Our Post-Exam Review of the February 2024 CII AF5 Exam
Our Post-Exam Review of the February 2024 CII AF5 Exam
The CII has now released the exam guide for the February sitting of AF5 so we can see how we did in our pre-exam analysis.
This article is correct as at 23 April 2024.
If you haven’t already seen the exam guide for February, you can access it here.
This time, the fact-find, released two weeks prior to the exam, concerned Neil and Helen, a married couple in their 50s with two children aged 16 and 17.
The objectives, given on exam day, were as follows:
Immediate objectives
- Improve the tax-efficiency of their current arrangements.
- Consider the merits of accepting the additional benefits from Neil’s employer.
- Review their existing pension fund choices.
Longer-term objectives
- Ensure they have sufficient assets to enable them to retire in 10 years’ time.
- Set up a regular savings plan.
- Ensure the use of all tax allowances to improve their future arrangements.
| 1. | (a) State the additional information you would require in order to advise Neil and Helen on the suitability of their current arrangements to meet their retirement objectives. | It's not unusual for AF5 to start with a general fact-finding question regarding the client’s current arrangements, hence we had anticipated this question and provided full model answers. |
| (b) Identify a range of actions that a financial adviser could take when dealing with Neil and Helen to ensure that they comply with the Consumer Understanding requirement under FCA Consumer Duty rules. | Whilst we had not covered a question on the Consumer Understanding rules specifically, some of the points had been covered in our generic section around the financial advice process. It was good to see most candidates did perform well on this question from their own knowledge and experience in this area. | |
| 2. | (a) Explain to Neil and Helen why it is important for them to request a State Pension forecast and state the information this could provide to them. | We had not anticipated this specific question on the State Pension forecast. We hope well-prepared candidates understood the information a State Pension forecast provided and could use the model answers provided in our analysis around State Pensions to pick up most of the marks on offer here. |
| (b) Explain in detail to Neil how increasing his current level of employee pension contributions will improve his Income Tax position. | The Income Tax benefits of Neil increasing his pension contributions was covered in detail throughout the analysis including the benefit of reinstating his personal allowance if they were increased sufficiently. | |
| 3. | (a) Recommend and justify a range of actions that Neil and Helen could take to improve their Income Tax and Capital Gains Tax position. | We had covered two ‘Recommend and Justify’ questions relating to their retirement objectives and improving the tax efficiency of their existing arrangements which could have been used to answer this question in full. |
| (b) Outline to Neil and Helen the tax treatment of the Offshore Investment Bond and how it might be used in the future. | We had provided a self-test question on the benefits of retaining the Offshore Investment Bond and using it in the future including all the taxation implications. Anyone using our analysis should have scored highly on the question. | |
| 4. | (a) Explain to Neil and Helen how a cashflow model could be used to assist them in assessing the affordability of retiring in 10 years’ time. | Model answers for the benefits of a cashflow model question were provided in our generic section. To pick up full marks we hope candidates were able to make their answers specific to Neil and Helen retiring in 10 years. |
| (b) Identify the key reasons why their existing pension fund investment choices may not be suitable for their long-term needs. | Our analysis had provided significant details with regard to the suitability of their current pension fund choices. | |
| 5. | (a) Neil has been offered the opportunity to join his Employer’s Share Incentive Plan (SIP). Explain to Neil why joining the SIP might be suitable to assist them in their retirement planning objective. | We had correctly anticipated using the Share Incentive Plan for regular savings and assessing the employer protection benefits as two of the client’s immediate objectives, so we had predicted both of these questions in our analysis. |
| (b) Identify the additional information you would require in respect of Neil’s new employer’s range of optional employer-sponsored protection benefits in order to assess their suitability for the family needs. | ||
| 6. | (a) Outline to Neil and Helen how a Mutual Will operates and explain why they should review the suitability of their existing Wills with their solicitor. | A question on the features of a Mutual Will in comparison to a Mirror Will was included within our analysis. |
| (b) State the key advantages for Neil and Helen of making a lump sum investment of £20,000 each into a Stocks & Shares ISA for the new tax year, instead of making regular monthly investments. | The benefits of using Neil and Helen’s other investments to fund ISAs was detailed throughout the analysis. We had not anticipated the question regarding the benefits of a lump sum over regular contributions. | |
| 7. | (a) Explain to Neil and Helen any Capital Gains Tax implications that might arise, should they decide to sell and downsize their property. | We were surprised at the number of marks on offer for this question given the likelihood the sale of the property would qualify for private residence relief (PRR). We hope candidates were able to think on their feet and expand on the CGT implications if they didn’t apply for PRR which appears to be the path the CII took with their model answer. |
| (b) Explain to Neil and Helen why they may wish to consider selling some of Neil’s individual equities. | We had analysed the individual equities in full including the benefits of selling them. | |
| 8. | (a) Identify the key issues that should be considered when reviewing Neil’s existing investment in the Asia Pacific Emerging Market Equity Funds. | This was a twist on the usual review question. We had provided model answers for a question on reviewing investment strategy and a general review but had not focused on the Emerging Market Fund specifically. |
| (b) Identify seven key issues that you would discuss with Neil and Helen in respect of their retirement planning objectives at your next review meeting. | We had provided model answers for a review question around their retirement objective. | |
Chartered Insurance Institute (2024). AF5 – Financial planning process: February 2024 Examination Guide. Retrieved from www.cii.co.uk.
A Post-Exam Review of the February 2024 #CII #AF5 Exam. Share on X
Overall, in our view, this paper was particularly challenging. Usually there are one or maybe two curveball questions, but this paper threw in three very niche curveballs – ouch! The CGT on the sale of the house, the review of the Emerging Market Funds and the Consumer Understanding rules were all tricky questions. Having said that, many of the other questions were anticipated in full in our analysis so well-prepared candidates hopefully picked up enough marks across the exam to get the pass.
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