Our Post-Exam Review of the October 2019 CII AF5 Exam

Now the CII has released the papers for the October exams, we can see how we did in our AF5 pre-exam analysis. This is useful reading if you’re planning to sit the AF5 exam in April.

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

Let’s start with the objectives, which are given on exam day.

Immediate objectives:

• To review the suitability and tax-efficiency of their current savings and investments
• To ensure that the family has sufficient protection in place

Longer-term objectives:

• To implement a suitable strategy to enable Simon and Grace to retire at age 60
• To ensure that their investment holdings remain suitable for the long term

Question 1

The first question was a fact-finding question; candidates had to identify the additional information needed to assess if Simon and Grace can retire at age 60.  This was for 12 marks, and we had provided full analysis on this to achieve the marks here.

Question 2

The second question asked for reasons why a SIPP may not be suitable for Simon with the second part asking why it is important to carry out regular reviews of pensions.  We hadn’t specifically covered the first area but had included information on reviews, some of which could have been used for the second part of the question.

Question 3

This question was related mostly to the choice of funds by Grace: firstly, the drawbacks for her of continuing to invest in the commercial property fund and secondly, why she might consider using a targeted absolute return fund – the second part we had covered in full and the first part we trust candidates would have been able to draw on their own experience in order to gain the marks.

Question 4

Here, candidates were being asked for an explanation of how Simon and Grace could consolidate their existing investments onto an investment platform and why this may be suitable for them. Part (b) was an identification of the key factors that Grace should consider when selecting ethical investments; both these areas are covered in our generic section, but we had also provided a full list of the issues an adviser should consider when formulating an ethical strategy.  The final part of Question 4 was a recommend-and-justify question; this time, on the actions that they should take to increase the prospect of their having sufficient income in retirement – this was for 12 marks and we had covered this with the information consolidated in a table for easy revision.

Question 5

Question 5 was in two parts: how the future sale of Simon’s business will be treated for CGT and secondly, how he could maintain business relief following the sale of his business to mitigate future IHT.  We had given full details of how his business would be taxed on disposal, as well as how an EIS and SEIS could be used not only to help with capital gains tax but also to retain business relief.

Question 6

Question 6 asked candidates to explain how the clients could use their offshore investment bond to provide tax-efficient funds to support the children through university. Within our generic section is information on the taxation implications of bonds, but we had also provided specific information on the offshore bond and how much they could withdraw without any immediate liability as well as a reminder of the new 5 step HMRC process.

The second part of Question 6 asked for the key factors that the clients should consider before deciding if they will provide funds to repay the student loan after Harry graduates.  Several parts of the analysis would have been useful here: the fact-finding section where we had provided full questions on helping to ensure the children left university without debt as well as the use of their investments to help pay off the loans.

Question 7

This was on protection: firstly, the suitability of their current protection arrangements, which we had covered in full; secondly, the benefits for Simon if he sets up a relevant life policy for himself through his company. We had provided some information on RLPs to gain some marks here.

The final part of Question 7 was another recommend-and-justify question – this time, a suitable policy that Simon could set up via his company to provide a long-term regular income in the event of incapacity to replace his existing ASU policy, and again we had provided the necessary information to answer this part of the question.

Question 8

Finally Question 8, and instead of the usual review question, this was an explanation of why NS&I Premium Bonds may not be suitable for Simon in meeting his longer-term objectives. This final question was for 8 marks, and we had talked enough about how Simon should consider re-investing the monies in the premium bonds to gain some of the marks here.

Overall, the objectives were generally expected and many of the resulting questions were anticipated and covered in full in our analysis.  Some signposts in the fact-find didn’t translate into questions. For example, the client’s mortgage was running beyond their intended retirement date, and they had no life cover in place, nor the fact that the various UK company shares Simon held were in ‘certificated form’ nor the fact that they had no idea how much State pension they would be entitled to.

Grab the resources you need!

If you’re studying for your CII AF5 exam, and you’re wanting to prepare as much as possible, 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!