XPLAN and the Advice Process 

Introduction

Overview

Many advisers use the Advice to Client process to manage the advice process in their business.To enable participants to be able to relate to the different modules in XPLAN, this course is structured  along the line of the Advice to Client process.

XPLAN and Financial Planning
The components and tools in XPLAN have been created to support and complement the process of providing quality and efficient recommendations to clients.

Navigating XPLAN

XPLAN Overview

XPLAN is a web based financial planning software package that brings together the different stages in the advice process through the use of a number of modules and tools.

XPLAN enables delivery of advice to clients through integrated client management, modelling and
portfolio management tools and applications.

The facilitator will demonstrate and take you through each of the modules and tools, and explain their function to you.

XPLAN Components 

Logging into XPLAN

1. To login, access your designated website by typing in your website address

2. The login page for your website is displayed

3. . Enter your User ID and Password and click 

Navigating the XPLAN Interface

The XPLAN interface is composed of three areas, the Title bar, the Navigation menu, and the Main Page.

Title bar

The title bar contains a number of links and functions, and is always displayed.

Home, Add and Quicklinks lists:

XPLAN 

This button name can be customised and the default name is XPLAN. It contains links to your User
Dashboard, News and administration and module functionality (depending on your User Capabilities only some links may display)

Add

Allows for creating a new:

• Client

• Group

• Professional Adviser

• Referrer

• Supplier

• User

• Diary Event

• Note

• Task 

• Thread

Quicklinks

A customisable list where you can add links that you frequently access. All links in the XPLAN list can be added as Quicklinks.

The Instant Search  icon allows you to search for any key heading within your XPLAN system. Once you have searched, hyperlinks will be shown to take you directly to that location.

Icons

	Notification messages are commonly generated by XPLAN when a report has been generated. The number of unread notification messages displays beside the icon (as shown)
	Open a Time Taken Ticker
	Access XPLAN Help
	Access XPLAN Help
	Logout from XPLAN

Searching

The Quick Search box allows you to search for entities, notes or tasks.

Navigation menu

The navigation menu displays on the left of the currently accessed Page. It allows for navigation between modules and within the current module. When using a Wizard, the navigation menu can also display the pages within the Wizard, allowing you to move between pages as required.

You can collapse and expand the navigation menu by clicking the expand/contract button:

When collapsed, the current page expands horizontally to fill your web browser.

Main Page

The current page displays in the Page area

Client name - when a client has associated entities, such as a companies, trusts or SMSF, you can click the client's name and select an entity to access it.

Control buttons - buttons for the current page, such as for editing fields or moving between Wizard pages, are always located on the top-right.

Panels - some interface elements display as panels. Each panel is controlled by panel buttons. Like pages, panels can also have control buttons for editing the data within the panel.

Panel buttons - each panel has its own control buttons. Depending on the functionality offered by a panel, some or all of the following buttons may display:

BUTTON	FUNCTION
Close	Close the panel.
Collapse	Collapse the panel. Only the panel title displays.
Expand	Expand a panel title to display the whole panel.
Configuration	Access the panel configuration settings, such as the information displayed.
Download	Download the contents within the panel, such as a chart.

 Any time you see  click on the arrow to access additional options and sub menus.

Getting Help

Overview

XPLAN has an Online Help function which provides the most up to date information on the different
components and tools in the system. Interactive Tutorials are also available for viewing Training
Workshops. The Help files also provide updates on all new software versions

Accessing Help

1. Click on the Help function located on top of the Title bar

   

2. The “Help” screen is displayed

3. Navigate using the menu bar located on the left.

   

4. You may also want to use the “Search” function available.

Accessing Interactive Tutorials from within the Help Files

1. Select “Video Tutorials” followed by “Training Workshops” from the menu bar located on the left:

   

2. Click on the workshop you would like to view.

3. A video will start automatically with a chapter menu available from the left side menu bar.

 Dashboard is the default ‘home’ screen to load. To navigate back to the ‘home’ screen, just click on the site logo. You can also open additional windows by holding down the ‘Shift’ key and click on the logo. ‘Ctrl’ and click will open new tabs

XTools

Introduction

XTOOLS comprises a selection of stand-alone calculators; these calculators are considered
invaluable instruments when explaining financial scenarios to clients and/or graphically illustrating a client’s financial position.

XTOOLS is logical in its approach, ensuring its ease of use no matter how complicated a scenario or calculation may be.

Different between XTOOLS and XTOOLS+

XTOOLS provides advisers with sophisticated cashflow tools specifically catered to everyday financial planning strategies:

• Investment

• Debt

• Taxation

• Social Security

• Retirement

XTOOLS only have a few input screens, and provide a cash flow and graphical output.

XTOOLS+ (or CALM - Cash flow, Asset & Liability Model), is our flagship strategy-based generic
modeling tool. CALM provides holistic analysis of your client's objectives, cash flow and investments to analyse and model financial planning strategies across multiple entities.

XTOOLS+ FEATURES

• Model up to 30 separate asset holdings (non-property), 20 liabilities (P&I/interest only), and 10 direct properties (residential/investment)

• Assets - benchmark allocations, managed or direct investments

•  Liabilities - principal & interest or interest-only, of any deductibility

• Direct Properties - principal residence or investment

• Asset/cash flow descriptions to uniquely reflect your client’s projection

• Ability to match liabilities and assets for detailed gearing analysis

• Flexible cash flow timings and types, both regular and one-off

• Multiple contribution, withdrawal, and reinvestment periods for all assets

• Auto surplus/deficit cash flow allocation to/from assets or debt

• Automatic asset encashment to minimise CGT

• Income/growth/franking based on dealer assumptions/asset allocations

• Quarterly or annual analysis

• Unlimited number of scenario based projections for each client.

• Ability to integrate scenarios with financial plans in Microsoft Word

XPLAN has employed simulation techniques in XTOOLS (not XTOOLS+) to help assess how uncertain variables such as inflation, salary inflation, investment return and life expectancy affect investment projections. XPLAN will offer numerous options with slightly differing values for each
uncertain variable giving a statistical sampling of your projection output. NOTE:- Results above the 95th percentile and below the 5th percentile are not shown. 50% of the values will fall below the median, however only 45% over and under the median is shown.

