Our Post-Exam Review of the October 2019 CII R06 Exam

The R06 exam paper from the October sitting has been released by the CII prompting us to see how we did in our pre-exam analysis.  

If you haven’t seen the paper yet, you can access it here.

Case Study 1

Case Study 1 concerned John and his partner Emily, both aged 63.  John was divorced with 3 adult children, and Emily was a widow with 1 daughter and 3 grandchildren.

Their first financial aim was to:

Generate an adequate income in retirement

There were quite a few questions that covered this aim.  The first one asked candidates to explain why John should consider increasing contributions into his workplace pension scheme.  We had information on this area for Case Study 2, which could have been used to answer this.

John also had a personal pension, and so there was a question asking for the drawbacks and benefits of his accepting the guaranteed annuity rate at age 65, an explanation as to why the transfer value was higher than the current value and why it’s important to keep the plan under review. We had this covered with a table of pros and cons of John’s taking the GAR offered, as well as the further information needed, which covered the difference between the fund value and the transfer value.

A further question for this aim was identifying factors to be considered when reviewing their arrangements to determine retirement income, and again, we had this covered in full.

And the final question came at the end: candidates had to explain the factors to take into account when deciding whether to utilise a series of UFPLS to provide retirement benefits; this question we had not unfortunately anticipated.

The second aim was to:

Ensure that their current investment holdings are suitable and tax-efficient

There was only one question that appeared to relate to this aim.  Candidates had to explain why Emily could consider moving some of the cash held in the ISA into a range of actively managed UK and global equity funds.  We had provided analysis on why Emily’s ISAs may not have matched her ATR and the reasons why her holdings were not suitable, which could have been used to answer this question.

The third aim was to:

Ensure that John’s estate can be passed as tax-efficiently as possible to his children

There were two questions that could be linked to this aim.  The recommend-and-justify question, where candidates had to explain the actions John could take to ensure that his estate passes as tax-efficiently as possible to his children on his death, and secondly candidates were asked to explain the importance of keeping wills and death benefit nominations fully up to date.  We had both these covered in full within the analysis.

All in all, the first case study seemed heavily weighted towards the retirement aim.

Case Study 2

Onto Case Study 2, which focused on Rafa and Lara, a married couple with two financially independent children.

Their first financial aim was to:

Ensure that their mortgages are repaid before they retire

Question (c) related to their holiday cottage.  Firstly, candidates had to state the factors to be aware of if they chose to use the sale proceeds of Lara’s business to repay the mortgage on the cottage. This question was for 8 marks, and as we had provided the pros and cons of using the money from the sale of the business to repay the mortgage, this information could have been adapted to answer this part of the question.

Also related to the cottage (but not the aim), candidates had to explain how the rental income from their holiday home is taxed and how the sale proceeds may be taxed if they decide to sell the cottage – we had covered both taxation elements in full.

Their second financial aim was:

Put in place a suitable investment strategy to fund their retirement

There were two questions relating to pensions: one on fact-finding, which we had covered and one on the process that should be followed when advising Rafa in respect of his pension arrangements, and unfortunately, this is something we hadn’t considered.  

There doesn’t appear to have been a question relating particularly to aim 3, but we did have others, which included the key information required to enable an adviser to assess the suitability of their protection policy (for 10 marks) and the advantages and disadvantages of Rafa’s joining his employer’s group PMI scheme (again for 10 marks).  We had all the information needed to answer both these protection questions, so we hope candidates would have scored full marks here.

The case study had mentioned they might wish to do IHT planning in the future, and one question appeared asking candidates to explain how a DGT would operate.  This was for 8 marks, and we are pleased to say our analysis had DGTs (and Loan trusts) covered in full.  

There was also a question on the benefits and drawbacks of their retaining the current funds in the unit trust and ISAs, and we had also provided information on their investment portfolio needed to answer this question.

The final question asked for the factors an adviser should take into account when advising on their investments at the next annual review meeting.  The review question on investments was actually covered in Case Study 1, so it could have been adapted to suit the clients in Case Study 2.

Overall, this seemed to be a very reasonable R06 paper, with students having plenty of opportunities to score well using the analysis we had provided.

Grab the resources you need!

If you’re studying for your CII R06 exam, and you’re wanting to feel more confident on exam day, 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!