Our Post-Exam Review of the January 2017 CII R06 Exam

The CII have released the exam paper from their January 2017 R06 exam, so it’s time to see how we did in our pre-exam analysis – of interest to CII R06 candidates.

Case Study 1

Case study 1 focused on Paul and Ann, a married couple in their mid to late 60’s with two grown-up children.  Their goals were to:

1. ensure they have sufficient ongoing income in retirement
2. assess the suitability of their current savings and investments
3. provide a tax-efficient lump sum from their investments to assist David (their son) with his house purchase

The paper started, as is usual, with a fact-finding question; candidates had to state the additional information they would need to advise the clients on achieving goal number 1. There were 15 marks on offer, and our analysis covered 13 bullet points in answer to this very question, so it was a good start.  We say it each time, but anyone preparing for the R06 exam should prepare fact-find questions for each of the given goals; we make sure we cover all of them so students are fully prepared.

The next question asked for the advantages and disadvantages of Paul’s switching to FAD rather than staying in capped drawdown.  We gave a table showing the pros and cons of capped drawdown, so this information could have been adapted to help with this particular question.

The exam continued with the key factors to consider when reviewing the suitability of their investments.  The question was for 8 marks, and as we had given a lot of detail for this aim, the key factors to consider would certainly have been covered.

The recommend and justify question was on the changes they could make to their existing deposits and investments to ensure they meet their aim of increasing income in retirement.

Although we didn’t do a recommend and justify table to answer this question, we did have a lot of information on the suitability of their current savings and investments with comments such as some of the fund choices were too high or too low – the well-prepared student would have used this information to successfully answer this question.

Questions then moved from retirement to the gift to their son David.  The questions revolved around the IHT consequences of providing the funds by an interest-free loan and then in the form of a gift. For this aim, we had provided a table showing the pros and cons of using both these methods to make the gift, which included the IHT implications, so we are confident full marks would have been achieved here.

The next question we also covered in full: the process for determining the most tax efficient way of withdrawing money from their investment bond to help with the house purchase – another 10 marks in the bag.

The final question was a slight curve ball for us.  Candidates had to comment on the suitability of using a PLA to meet income needs, and it was for 13 marks!  We had been told in the case study that the clients were concerned about long-term care, so this had led us down the track of immediate need annuities and equity release.   This wasn’t exactly what was tested, but we had provided a table giving comprehensive information on annuities, and this could easily have been adapted to answer this final question.

Case Study 2

So onto the next case study, which focused on Dan and Sarah, a married couple in their thirties with two young children.

Their goals were given as:

1. ensure their mortgage is repaid before retirement
2. provide financial security for their family in the event of death or serious illness
3. ensure they have sufficient income in retirement;
4. effect suitable savings to plan for future university costs.

The first question wasn’t really about these goals, and instead, candidates were asked to identify the information needed to assess the suitability of Dan’s existing IP policy. In the fact-finding answer to the financial protection goal, we asked for more information on the IP policy, eg the level of benefit, deferred period, own or any occupation and indexation, as well as asking whether his back injury had been disclosed.  All of this should have been used to answer the question and pick up at least half the marks on offer.

Candidates were then asked another slightly off-piste question this time the benefits to Sarah of joining her PMI scheme – luckily we had covered this in full in the end section entitled ‘other potential areas’.

The recommend and justify question for this case study was around a product to cover the death or serious illness of either client.  Whenever protection needs are identified, we always provide full details of the products that should be recommended and the justification for them – this is in table format, so the bullet points are easy to read and remember so this question was covered in full.

One question we didn’t see coming was one around the pros and cons of using their pension products as a mortgage repayment vehicle rather than ISAs.  This was for 12 marks, and we hope that candidates would have used their knowledge to gain the majority of these marks.

More questions on pensions and next six reasons were required for why the default fund in Sarah’s auto-enrolment pension scheme may be suitable for her.  We are pleased to say we had this question covered.

Candidates then had to state the main features of a Junior ISA and explain how a product could be used to fund university costs.  We had some information on Junior ISAs with the main detail given.

Next was a question on the main features of Support for Mortgage Interest and again we had given the all the main features to answer this question for the 8 marks on offer.

It was then time to test the offset mortgage; the question was on the financial benefits of using an offset mortgage rather than holding money in their savings account, and again we had provided information on how an offset mortgage works and why they should transfer the savings account money.  We are confident this would have achieved the full 7 marks allocated.

And finally the review question, this time students were asked for 7 issues that an adviser should discuss at the next annual review meeting.  The review question usually comes up, and the key thing to remember is to give a few generic answers that apply to anyone and then a couple of specifics that apply to the clients.  Our review answer was in section 1, but most of the information given could have been adapted for the clients in case study 2.

Overall, we are happy to say that any student using our analysis of the January 2017 case studies would have achieved a good pass.

Grab the resources you need!

If you’re studying for your CII R06 exam, and you’re wanting to feel confident as you enter the exam room, grab our free taster analysis to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the R06 case study analysis taster now!

Over to You…

If you’re planning on sitting R06 in April, on what areas will you focus your revision?