XTOOLS Calculators

Debt > Debt Consolidation

Debt Consolidation allows an adviser to model the consolidation of up to 10 existing tranches of debt to a single Principal and Interest Loan. Existing loans may be credit cards, store cards, or personal loans for any purpose. The tool allows for loans payable at any interest rate assuming monthly repayments.

The tool presents results and allows advisers to easily quantify savings possible in interest, fees and time by consolidating debt at lower interest rates.

Debt > Loan Illustrator

This tool allows advisers to amortise any outstanding loan balance. The tool directly compares actual loan repayments made against the lender's standard loan schedule to highlight savings in interest and time.

An existing loan can be modelled and the effect of the following demonstrated:

• additional regular repayments

• commencement and regular fees

• forward interest rates to quantify the effect of rising or falling interest rates

• lump sum repayments or additional draw downs

In addition, Loan Illustrator can automatically amortise the outstanding loan to a specified early
repayment date. The tool will automatically determine the additional repayments required to
extinguish the loan by the specified date.

Insurance > Needs Analysis

Insurance Needs Analysis is a projection based analytical tool for assessing insurance needs. It takes into account projection term and survivor liquidity in each future term when calculating the level of insurance required.

Investment > Direct Property

Direct Property allows an adviser to isolate the effects of direct property investment in relation to capital, tax savings and cashflow. Up to four properties may be catered for, with the associated gearing also considered. The loan details are customisable for added flexibility in relation to term, repayments, type and deductibility. Ownership may be apportioned between client and partner for each property, and each property may be current, purchased now or in a future year. Principal residences may also be accounted for by identifying them as non-taxable property.

Investment > Education Funding

This tool can be used to determine adequate savings to fund education expenses. It allows for primary, secondary and tertiary education expenses for up to 5 children. Education expenses are funded directly via an investment fund. Education Funding caters for one-off education expenses and funding from sources other than an investment fund, such as salary. Appropriate levels of funding can be quickly determined by optimising the initial investment amount or the amount of regular savings.

Investment > First Home Saver

The First Home Saver Xtool allows advisers to model and compare client's saving for a home deposit in a First Home Saver Account in comparison to saving in a regular asset. Government contributions applicable for the First Home Saver account are calculated taking into account indexed thresholds and account balance caps. Additionally, the First Home Saver Xtool calculates the change required in contributions from the client in order to achieve their savings goal in the specified time frame.

Investment > Instalment Gearing

This tool can be used to illustrate the benefits of a long term instalment gearing strategy, including the ability to maintain the gearing at a constant level. Utilising various risk profiles or specific asset classes, the tool allows analysis of the effects on capital, cashflow and taxation. Ownership is fully customisable with the ability to hold investments individually, jointly or split disproportionately between members of a couple. Various fees and interest rates may also be accounted for.

Investment > Profiles

This tool is intended to help quantify the characteristics of the investment profiles and related assumptions adopted by the licensee group. It provides a study of the assumed risk and return properties of the standard investment profiles. In doing so, the tool models a regular savings plan assumed to be invested in a portfolio with asset allocation equal to that of the investment profile. The illustration can be made relevant to an individual by allowing for actual balances and ongoing savings as part of a regular savings plan.

Investment > Savings

The Savings Xtool is for calculating how much a client should change their contributions in order to
meet a savings goal

Lifestyle > Lifestyle Goals

XPLAN’s Lifestyle Goals is designed specifically for the financial planner who wants to use an illustration tool to aid goal setting, strategy and review discussions with their clients. Lifestyle Goals offers bold display screens which feature one-click changes to strategy and input without needing to navigate away from the main results screens.

Retirement > Allocated Pension

This tool can be used to illustrate both a new and an existing allocated pension. Utilising various risk profiles or asset classes, the tool allows analysis of the effects on capital and tax position over the long term. With the ability to allow for Account Based Pensions, Annuities and Allocated Pensions; this tool aims to covers all aspects of retirement income streams

Retirement > Life Expectancy

The Life Expectancy XTool has been designed to simply investigate life expectancy in more detail. Based on the client’s age and gender, the XTool will determine the client's expected future lifetime. The probability of survival (based on life tables) to future ages is also available. The purpose of the tool is to put financial objectives in the perspective of life expectancies, particularly relevant when discussing needs and objectives. The Life Expectancy XTool uses the most recent Australian Life Tables.

Retirement > Lump Sum vs. Pension

The Lump Sum vs. Pension XTool allows you to show clients a comparison of the effects of retaining superannuation benefits in an account based pension with pension income drawdowns, versus an accumulation account with regular drawdown lump sum payments of the same amount.

Retirement > Retirement Funding

For a client or client couple, this tool enables the adviser to analyse and present the suitability of existing retirement funding. The projection of retirement wealth can be summarised graphically, and quantified by simulating the likelihood of achieving financial objectives. As well as catering for retirement goals such as expenditure and estate capital, this tool incorporates education costs. Often, funding child education and retirement are seen as opposing goals. Retirement Funding allows advisers to easily demonstrate how education and retirement goals can both be met.

Retirement Funding quantifies the effect on specified financial objectives of:

• increasing retirement savings

• different investment profiles on expected returns and volatility

• saving sooner rather than later

• lump sum savings/withdrawals

• paying an allocated pension

• optimising entitlements

• adopting a contribution to spouse strategy

• eligibility to receive income support, including age, blind, disability and service pension and partner allowance

Retirement Funding accumulates assets for the purpose of providing retirement income. The focus of results is not necessarily on dollar values, but whether financial objectives can be met over the
XOOTLS+ Wealth Creation: Participant Guide_V 8.0 (XP2.4) 17 IRESS Ltd September 2012 projection period. The projection period may be limited to the longest life expectancy or a selected timeframe (expressed relative to life expectancy).

Depending on the level of accuracy required and the data available, Retirement Funding provides
either a simple or detailed analysis. Detailed analysis allows the advisor to state how the funds will be used in retirement, together with a full analysis of the taxation consequences. Simple analysis assumes that all retirement benefits are taken in cash, and no taxation consequences of the withdrawal are considered.

Retirement > Super Projection

The Super Projection XTool allows you to compare the performance of a client's existing
superannuation plans against up to four replacement plans.

Retirement > TTRAP

The Transition to Retirement XTOOLS gives you the ability to model and assess the benefits available to clients from accessing superannuation as an income source but continue working in some capacity and topping up their retirement savings.

