Preparing for the CII’s AF5 and R06 Financial Advice Questions
In this article, we take a look at the financial advice process from an exam preparation perspective. This is relevant to the CII’s R06 and AF5 exams.
This article is correct as at 24 January 2023.
Exams Preparation
In both the R06 and AF5 CII examinations, you’re likely to come across a question in relation to the financial advice process, covering the following learning outcomes:
- R06: Establish and explain the client/adviser relationship and the importance of positive customer outcomes.
- AF5: Understanding of the relationship and responsibilities between adviser and client and the need to establish the scope of the planning brief and the importance of achieving positive outcomes.
In both cases, these are the types of questions that you can generally pre-prepare for.
The Financial Planning Process
For example, to answer the question ‘What are the six steps in the financial planning process?’ you could list the following:
- Establish and define the client and personal financial planner relationship.
- Gather client data and determine goals and expectations.
- Analyse and evaluate the client’s financial status.
- Develop and present the financial plan.
- Implement the financial planning recommendations.
- Monitor the financial plan and the financial planning relationship.
That was quite a generic question with a fairly straightforward answer.
A more challenging question along similar lines might be to ‘Describe the process a financial adviser should follow to advise a client on investment planning.’ Here, your answer might include the following:
- Establish the relationship, disclosure of status and advisor remuneration.
- Establish the client’s goals/expectations/objectives/fact-finding/ethical views/affordability.
- Timescales for investment.
- Attitude to risk/capacity for loss.
- Amount of emergency fund.
- Analyse the client’s situation.
- Formulate recommendations/develop the financial plan.
- Take into account the client’s tax status and use of tax wrappers
- Asset allocation and fund selection.
- Recommend and implement.
- Review/rebalance/monitor.
Benefits of Financial Advice
Finally, a case study might flag that the clients have never taken financial advice before or are curious about the benefits of doing so. You could therefore be asked to ‘Outline the benefits of receiving and acting upon financial planning advice.’ In which case, your answer might include:
- Their financial problems, goals, and priorities will be identified.
- Benefit from adviser’s research.
- Help with budgeting/cashflow.
- Assessment of suitability of existing arrangements.
- Tax planning, use of tax wrappers, or tax efficiency.
- Assessment of attitude to risk (ATR) and capacity for loss.
- Receive recommendations/implement a financial plan.
- Dealing with professional/ knowledge/clarity of explanation/aids understanding.
- Ongoing service/reviews.
- Consumer protection/regulated advice.
Positive (Customer) Outcomes
Finally, note the terms ‘positive outcomes’ and ‘positive customer outcomes’ within the R06 and AF5 syllabuses.
Future questions in this area may well relate to the Financial Conduct Authority’s (FCA’s) new Consumer Principle that requires firms to act to deliver good outcomes for retail customers.
In summary, cross-cutting rules will provide greater clarity on the FCA’s expectations under the new Principle and help firms interpret four outcomes which relate to
- products and services;
- price and value;
- consumer understanding; and
- consumer support.
Grab the resources you need!
Grab our free taster analysis to try out one of Brand Financial Training’s resources for yourself. Click the link to download the AF5 fact-find analysis taster now!
Alternatively, if it’s the R06 exam you’re preparing for, you can download its taster here.
