20000
25000
30000
35000
Note-ex
(appendix)
Pension Total
expenditure
savings Income

16. By considering both income and expenditure her savings is now 550.8 at bank but her
investment in pension can earn her nearly 60% of present earnings after retirement.
Bank
Gilts
Prudential plc
Lloyd Banking Group plc
Real Estate
Details of her Assets in £ is like, Bank(250), Gilts(1500), equities ( Prudential
plc,3791.52 with its market price at 12.6384; Lloyd Banking Group plc,3936 with
its market price at 0.7872), Real Estate( 54510). Her total asset is £63987 and
total liability is 0. (Note-AL)

17. Client is invited to attend a review of their position at yearly intervals on
September.
This review is important due to:
Evaluation and changes of assets
Evaluation of strategies
Assets in the fund may have different growth prospective over time
that changes with time. Here service sector is estimated as a
prospective but in next year this picture may change.
Any changes in income and earning can be tax bearing and directed to
investment opportunity as the changes in expenditure is not so
instable.
This review can help to get better return from investment.

18. Issues are important to consider in future
1. The interest rate and cash inflow in market is now downward but estimated to
increase very soon. If market still persists in range or gone to very volatile
situation then purchased equities needed to be altered. A notice for earlier
review will be communicated that time.
2. Her asset is also now £63987, distributed in 4 different assets like cash of
£250(which is low yielding and reduced from previously £74250. Her investment
in Gilts is unaltered, remained £1500 with 8% yield but redeeming the previous
fund (equity) and adding approximately £5500 extra amount from the bank
deposit two low risk shares are bought for medium time investment from
prospective service sector. Rest amount of bank deposit is invested in real
estate. All the liability is written off to reduce the expenditure and ultimately
she can save at the end of year. Here the difference is thin which may need to
be altered for any circumstances. Client can send mail for review in that
situation.
3. 3 weeks before September and 1 week before the exact meeting date and time
is sent normally if point 1 does not come up earlier.
4. Here report is based on some assumptions on interest rate, inflation and
macroeconomic factors but change of those factors are uncontrollable. If the
change is beyond tolerance then further review on investment is needed and a
mail 1 week prior to meeting date and time will be sent as emergency.