With the ability to give an in-depth view of tax, income stream(s), long-term retirement savings and the ability to meet expenditure objects, the TTRAP tool gives concise yet accurate details of all
aspects of this popular retirement and superannuation strategy.

Social Security > Income Support

The Income Support XTool allows you to do a point in time calculation on a client’s entitlement for Centrelink Benefits based on their Assets and Income.

Taxation > Income Tax Calculator

This is intended to serve as a quick tax estimation tool for the current tax year. It quickly allows an adviser to establish income after tax in determining surplus income available for investment.

The tool is sensitive to resident tax status and income types such as franked and unfranked investment income. HECS debt repayment and Medicare Levy Surcharge liability are also automatically calculated.

For a married couple this tool will present individual assessment as well as couple assessment

Taxation > Tax on Super Lump Sum

This tool quickly allows an adviser to establish the tax payable on a superannuation lump sum, consistent with its respective components. The implications of Medicare, HECS and other income are considered.

For a married couple this tool will present individual assessment as well as couple assessment.

Hints and Tips

• When using the calculators, be sure to only input details relating to that specific calculator; for example, if you are using the Retirement Funding calculator, make sure you are only put in information from the client’s retirement date. Trying to commence a Transition to Retirement Income Stream will not work and will throw out your calculations; there is a specific calculator for Transition to Retirement Income Streams.

• Make sure your Scenario names are appropriate and relevant; over time the list of scenarios you create will be quite extensive, if all are named ‘Current Situation’ it may be difficult todecipher which is the relevant/appropriate scenario.

Instalment Gearing Calculator

Introduction

This tool can be used to illustrate the benefits of a long term instalment gearing strategy, including the ability to maintain the gearing at a constant level. Utilising various risk profiles or specific asset classes, the tool allows analysis of the effects on capital, cashflow and taxation. Ownership is fully customisable with the ability to hold investments individually, jointly or split proportionately between members of a couple. Various fees and interest rates may be also accounted for.

Case Study

John and Mary have set aside $5,000 and can contribute a further $500 per month.

You have recommended that they borrow $10,000 initially, then, drawdown an additional $500 per
month from the recommended borrowings.

This will means a total monthly instalment of $1,000 will be contributed to their portfolio ($500 of
personal funds and $500 from the loan). John earns $70,000 per annum and Mary earns $50,000 per annum.

All savings are to be invested into a Growth portfolio that is consistent with their risk profile. Their
investment time frame is 10 years including ongoing instalments.

The strategy will be implemented in John’s name only.

Using the Instalment Gearing Calculator

1. You must create a client using the Add Client function in the application bar.

   

   As this is an advanced workshop, we will only enter the bare minimum information to set up

   the client.

   Client Type: Individual

   Basic Details: as per screen shot below

   

   Contact Details: Leave Blank

   Once the client has been created, we will navigate to the “Key Details” page and enter the

   Date of Birth and Marital status.

   

2. Once the client has been created, click on the XTools / XTools+ menu item within the lefthand navigation bar, and then Investment > Instalment Gearing to open the InstalmentGearing calculator.

   

3. Enter a scenario name (e.g. Scenario 1 - 2012), then click on 

   

   Note: it is important you utilise appropriate naming conventions to distinguish between different scenarios.

4. Enter the client’s Personal Data as shown below (as per the case study).

   

   Note: The client information should pull through automatically from Client Focus

5. Click the  button  (top right hand corner of the page) to submit the data and proceed to the next screen.

6. Enter the Instalments information as shown below (as per the case study).

   

7. Click the  Button (top right hand corner of the page) to submit the data and proceed to the next screen.

8. Alter the client’s Economic assumptions as shown below (as per the case study)

   

   Note: The Rates of Return (ROR) and Standard Deviation (SD) will be pre-defined at the site level as a business assumption. You can also “Apply Custom” Rates of Return and Standard Deviations as applicable.

9. Click the  button (top right hand corner of the page) to submit the data and

   proceed to the next screen.

10. Enter an ‘interest rate’ (for this example we have used 10.50%)

    

11. To view the Key Results, Click on Display > Key Results
    

Understanding the results
Using the Display and Chart menu items in the left navigation bar, answer the following questions:

1. What are the long term prospects for the Clients’ investment?

   

   Charts can illustrate the progression of the investment and debt over the projection period. The chart below is under Chart/Geared Investment.

   

   Charts can be saved by clicking on the  button which will open the default file

   type.

2. What result would have been achieved if the investment was not geared?

   

3. . What tax savings were generated?

   

4. What are the tax consequences for John if the investment is sold after 10 years?

   

XTOOLS+ Case Study

Introduction

In order to model John and Mary’s overall position in a more detailed manner, we require additional information about their personal financial position.

Once we have this information, we can effectively project John and Mary’s financial situation through to retirement, or even life expectancy, using XPLAN’s modelling tool XTOOLS+.

Client Details

Creating XTOOLS+ Scenarios – Wealth Creation

Introduction

XTOOLS+ (or CALM - Cash flow, Asset & Liability Model), is our flagship strategy-based generic modelling tool. CALM provides holistic analysis of your client's objectives, cash flow and investments to analyse and model financial planning strategies across multiple entities.

Recommendations:

John & Mary would like you to present to them the following scenarios:

Their current position

1. A proposal to invest in a Growth portfolio with a Regular Savings Plan

2. A proposal to invest in a Growth portfolio using a Gearing facility

3. A proposal to use the Equity in their home to invest, combined with a debt recycling strategy

4. A proposal for both John and Mary to Salary Sacrifice to super, and also make Non Concessional contributions of $1,000 per year to their respective super accounts until retirement.

Creating the Current Position

1. We can use the client we previously created for the Instalment Gearing scenario.

2. From the Client Focus screen, click on the XTOOLS/XTOOLS+ > XTOOLS+ CALM menu

   item from the left hand navigation bar

   

3. Enter a scenario name (e.g. Current 2012), then click on 

   

   NOTE: It is important you utilise appropriate naming conventions to distinguish between different scenarios. Also keep the naming convention to Alpha Numeric characters to avoid errors when merging Coded Documents.

