FPC001B Economic And Legal Context For Financial Planning

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Question 3 Market impacts on strategy (20 marks | Word limit: 1,000 words)

LO2: Explain the impact of current issues and key economic and financial indicators on the Australian and global financial markets.

LO4: Examine some of the major issues currently facing the financial planning industry in Australia.

Define ‘sequencing risk’ in relation to retirement planning and describe how market conditions over the accumulation phase of saving for retirement can affect retirement outcomes. How might this risk affect the retirement goals of Marcus and Jill? Include in your answer the following:

  • definition of sequencing risk, with two examples provided
  • four (4) ways to mitigate against sequencing risk
  • brief analysis of Marcus and Jill’s financial situation
  • implications of market forces on Marcus and Jill’s desired retirement age and funding requirements. The response should take into account the impact of COVID-19 on financial markets during 2020. 

The following resources are provided to assist in your response to this question:

  • Basu AK, Doran, BM & Drew, ME 2013, ‘Sequencing risk: the worst returns in their worst order ‘, JASSA The Finsia Journal of Applied Finance, no. 4, pp. 7–13, viewed 13 November 2020, ProQuest databaseavailable within the OpenAthens portal in the Kaplan Professional Library.
  • Productivity Commission 2016, ‘Submission 26 — Drew Walk and Co’, Superannuation competitiveness and efficiency, Australian Government, 18 April, viewed 13 November 2020, <www.pc.gov.au/__data/assets/pdf_file/0010/198082/sub026-superannuation-competitiveness-efficiency.pdf>.

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