Our Post-Exam Review of the September 2024 CII AF5 Exam
Our Post-Exam Review of the September 2024 CII AF5 Exam
The CII has now released the exam guide for the September sitting of AF5 so we can see how we did in our pre-exam analysis.
This article is correct as at 26 November 2024.
If you haven’t already seen the exam guide for September, you can access it here.
This time, the fact-find, released two weeks prior to the exam, concerned Tom and Sally, a couple in their early forties with two children aged 15 and 13.
The objectives, given on exam day, were as follows:
Immediate objectives
- Review the suitability of their existing investment portfolio.
- Ensure they have sufficient protection in place.
- Review the suitability of the onshore investment bond.
Longer-term objectives
- Ensure they have sufficient funds for their retirement.
- Improve the long-term tax-efficiency of their financial arrangements.
- Provide financial support for their children whilst at university.
| 1. | (a) Identify the additional information that you would require in order to advise Tom and Sally on the suitability of their pensions, savings and investments to meet their longer-term objectives. | As expected, the exam began with a general fact-finding question around the couple’s finances. We trust candidates who studied our model answers were able to secure most of the 15 marks on offer. |
| (b) Explain to Tom and Sally the factors they should take into consideration when reviewing their current cash holdings. | It was evident from the fact-find that Tom and Sally were overweight in cash, so hopefully this question did not come as a surprise. Model answers regarding the suitability of their cash holdings were provided in detail in the analysis. | |
| 2. | (a) Outline the personal and financial factors that an adviser should take into consideration when identifying Tom and Sally’s protection needs in the event of either death. No calculations are required. | Protection needs were an objective identified in our analysis, and we covered the key considerations an adviser should consider and provided a self-test question around this subject. |
| (b) Explain to Tom and Sally why they might wish to put in place a critical illness policy and explain how a suitable policy should be set up. | We had recommended and justified a CIC policy (with life cover) and suggested it be index linked and set up in a split trust. | |
| 3. | (a) Recommend and justify how Tom and Sally could use the onshore investment bond in a tax-efficient manner to assist them in meeting their financial objectives. | Our analysis had covered how the investment bond could be used to pay off their mortgage and the factors to consider when assessing if they should keep it. Our model answers (in line with the CII answers) were centred mainly around the taxation angle, as they often are, when investment bonds are examined. |
| (b) Explain how the onshore investment bond would be treated for Inheritance Tax purposes if Tom’s mother died in the next seven years. | We had covered in detail the IHT position of the investment bond should the mother die. | |
| 4. | (a) Outline the key reasons why Tom’s existing investment holding in the UK FTSE-100 Index Tracker fund may be unsuitable. | Our analyses always include the pros and cons of each investment fund held by the clients. We had therefore covered most marks on offer for this question around the FTSE 100 fund. |
| (b) Recommend and justify a range of actions to enable Tom and Sally to improve the diversification of their existing ISA portfolios. | We had recommended and justified many actions Tom and Sally could take to improve their investment strategy including investing in multi asset funds, commodities, reducing equity exposure, increasing exposure to property, fixed interest and global funds. | |
| 5. | (a) Outline the key issues that Sally should take into consideration before deciding to transfer her pension benefits from her former employer’s workplace pension scheme into her new pension plan. | When information about a previous DC pension is provided, we usually consider the pros and cons of consolidating their pensions. We had therefore addressed this exact question in our analysis. |
| (b) Identify the issues that should be considered when advising Tom and Sally on a suitable portfolio of ESG collective investment funds. | Our analysis outlined the key issues to discuss with Tom and Sally to align their investments with their ethical values, including the benefits of ESG investing and the drawbacks of Sally’s current ethical funds. We hope candidates were able to adapt our model answers to secure most of the marks available. | |
| 6. | (a) Explain briefly to Tom and Sally the reasons why they might consider investing some of their existing cash holdings in commodities, or commodity-based funds. | The use of commodity funds was clearly highlighted, and we had thoroughly covered both direct investment in commodities and commodity funds, along with the reasons for investment. |
| (b) Identify five benefits and five drawbacks for Tom and Sally of investing in gold or gold-based funds. | The benefits and drawbacks of investing in precious metals and physical assets was also covered in full. | |
| 7. | (a) Explain the reasons why Tom and Sally may not wish to use Junior ISAs to assist in meeting their children’s future university costs. | We had not fully detailed the drawbacks of a Junior ISA, but we hope candidates were able to expand on some of the points we had mentioned around Junior ISAs, such as the children gaining access at 18 and the loss of control for Sally and Tom. |
| (b) Tom and Sally wish to use some of their surplus income to invest for their retirement. Explain the factors they should take into consideration when deciding whether to invest further into pensions or ISAs or a combination of both. | The benefits of both increasing their pension provision and the benefits of using future ISA allowances were detailed throughout the analysis. | |
| 8. | (a) Identify the key aspects of Tom and Sally’s current arrangements that should be taken into consideration when carrying out an initial stress-test of their financial position. | Our analysis had covered stress testing in terms of their retirement provision and employer sponsored protection benefits. We hope candidates were able to expand and bespoke their answers to this question. |
| (b) Identify the benefits for Tom and Sally of receiving ongoing advice from their financial adviser. | Sally and Tom had always managed their own finances, so we had anticipated a question on the benefits of taking financial advice. We hope candidates who worked through our analysis were able to finish the exam on a high. | |
Chartered Insurance Institute (2024). AF5 – Financial planning process: September 2024 Examination Guide. Retrieved from www.cii.co.uk.
A Post-Exam Review of the September 2024 #CII #AF5 Exam. Share on X
Overall, this paper was challenging but fair. Although some of the question stems were tricky, all the subject areas tested were highlighted in the fact-find and in our analysis. We believe candidates who practised adapting their answers to different question styles would have performed well in this exam.
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