4. Once the scenario is created, you will be taken through to the Modelling Wizard and will beprompted to enter the Basic Details for John and Mary:

   

   Proj Start Date – This date cannot be earlier than the 1st day of the current financial year. Any non 1 July start dates will cause the first year of analysis to be pro-rated

   Initial Frequency – This allows the initial period to be analysed and viewed by quarters ormonths; doing this enables more accuracy in relation to the timing of short term events. Ifquarterly or monthly are selected here, you will have the option to view the cash flow annually.

   Specify Future Key Dates – This option allows you to input specific dates to be selected when modelling (e.g. a retirement date other than 1 July of a year).

   Retirement Date – The date selected here will be the date represented as the Client’sRetirement Date (Retmt C) and/or Partner’s Retirement Date (Retmt P) throughout the inputscreens.
   

   You can use the  button to import information from Client Focus and IPS.

5. Click the  button (top right hand corner of the page) to submit the data andproceed to the next screen (Children). As we are not entering the details of Children, pressthe Next button once more to move forward to the Individual / Cashflow / Income and Expend.

6. At the Individual/Cashflow/Income and Expend screen, enter the following information (as per the case study):

   

   The  buttons pull through the Income and Expenditure details from Client

   Focus/Financial/Cashflow (if entered).

   NOTE: When importing ‘Expenditure’ information, be sure the Type is correctly associated to the expenditure itself (i.e. Post Tax or Pre Tax).

   Add Income/ Add Expenditure – Use these drop down menus to add additional income and/or expenditure items where applicable.

   Description – Where a description is entered, this will flow through to the display screens,allowing a more personalised result.

   Income Value – When entering the client’s salary amounts, make sure the figure is after any fringe benefits, however, before any salary sacrifice contributions or tax paid.

   Pre/Post Tax Expenditure – Distinguishes between non-deductible and/or deductibleexpenditure items.

7. Click the  button (top right hand corner of the page) to submit the data; continueclicking this button until you reach Assets/Holdings. Alternatively, you can access this area by selecting Assets, then Holdings from the left hand navigation bar.
   
   NOTE: For the purpose of this case study we do not need to view/input details from the Term Payments, Reportable Fringe Benefits and Income Support screens; however we do recommend you familiarize yourself with these screens at a later stage.
8. Input the Client’s Asset details (as per the case study) via the Assets/Holdings screen:
   
   

   Add Investment – Use this drop down menu to add additional investments where applicable.

   Description – Where a description is entered, this will flow through to the display screens,allowing a more personalised result.

   Cost Base / CGT – The values entered here will serve its purpose only in the year the asset is sold, if there is no intention to sell the asset, the CGT value will be irrelevant; CGT is notapplicable to Domestic or International Cash.

   NOTE: Do not enter direct property information such as the principal residence or investment property; there is a separate area for these types of assets, which we will be covering shortly.

9. Click the  button (top right hand corner of the page) to submit the data; continueclicking this button until you reach Assets/Rates and Fees. Alternatively, you can access this area by selecting Rates and Fees (within the Assets menu) from the left hand navigation bar.

   NOTE: For the purpose of this case study we do not need to view/input details from the Transactions and Income screens; we will however be accessing these screens for the proposed scenario.

10. Enter the assumed Income for the Bank Account as follows (as per the case study):
    
    

    System/Custom – Where the appropriate capability is provided, the user may select Custom to override the dealer assumptions; the default however, is the System assumptions.

    Entry fee – Entering a value here will not apply to existing holdings, however it will apply toadditional/future contributions (including any re-investments) to the asset, and deducted from the final balance.
    

    MER – Applied by reducing the annual return

    Adviser Fee – Impacts cashflow and treated as tax deductible.

    Free – Refers to the tax free portion of the Asset.

    Deferred – What percentage of the investment is tax deferred

11. Click the  button (top right hand corner of the page) to submit the data and
    proceed to the next screen.
12. At the Assets/Property/Holdings screen, enter the Principal Residence information as
    follows (as per the case study):
    
    

    Commence – Allows you to specify whether the property is currently in existence (using 'Start') or whether the property will be purchased at a future date. NOTE: Start is different from 1 July in the first projection year. Start assumes the Asset / Liability is already owned, whereas 1 July assumes that the investment is purchased / liability is drawn down at the beginning of the period of projection from a cash flow perspective.

    Redeem – Allows you to specify a redemption date in the future.

    NOTE: You can also ‘sell/redeem’ a property via the display screens, using the applicable input fields.

    Primary Residence<->Investment Status – Enables the ‘Family Home’ to move from PrincipalResidence status to an Investment property, or vice versa.NOTE: Once you select a date for this to occur, you cannot move the Investment property back to PrincipalResidence status.

13. . Click the  button to submit the data and proceed to the next screen.

14. Enter the assumed ‘Growth’ return for the Principal Residence as per the case study:

    

    Income/Rent – May be expressed as either a percentage or $ amount.

    Rent Escalation – The associated escalation will apply to either the percentage or $ amount entered for Income/Rent.
    Depreciation – Can also be expressed as a percentage or $ amount.

    NOTE: If you have selected a date for the Principal Residence to become an Investment property (Primary Residence <-> Investment Status) you may nominate an assumed income at this point; the income will not be paid while the property still remains as a Principal Residence, only when it becomes an Investment property (on the date your nominated) will the income commence.

15. Click the  button to submit the data and proceed to the next screen.

16. Enter the Non-Financial Assets as follows via the Assets/Non Financial/Holdings screen:

    
    Indexation – Allows indexation or depreciation of existing non financial assets. Where a‘Commence’ date (or purchase date) is specified for the future, the value will be indexed using CPI and then, the ‘Indexation’ rate will apply after the purchase. This is relevant for instances where a car is being purchased; the purchase price will increase over time, however the value will depreciate upon leaving the showroom.

    NOTE: When calculating Centrelink benefits, the amounts associated to Home Contents and Motor Vehicle/s count towards the Assets Test.

17. Click the  button to submit the data and proceed to the next screen.

18. The Super/Key Details screen allows you to input the following details:

    
    Set Super Salary to Earned Income – By selecting ‘Yes’, the SGC amount will be paidaccording the Employment salary entered in the Cashflow/Income and Expend page; this will allow variations in earned income over time. By selecting ‘No’ you are able to specify a nominated salary amount for the SGC amounts to be calculated from; however, this will be a fixed amount (indexed to salary inflation)

    Eligible Service date – Ensure that the Eligible Service date that you wish to use is the correct date, as this may differ from the date shown in Xtools+.

