Case Study 2: Maureen’s Dilemma

In 2007, Maureen Carter, a retired 64-year-old, divorced her husband of 42 years. As part of the property settlement, the family home was sold and Maureen’s share was approximately $450,000. In addition to this amount, the remainder of the property settlement amounted to an additional $550,000. Her total settlement hence amounted to $1,000,000. Since she was going through a difficult adjustment, she decided to rent a unit in Parramatta on a six-month lease but she always intended to buy a unit in the near future.
Maureen went to see a friend Jill, who was a financial planner, to get advice as to how to invest the funds to secure a comfortable retirement. She made it clear to Jill that her priorities were income and to make the money work for her. In her initial interview with Jill, Maureen indicated that she intended to buy a property in the next 12 months.
On the basis of their conversations, Jill assessed Maureen to be a growth investor and recommended the following investments.

Allocated pension (1) $350,000
Allocated pension (2) $400,000
Bank shares $80,000
Unlisted property trust $90,000
Managed Australian share fund $65,000
Bank account $15,000

In mid-2008, Maureen became concerned about the market fluctuation and the rapid deterioration in the economy. She decided it was time to buy a property to live in and approached Jill for the funds. Maureen was shocked when Jill told her that it would take weeks to make the funds available as one of the allocated pensions would now need to be commuted to a lump sum. In panic mode, Maureen purchased a unit for $380,000 in August 2008. As the global financial crisis worsened, Maureen found her income declining drastically, the unlisted property trust was frozen and the value of the shares she held plummeted in value. Maureen now found her overall remaining capital had fallen by $250,000. She now had insufficient funds to provide sufficient income for her…