Certified Financial Planner Assignment, UTAR, Malaysia Some weeks ago, you (Danny Lim) a Certified Financial Planner (CFP) and a licensed Financial Planner met your old friend

Some weeks ago, you (Danny Lim) a Certified Financial Planner (CFP) and a licensed Financial Planner met your old friend Petros Pang and his petite wife Lydia Pang at the local Golf Club. After drinks and snacks, Petros and Lydia asked if you could help guide them in their financial journey. They confess that until now they had never taken any professional advice on wealth management or personal financial planning. They wondered if your guidance could help them achieve their short-to-medium term as well as their longer-term retirement goals.

Petros and Lydia celebrated their half-century birthday recently. Petros will soon be at the high end of his earning capacity. Sadly, he is staring in the face the stark reality that his overall financial situation falls rather short of someone at that high level and age. He concedes that their net worth should have been much higher. Both of them are very occupied with social and charity work outside office hours. They admit that their financial management was always on the agenda, but never quite reached number one. They want and need your help before it is beyond redemption.

The couple has four children, a boy, and three girls – Alex (age 21), Bella (age 18), Claire (age 13), and Dyna (age 10).

Petros is a smart and honest businessman, who started this first venture shortly after graduating with a Business degree. During their internship, he was employed in a similar business, where he learned many tricks of the trade and some hard truths, including ‘nobody owes you a living’.

Lydia is a very happy full-time homemaker. She was employed in a Law firm when she married Petros. After the birth of Bella, she ceased working full-time. During the last two to three years, she has dabbled in some online sales for diversion. She makes only a negligible sum of money.

Alex is married to Emily and they have a son, Elon. They live separately from his parents in a pretty small apartment. Their toddler was left with Alex’s parents. This arrangement was supposed to be temporary until they found a more spacious place to live. Unfortunately, the timeline just dragged on. Alex did not complete college. He met his wife at a social gathering. They both love the outdoors and spend all their earnings pursuing that lifestyle, living pay cheque to pay cheque. The situation has created tension between Alex and his parents. Emily was never close to Petros or Lydia, who is sadly resigned to taking care of their grandchild, whom they dearly love.

Bella has always been interested in the medical profession. She is a very responsible and serious person. She is hoping to study either medicine or pharmacy. Currently, she is in pre-university and will sit the entrance examinations within the year.

Claire, unlike her older sister, plans to be an Information Technologist. She loves big data analysis and wants to pursue a Doctorate in that field, leaving the option to decide on specifics as she goes along.

Both Bella and Claire attended the same private school, some distance from their home, in their secondary school years.

Dyna, the youngest, was diagnosed with Down syndrome in the early stages of Lydia’s pregnancy. The parents, being people of faith, accepted that as a challenge. They take great care of her, as do her siblings. After taking advice, they decided to send her to a primary school and she is fully included in mainstream classes. Sadly, she has an extensive history of necessary medical intervention which has led to anxiety and trauma issues impairing her learning, participation, and social interaction.

Petros and Lydia live in a relatively upmarket Kuala Lumpur suburb, with their children and grandchild. Their house is currently valued at around RM2,750,000. Petros grew up in Sungai Petani, Kedah. Lydia, of baba nyonya heritage, lived in Malacca until she went to Kuala Lumpur for her tertiary education. Periodically, but at least once a year, they visit both their hometowns to see relatives there. However, both sets of their parents have passed on.

Petros and Lydia bought the house in joint names exactly eighteen (18) years ago for RM800,000, with 80% financing by a local bank. The twenty (20) year tenure loan came with an adjustable interest rate of 6.5%. Due to the gradual decline in interest rates over the years, the loan interest rate was reduced to 4.8% a few years ago. Since then, housing loan interest rates remain at the same level. Monthly loan repayment is roughly RM 4,153.

Eight and a half years ago, during a rapidly expanding economy, with his business soaring, Petros and Lydia decided to dive headlong into the red-hot property market. On the recommendation of one of Petros’s many close acquaintances, they purchased an apartment located within the vicinity of Kuala Lumpur City Centre (KLCC). They paid RM2,800,000 for the corner apartment, financed by a 20-year 4.5% per annum mortgage of RM1,440,000, with monthly repayment being approximately RM9,110.

Currently, the apartment is tenanted at RM8,500 monthly rental. The tenancy agreement will run for another 20 months. The rental was higher in earlier years. The average monthly maintenance and other operating expenditure incurred is presently RM2,500.

Both Petros and Lydia had hoped that the apartment would have provided for their retirement. Unfortunately, things have not really worked out, as similar apartments in the vicinity and in the same block were fetching only around RM2,500,000 even prior to the pandemic. Since then, there has been less uncertainty in the property market with both rental and purchase demand steadying a little.

Petros owns two (2) cars, both registered in his name. They have purchased all their cars brand new. Details of the cars and financing are as follows:

Both these cars are necessities for Petros and Lydia. Petros uses the car to motor around for his business whereas Lydia ferries her three daughters to and from school daily. The schools are some distance from their home.

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