19. Click the  button to submit the data and proceed to the next screen.
20. Enter the Client’s superannuation details (as per the case study) via the
    Super/Accumulation screen:
    
    
21. Click the  button (top right hand corner of the page) to submit the data; continueclicking this button until you reach Liabilities/Loan Details. Alternatively, you can access this area by selecting Liabilities, then Loan Details from the left-hand navigation bar.

    NOTE: For the purpose of this case study we do not need to view/input details from the Super/Defined Benefits screen or, any of the Pensions input screens; however we do recommend you familiarize yourself with these screens at a later stage.

22. The Clients have a loan associated with their Principal Residence; insert their loan information via the Liabilities/Loan Details screen as shown below:
    
    The  button pulls through the Liabilities fromClient Focus/Financial/Balance Sheet.

    Add Liability– Use this drop down menu to add additional liabilities where applicable.

    Repayment – You can nominate when the loan is to be finalized; the minimum payments will be adjusted to ensure the loan is paid off within the timeframe specified.
    Principal – The amount specified here is the outstanding balance of the loan.

    Credit Limit – The amount entered here is the total credit applicable; if the ‘Principal’ amount equals the ‘Credit Limit’ amount, then no additional credit is available, on the other hand, if the ‘Principal’ is less than the ‘Credit Limit’, the available credit is the difference between the ‘Credit Limit’ and the ‘Principal’ amount.
    

23. Click the  button to submit the data and proceed to the next screen.
24. The Liabilities/Rates and Fees screen enables you to enter the interest rate, deductibility
    and fees associated with each liability. Enter the applicable information, as per the case
    study, shown below:
    
25. Click  the button to submit the data and proceed to the next screen
26. The Liabilities/Repayments screen allows you to specify the repayment terms:
    
    Repay Loan – You may choose to capitalise the repayments on the loan by selecting ‘No’ inRepay Loan, however, it is important to have set a Credit Limit first in the Liabilities/LoanDetails screen.

    NOTE: If you chose to repay the loan, the minimum repayment will be automatically calculated and applied. If you wish to specify a repayment above the minimum level, this may be inserted in the ‘Specified Repay’ section.

27. Click the  button to submit the data; continue clicking this button until you reach
    Liabilities/Associate. Alternatively, you can access this area by selecting Liabilities, and
    then Associate from the left hand navigation bar.
28. The Liabilities/Associate page allows the gearing of assets to be projected, by associating
    the debt with the appropriate asset; enter the association as specified below
    
    Mortgage Offset – You can nominate an ‘Offset Liability’ or ‘Offset Asset’; by nominating an ‘Offset Asset’, the ‘Principal’ loan amount is reduced by the balance of the ‘Offset Asset’.
29. Click the  button to submit the data and proceed to the next screen.
30. Confirm the Economic details as follows:
    
31. To view the outcomes, expand the Display Menu, and then choose the relevant page:
    
    
    
    NOTE: You can direct the way that the clients Surplus Cashflow is distributed OR any Cashflow Deficits are funded by taking the following steps.

    • Display/Individual/Cashflow/Consolidated (as shown below):

      

    • Then, select  (as shown below):

      

    • Change the Surplus Option Dropdown to the particular pre-set option available or formulate a Custom option.

      

    • Enter the Custom details as shown below: 

    • Click the  button to retain the data and view the display/output screens to see the impact of the changes. Be mindful that if this Scenario is being used as a template, this cashflow direction will carry through to other Scenario’s.

      NOTE: if the “Non-Deduct Debt” option is set to “Yes”, this will direct surplus cashflow to the Nondeductible Debt first and then as directed after the timeframe expires or the debt clears.

      NOTE: You can also change the length of the projections by completing the following actions:

    • In any of the Display pages, there is a hyperlink option in the top left corner of the Main Pages that looks like  . Click on this link and the following window will appear: 

      

    • The default projection period is the Client’s Life Expectancy, but can be changed.

    • The next group of options define which periods are viewable in the Display pages. The settings above will only show the first 10 Periods and then no more.

    • Finally, you can elect to hide the Null Rows. These are the input fields available in the Display (will be looked at in Proposed Scenario 1). 

Creating Proposed Scenario 1 – Growth Portfolio and RSP

Objectives:

• John and Mary wish to utilise $20,000 of their Savings to invest in a Managed Fund portfolio, in line with their risk profile (Growth)

• They are also prepared to contribute a further $12,000 per annum to their Managed Fundinvestment portfolio until they retire.

• They are looking for long term growth and therefore, do not require the investment incomeuntil they retire

Will John and Mary be in a position to comfortably proceed with the above?
Will they be in a better financial position having implemented the above recommendations?

1. Using your ‘Current Scenario’ as a template, create a new scenario called Regular Savings

   Plan or RSP; this can be done by clicking on the drop down arrow on the ‘Current Scenario’

   name and selecting ‘Save As’ (as shown below) while in any of the Display pages:

   

2. Type in the new scenario name (example shown below), then press 

   

   The new scenario name will replace the old scenario and, appear as follows:

   

   Now, you are able to change/amend details without affecting the ‘Current Scenario’; using the new scenario, you are able to put together a recommendation for the client to consider, you can also compare their ‘Current’ position to the new ‘Proposed/Recommended’ position.

3. In order to setup the proposed Managed Fund, you must return to the Input screen

   Individual/Assets/Holdings, then enter the details as shown below:

   

   NOTE: Be sure not to input a ‘Value’; this will be done via the Display screens.

4. Click the button (top right hand corner of the page) to submit the data; continue

   clicking this button until you reach Assets/Income. Alternatively, you can access this area by selecting Assets, and then Income from the left hand navigation bar.

5. Reinvest the income distributions for the Managed Fund, as shown below:

   

   Type - You may choose one of the available options; Reinvest or No Reinvestment.

   NOTE: The default option for all assets is ‘No Reinvestment’, therefore is it not necessary to list all assets and select ‘No Reinvestment’.

