Our Post-Exam Review of the April 2017 CII AF5 Exam

Now the CII have released the papers for the April exams, we can see how we did in our AF5 analysis and our predictions of what might be examined. This will be particularly useful reading if you are planning to sit AF5 in the near future.

If you haven’t already seen the question paper for April, you can access it on the CII website.

It’s not until a student gets into the exam that they know what the short-term and long-term objectives are, but we are pleased to say that we predicted these pretty much spot on. The only one we didn’t see coming was ‘assessing the family cash flow position in relation to their objectives’ but the other six, we predicted accurately.

Question 1

The first question in most AF5 exam papers is usually around identifying the additional information you’d need, as an adviser, to help the clients with their immediate and longer term objectives.  This time, however, the question concentrated on just one of the clients’ objectives:  to generate adequate income in retirement.  Each of our analyses always covers a fact-finding model answer for each objective, so this was covered in full.  The second part of the first question was describing seven benefits of increasing pension contributions, and we are pleased to say that, throughout the analysis, we mentioned pension contributions and the reasons why they should increase them, so the necessary information was available.

Question 2

The next question was on the inherited investment portfolio. Firstly, students had to evaluate the suitability of the portfolio for them and secondly, its tax efficiency. Part (b) of the question combined both of these aspects with a recommend and justify question to ensure both suitability and tax efficiency.  All in all, Question 2 was worth 22 marks, and our fact-finding model answer on ensuring investments are suitable and tax efficient could have been easily adapted to cover part (a), and part (b) was covered in full too.

Question 3

Question 3 covered the buy-to-let (BTL) objective. Students were asked to give 9 key drawbacks of using a BTL property as part of the retirement strategy; using the inherited SIPP to fund the purchase and the tax implications arising from this.  Part (c) of this question was identifying 7 key benefits of using a BTL mortgage to fund the purchase.  Our analysis covered the disadvantages of investing in a BTL property, and the fact-finding model answer included bullet points relating to the tax drawbacks ie income tax on rent and CGT on eventual disposal.  We did have a section entitled ‘options for funding’ which did of course include the SIPP and a BTL mortgage – though these points would have needed expanding by the student to get maximum marks.

Question 4

This question was on Paul’s mother’s LPA and specifically how it can continue now her husband has died.  We are pleased to say we had this area covered in full.

One area we hadn’t considered, however, made up the second part of this question, and this was regarding Paul’s deceased father’s transferable nil rate band.  For eight marks, students were asked to explain how Paul’s inheritance would affect the amount of NRB that could be transferred, and there were three marks on offer for explaining how it can be claimed.  This seems, to us, a bit of divergence from the usual style of questions which usually just focuses on the clients, and although Paul’s parents’ situation does of course impact him, the questions did take us by surprise.

Question 5

Onto Question 5, which was on cash flow modelling, and although we have some information on this in our generic question section, it was not enough for the 15 marks on offer, so candidates would have had to use their own knowledge and experience here to gain more marks.

Question 6

This question concerned their mortgage strategy.  There were various questions around the suitability (or not!) of their savings plan; a recommend and justify question on the actions they could take to increase the probability of repaying their mortgage at the end of the term and an explanation of why they might consider switching to repayment.  In total, 25 marks were on offer here, and if we add this to the 25 marks on Question 3 covering the buy-to-let, this was an exam paper heavily weighted towards property and mortgages. This is an area not specifically mentioned in the AF5 syllabus, but these areas do, of course, affect a client’s financial planning, so it’s clearly an area students had to be prepared for.

We had a complete section on paying off their mortgage; the options to pay off early as well as the benefits of switching to repayment.  Again, to gain the full 25 marks, a student would have needed to call on their own knowledge and experience as well.

Question 7

Question 7 gave 32 marks in total for questions around protection; students had to comment on any weaknesses which we had covered.  They then had to identify additional information that would be needed regarding Paul’s critical illness policy which we also had covered.  Finally they had to recommend and justify a suitable policy to provide regular income in event of Paul suffering a long term illness and being unable to work and again we are happy to say this was covered in full.

Covering Predicted Areas With a Bit Extra

This paper covered all the areas we predicted with a couple of extra bits thrown in too.  The one thing missing was a question on risk but the rest followed a now familiar pattern with the usual review question featuring as Question 8.  We are confident that students at this level using our analysis should have achieved a good pass.

Grab the resources you need!

If you’re studying for your CII AF5 exam, and you’re visualising a pass on exam day, you’ll need to avail yourself of all the necessary tools to do so. 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!

Over to You…

If you’re planning on sitting AF5 in October, which types of questions do you find the most challenging?