Our Post-Exam Review of the October 2020 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.  

You can access the exam guide here.

Case Study 1

Case Study 1 introduced us to Vassos and Rania, both aged 28, with Rania pregnant with their first child.

Their financial aims were to:

• Ensure they have adequate financial protection arrangements
• Purchase their first home
• Consider the repayment of their personal debt 

The exam started with a question not related to any of their financial aims!  Candidates had to state the benefits to Vassos and Rania of undertaking a computerised risk-profiling exercise when obtaining financial advice.  Although it wasn’t specifically related to an aim, it was signposted in the exam that they ‘consider themselves’ to be medium- to high-risk investors which suggested they had not been formally assessed.  We provide content on risk profiling in our generic section of the analysis, which candidates are frequently reminded to study throughout the main content; using this would have meant candidates scoring most of the marks available.

The second question was related to Aim 1.  Candidates had to state the key differences between a personal income protection insurance policy and a critical illness policy for Rania.

The second part of the question was to state the benefits of their effecting a family income benefit policy.  The whole of question (b) was for 22 marks.

We had provided tables of the products to recommend in the event of the death of Vassos or Rania and upon diagnosis of a serious illness, so we had covered family income benefit, critical illness, and income protection.  These tables also provided the justifications for such recommendations so included most of the detail needed to answer these questions.

Question (c) asked for an outline of the additional information that an adviser would need to obtain to provide retirement planning advice to Vassos and Rania.  Again, retirement planning was not one of their stated aims, so candidates may not have been fully prepared for this question.  It was for 13 marks and because pension information had been given in the case study, we had included some content on the benefits of their remaining in their pension schemes and some commentary on the fund choices, so this could have been used to gain some of the marks here.

Question d (i) and (ii) were questions relating to the gift and loan from their parents.  Part (i) asked for an explanation of the possible IHT implications for Rania’s parents of making the planned gift for 8 marks, and part (ii) asked for an explanation of the key issues that Vassos’s parents should consider when setting up the loan agreement – for another 8 marks.

We had included the factors that Vassos’s parents should take into account before making a loan to them as well as the IHT situation of the gift from Rania’s parents.  Candidates using our analysis should have scored very well on this question.

Finally (e) and another two-part question.  Part (i) asked for the factors to be aware of when making a decision to repay their debts.  This was for 10 marks, and part (ii) asked candidates to identify the key drawbacks of their taking out Lifetime ISAs to save for the house deposit – for 8 marks.

We had covered this aim in full, giving the pros and the cons of their repaying their personal debt, which covered most of the factors in the model answer.  We had also included a section on Lifetime ISAs, which included the main features and benefits – some of which would have helped answer the second part of the question.

Case Study 2

Onto Case Study 2, which focused on Dietmar and Clara, both aged 76, married with 3 children and 7 grandchildren.

Their financial aims were to:

• Ensure they have sufficient income throughout retirement
• Ensure the suitability and tax efficiency of their current savings and investments
• Ensure their retirement income is protected against inflation 

The first question for this case study asked for an explanation of why it is unsuitable for them to retain the cash in the deposit account with their existing bank over the longer term.  This was for 8 marks.  We had provided commentary on the tax efficiency and suitability of their cash deposits, which would have enabled candidates to have scored well in this question.

Question (b) was in two parts: part (i) asked candidates to outline the key information that should be taken into consideration when building a lifetime cashflow model. This was for 10 marks. Part (ii) asked for six drawbacks for solely relying on lifetime cash flow models when planning for future financial objectives. We had the first part of the question covered by providing an explanation of how lifetime cashflow modelling can be used to show the impact of rising inflation on their retirement income.  Within this, was sufficient content to answer this question; although we had not covered the second part specifically.

Question (c) (i) asked candidates to explain how a purchased life annuity (PLA) operates – this was for 10 marks.  For another 5 marks, candidates had to state the key reasons why a PLA may not be a suitable arrangement for them.  We had provided a table, which gave nine advantages and nine disadvantages of their buying a PLA to supplement their retirement income, so there was enough information to gain good marks on this question.

Question (d) asked for an explanation of how retaining the existing portfolio of UK shares could help them in providing additional tax-efficient income – this was for a total of 9 marks.

We had provided the reasons for maintaining the blue chip shares, as well as the drawbacks, so there was some useful content here to help compile an answer.

Question (e), for 8 marks, asked for an outline of the changes they could make to their existing ISA holdings to enable them to generate a higher level of income, and question (f) asked for the range of suitable options they could consider to help to protect their financial arrangements from the impact of inflation. This was for 10 marks.  The model answers to these two questions were similar, and the table we had provided, giving recommendations and the justifications to ensure their ISAs are suitable for their needs, included most of the bullets within the model answers.

Finally, it was the review question; candidates had to state eight factors that an adviser should consider when reviewing their arrangements at their next annual review meeting, and we are pleased to say we had covered this exact question, so candidates should have scored very high marks here.

On the whole, this was a fair paper, although what did stand out was the lack of ‘recommend and justify’ questions and more of a focus on identifying ‘key issues’ or ‘key drawbacks/differences’.  Some questions could have thrown candidates who hadn’t used our analysis, such as the questions relating to their parents rather than to them as the clients. However, those who had studied our analysis in detail should have been very well prepared to achieve a pass.

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!