6. Click the  button to submit the data and proceed to the next screen .

7. You can use the System Default assumptions (as defined by your System Administrator) for

   the ‘Growth’, ‘Income’ and ‘Franked’ rates for any Asset. Alternatively, you can enter your own Custom rates

   

8. To view the cash flows, expand the Display Menu, and then choose the relevant page:

   

9. Access the Display screen Individual/Assets/Joint by selecting Individual, then Assets

   and then Joint from the left hand navigation bar:

   

10. Click the  button next to Withdrawals (under the Bank Account asset) to expand the

    selection:

    

11. Using the input fields enter the scenario information as shown below:

    

    Important: You must press the ‘Enter’ key once you have entered the above data so
    that the page is recalculated and the Withdrawal is factored into the model.
    
    
12. . This withdrawal had gone into the personal Cashflow for the Clients. To invest the $20,000cash into the Managed Fund, in the Display screens go to Individual/Assets/Client from theleft hand navigation bar

13. Now click the expand button next to Investments (under the Managed Fund) to expand the

    selection:.

    

14. Using the input fields, enter the $20,000 initial lump sum as shown below:

    

    Important: You must press the ‘Enter’ key once you have entered the above data so

    that the page is recalculated and the Withdrawal is factored into the model.

    At this point, you have met the following objectives:

    • John and Mary wish to utilise $20,000 of their Savings to invest in a Managed Fund portfolio, in line with their risk profile (Growth)

    • They are looking for long term growth and therefore, do not require the investment income until they retire.

15. To setup the regular contributions from Cashflow into the Managed Fund, you must return to the Input screen Individual/Assets/Transactions, then, enter the details as shown  below

    

    You have now met all of John and Mary’s stated objectives:

    • They are also prepared to contribute a further $12,000 per annum to their Managed Fund investment portfolio until they retire.

    • To view the cash flows, expand the Display Menu, and then choose the relevant page:

      

Creating Proposed Scenario 2 – Growth Portfolio using Gearing

Objectives:

• John and Mary wish to utilise $20,000 of their Savings and, borrow $20,000 from a Margin Loan facility, to invest in the same Managed Fund as mentioned in Regular Savings Plan above.

• They are prepared to continue contributing $1,000 per month from their Savings; however,they also wish to draw an additional $1,000 per month from their Margin Loan facility to invest in the above mentioned Managed Fund, until their retirement.

• They are looking for long term growth and therefore, do not require the investment income until they retire.

Will John and Mary be in a position to borrow funds?

Will they be in a better financial position if their gear into their investment?

1. Using your ‘Regular Savings Plan’ as a template, create a new scenario called RSP andGearing; this can be done by clicking on the drop down arrow next to the scenario name(‘Regular Savings Plan’) name and selecting ‘Save As’ (as shown below) from the drop downmenu:

   

   Type in the new scenario name (as shown below), then press

   

   The new scenario name will replace the old scenario and, appear as follows:

   

   Now, you are able to change/amend details without affecting the ‘Regular Saving Plan’ scenario; using the new scenario, you are able to put together a recommendation for the client to consider, you can also compare their ‘Current’ position to any of the new ‘Proposed/Recommended’ positions.

2. In order to setup the John’s new Margin Loan, you must return to the Input screenIndividual/Liabilities/Loan Details, then enter the details as shown below (be sure to includethe ‘Credit Limit’ amount also):

   

   The $100,000 ‘Credit Limit’ is simply a reference point; interest will not be applied to thisamount, only on the ‘Principal’ amount and/or any regular drawdowns up to the ‘Credit Limit’.

   NOTE: If the client’s wished to drawdown the initial amount at a later time (i.e. the following year), under the ‘Commence’ column, you would select the appropriate year. Alternatively, you can enter the drawdown amount through the ‘Display’ screen.

3. Click the  button (top right hand corner of the page) to submit the data and proceed to the next screen.

4. Enter the ‘Interest Rate’ in the Liabilities/Rates & Fees screen (for this scenario, we haveused 10.50%), also ensure that you specify that the loan is deductible:

   

5. Click the  button to submit the data and proceed to the next screen

6. Ensure the information displayed on the Liabilities/Repayments screen appears as follows:

   

7. Click the  button to submit the data and proceed to the next screen

   At this point, you have met the following objective:

   • John and Mary wish to utilise $20,000 of their Savings and, borrow $20,000 from a Margin Loan facility, to invest in the same Managed Fund as mentioned in Regular Savings Plan above.

8. At the Liabilities/Drawdowns screen, setup the regular drawdowns from the Margin Loan as follows:
   

9. Click the  button (top right hand corner of the page) to submit the data andproceed to the next screen.

10. In the Liabilities/Associate screen, link the Margin Loan to the Managed Fund portfolio, asshown below:

    

    NOTE: By associating the Margin Loan to the Managed Fund, you can monitor the LVR (Loan to Value Ratio) over the course of the projection period.

11. Because the Clients have decided to drawdown $12,000 per annum (on top of the initial$20,000), you must update the regular contributions being made to the Managed Fundportfolio. To do this, access the Assets/Transactions screen from the left hand navigationbar by clicking on Assets, then Transactions. Once you have reached this screen, input the details as follows:

    

    Equal to x Debt Drawdown - This option allows you to set the contribution amount to a predetermined amount which you stipulate via an associated loan (in this case the Margin Loan); this will ensure the contributions made to the Asset cease once the ‘Credit Limit’ of the associated loan has been reached.

12. To view the cash flows, expand the Display Menu, and then choose the relevant page:

    

13. In the Display screen, Liabilities/Client, you can see the ‘initial’ drawdown of $20,000 at the start of the period, plus, the regular drawdowns of $12,000:

    

    Towards the bottom of the screen, you can see the change in gearing ratio over the course of the projection period; this is because of the association between the Margin Loan and the Managed Fund portfolio.

    NOTE: The regular drawdowns cease by 2019; this is because the clients have reached the set credit limit amount of $100,000. The drawdowns then start again in 2022 as the Loan is repaid due to the initial term being 10 years (120 months) but the loan is being retained.

14. In the Display screen, Assets/Client, you can see the ‘Start of Period’ amount shows the
    $20,000 coming from the bank account, while the ‘Regular’ amount shows $44,000 (being the initial $20,000 drawn from the Margin Loan, plus the ongoing contributions from the Margin Loan and Bank Account combined):
    

    

    NOTE: The regular contributions reduce to $12,000 from 2019; this is because the clients have reached the set credit limit amount of $100,000, therefore, from 2019, it is only the Bank Account which is providing the regular contribution amounts.

    You have now met all of John and Mary’s stated objectives:

    • They are prepared to continue contributing $12,000 per annum from their Savings; however, they also wish to draw an additional $12,000 per annum from their Margin Loan facility to invest in the above mentioned Managed Fund, until their retirement.

    • They are looking for long term growth and therefore, do not require the investment income until they retire.

Creating Proposed Scenario 3 – Using Equity in Home to invest

Objectives:

• John and Mary wish to use the equity in their home to invest $150,000 in a Growth Portfolio

• They are prepared to borrow the same amount as is repaid on their mortgage, so that theiroverall debt remains the same on an ongoing basis.

• They are looking for long term growth and therefore, do not require the investment incomeuntil they retire

1. As this is a different Strategy than the Regular Savings Plan and RSP and Gearing scenarios,

   we will need to go back to the ‘Current 2012’ Scenario to use that as a base. This can be

   done in two steps:

   • by ‘clicking’ on the drop down box next to the scenario name and then choosing

     ‘Switch To’ in the menu (as shown below):

     

     Hint: You can only “Switch To” while you are in the Display Pages or Chart Pages.

   • Then using the drop down menu again, select ‘Save As’ and enter the Scenario

     name as follows:

     

2. Now that the new scenario is established we will set up the loan and the investments in to the managed fund.

   First we will need to go to Individual/Liabilities/Loan Details and add in the second loan:

   

   Type will be interest only, so that all available cash flow is directed towards reducing their nondeductible debt

   Commence – as this is a new loan to be drawn down, we will choose 1 July 2012 (the firstavailable 1 July)

   Repayment – We will repay the loan at the same time the client retires (Retmt C)Owner – will be Joint as the investment will be held in Joint names

   Description – Home Equity Loan

   Principal – is the amount to be drawn down, in this case $150,000

   Term – the number of months for the loan. If this is blank the loan will be held until it is repaid; or through to the end of the scenario.

   Limit Type – Group 1 – this allows multiple loans to have the same overall credit limit as they are linked to a single asset (in this case – a home). While there can be several smaller loans, there will be one overall credit limit, and the sum of the loans cannot go over the specified overall credit limit.

   Once you select ‘Group’ credit limits, a box will appear to enter the overall credit limit for thespecified group of assets (eg Group 1, Group 2, Group 3). In this case we will use $500,000 as the limit. The Credit Limits for all loans should be part of the same Group if they are using the same asset as equity. In this case, we will use Group 1 for both the existing Mortgage as well as the Home Equity Loan.

3. Click to  progress through to the “Rates and Fees” page. Enter the Rates and Fees

   for the Equity Loan, including the interest rate applicable on the loan, the percentage of the loan that is deductible as well as any initial or regular monthly fees

   

4. Click and ensure the information displayed on the Liabilities/Repayments screenappears as follows:

   

5. Click  and enter the Regular Drawdown details. As we are undertaking a debt recycling program, we can use the ‘Equal to Debt Repay’ option as per the following screen shot:

   

6. In order to setup the proposed Managed Fund, you must return to the Input screen

   Individual/Assets/Holdings, then enter the details as shown below:

   

   Note: Be sure not to input a ‘Value’; as this will assume that the investment is already held as there is no option for a deferred start date. This will be done via the Assets > Transactions screen.

7. Click  the button (top right hand corner of the page) to submit the data and accessthe Assets > Transactions screen.

8. Enter the amounts to be invested into the Managed fund by using the ‘Equal to Debt Drawdown’ option, as per the screen below. Once you choose this option, you will need to select from which loan the amount will be funded. In this case, we can choose the Home Equity Loan. This option will draw the initial amount ($150,000) as well as the ongoing amounts repaid on the mortgage.

   

9. Click  the button (top right hand corner of the page) to submit the data and access the Assets > Income screen. Alternatively, you can access this area by selecting Assets, and then Income from the left hand navigation bar.

10. Reinvest the income distributions for the Managed Fund, as shown below:

    

    Type - You may choose one of the available options; Reinvest or No Reinvestment.

    Note: The default option for all assets is ‘No Reinvestment’, therefore is it not necessary to list all assets and select ‘No Reinvestment’.

11. . Click the button (top right hand corner of the page) to submit the data and proceedto the next screen.

12. Enter the assumed ‘Growth’ and ‘Income’ rates for the Managed Fund; alternatively, you canenter Custom rates or, you can use the System assumptions as defined by the dealer:

    

13. In the Liabilities/Associate screen, link the Home Equity Loan to the Managed Fund portfolio, as shown below:

    

    This ensures that you can view the gearing ratio for the asset as well as making sure that only the net amount of the investment is counted for Centrelink purposes. If the loan and asset are not associated, then the full amount of the asset will be used when calculating Centrelink entitlements.

14. To view the cash flows, expand the Display Menu, and then choose the relevant page:

    We can view the drawdowns from the Loan by going to the Liabilities>Client in theDisplay/Output screen.

    We can view the contributions into the Managed Fund by going in to Assets > Client

Creating Proposed Scenario 4 – Salary Sacrificing & NonConcessional
contributions

Objectives:

• John and Mary wish to maximise from the tax concessions associated with super by SalarySacrificing $10,000 (each) to their relative super funds.

• In addition, each would like to make a Non-Concessional contribution of $1,000 to theirrespective super funds; with the Salary Sacrificing above, this should make both John andMary eligible for the Government Co-Contribution scheme.

• They are looking for long term growth, and therefore would like to compare which would bethe best option to achieve this, gearing or contributions to super.

Will they be in a better financial position if they gear or contribute to super?

1. Using your ‘Current Scenario’ as a template, create a new scenario called Super
   Contribution; this can be done in two steps:
   • Go back to Current Scenario by clicking on the drop down arrow on the scenarioname and selecting ‘Switch To’ (as shown below) from the Display screen:

     

   • Creating Home Equity Loan by clicking on the drop down arrow next to the scenarioname, and selecting ‘Save As’ (as shown below) from the Display screen:
     Type in the new scenario name (as shown below), then press

     
     The new scenario name will replace the old scenario and, appear as follows:
     
     Now, you are able to change/amend details without affecting the ‘Current Scenario’; using the new scenario, you are able to put together a new recommendation for the client to consider, you can also compare their ‘Current’ position to the new ‘Proposed’ scenarios
2. . In order to setup the Client’s Salary Sacrifice and Non Concessional contributions, you must return to the Input screen Individual/Super/Accumulation, then enter the details as shown below:
   
   Note: We have assumed that the Clients are happy to commence salary sacrificing and making nonconcessional contributions from the Start of the projection period, therefore, in the ‘Salary Sacrifice Timeframe’ field, you must enter the information shown above.
3. To view the cash flows, expand the Display Menu, and then choose the relevant page:
   
4. . In the Display screen, Super/Client, click the button next to Contributions (Net) to expand the selection:
   

   Note: The ‘Taxable Employee (Sal Sac) (Gross)’ and the ‘Post Tax’ amounts are indexed by AWOTE. The above screen can also be viewed for Mary by simply selecting Partner from the left hand navigation bar.

5. . To see how this impacts both John and Mary’s cashflow, access the Display screen

   Individual/Cashflow/Consolidated:
   
   Note: As shown above, even after salary sacrificing and making non concessional contributions to super, both John and Mary are in surplus cash flow; therefore, if the clients wish, they can either contribute more to super or consider commencing a gearing strategy in addition to their super contributions.
   You have now met all of John and Mary’s stated objectives:

   • John and Mary wish to maximise from the tax concessions associated with super by Salary Sacrificing $10,000 (each) to their relative super funds

   • In addition, each would like to make a Non-Concessional contribution of $1,000 to their respective super funds; with the Salary Sacrificing above, this should make Mary eligible for a part of the Government Co-Contribution.

   • In addition, each would like to make a Non-Concessional contribution of $1,000 to their respective super funds; with the Salary Sacrificing above, this should make Mary eligible for a part of the Government Co-Contribution.

Comparing 2 Scenarios

Objective:

• Compare Display Outputs of the Current Scenario with the Regular Savings Plan
  Scenario.

1. . If you are at the XTOOLS Index screen as shown below, select “Current 2012”

   

   Alternatively, if you are in one of the other scenarios generated from the above exercises (i.e. RSP and Gearing); use the “Switch To” option from the Heading Drop Down Menu as shown below:

   

2. Using the Navigation Menu, choose the relevant Display page that you would like to view /compare. In the screenshot below, we have used the CALM page, as this is a good overallsummary page, which bring a lot of information through to 1 page. However, you cancompare any of the display pages.

   

   To compare the Current Scenario to the Regular Savings Plan scenario, click on the DropDown Menu in the Heading (e.g. Current Scenario) and select Compare to, then select thescenario you wish to compare to (e.g. Regular Savings Plan):

   

3. A separate dialogue box should now appear with both scenarios appearing as a horizontal

   split screen:

   

   

   Use the scroll bars either on the right-hand side or at the bottom of the split screen to scroll through and compare the different information.

   Note: You can compare different screens if you wish; the above comparison compares the CALM Display screen for both the Current Scenario and the Regular Savings Plan. If you wanted to compare the Cashflow/Consolidated screen between each scenario for instance, you would select the Cashflow/Consolidated screen and use the “Compare To” option as above.

Compare Multiple Scenarios

Objective:

• Compare the Regular Savings Plan scenario to the RSP and Gearing scenario.

1. Repeat the same step as outlined above, however, when selecting the initial scenario fromthe XTOOLS Index screen, select the Regular Savings Plan scenario; then from that scenario, Compare to the RSP and Gearing.

You can graphically compare multiple scenarios by going to the Xtools Scenario Index screen and choosing ‘Compare Chart’ from the top right of the screen:

Then on the next screen, select which scenarios you would like to compare using the tick boxes and clicking 

You will then have a number of different Charts to choose from which compare different factors from each Scenario. Some handy Chart’s to use include:


NOTE: These charts will automatically set the ranges, with the horizontal axis based on the number of years included in your projection (this case study projects 20 periods), and the vertical axis is based on the range of figures in the projection.

Move your mouse over the different information points in the chart to see actual figures for that time period

Conclusion

Summary

Congratulations! You have completed the XTOOLS and XTOOLS+ course on Wealth Creation. This course covered some of the wealth creation aspects of XPLAN, such as:

• XTOOLS and XTOOLS+ navigation and data entry;

• Using XTOOLS calculators to model different client scenarios;

• Using XTOOLS to:

  • Analyse a client's objectives;

  • Take into account a client’s cash flow, assets and liabilities;

  • Model a financial planning strategy across multiple life changes.

This course workshopped several working scenarios. You would now be familiar with each tool and
would have seen how the results are presented.

This course is similar to the Advanced XTOOLS+ workshop and initial XTOOLS core courses. It is a
good refresher course and provides opportunity to ask questions and build on your existing XTOOLS

Review Learning Outcomes
You should now be able to:

• Project an entity’s full financial position

• Model multiple scenarios (for example, Retirement Only)

Support and Contacts

What do I do if I have problems using XPLAN?

• Contact the XPLAN support centre on 1300 1300 69 (option 1)

• Email your enquiry to xplansupport@iress.com.au

• Contact your Account Executive

The Help Desk will be operative from 7am – 6 pm Monday - Friday.

Customised Training

We offer a wide range of training and consulting services to get the most out of XPLAN for your business.

IRESS offers customised XPLAN training for any dealer groups or financial planning practices that require tailored training solutions for their staff. We discuss your specific needs, agenda items and timeframes, and develop an agreed training agenda based on your requirements. This training is chargeable based on the number of attendees, time and location of training required.

For further information contact your Account Executive or the National Training Manager:

Andrew Roberts

National Training Manager

03 9018 5813

aroberts@iress.com.au

Consulting Services/Tailored Solutions

IRESS' consulting service offers a focused review of a dealership/practice and
identifies how our Wealth products can improve business efficiency.
IRESS' consulting service offers a focused review of a dealership/practice and aims to identify
how XPLAN can be better utilised to improve business efficiency. While all aspects are covered, key
areas may include:

• Assisting with the development and implementation of workflow processes

• Fine tuning SOA

• Designing and implementing SOA

For further information contact your Account Executive or the Senior Project Consultant:

Andrew Wootton

Senior Project Consultant

07 3011 4700

awootton@iress.com.au