Post-exam Analysis of the October 2014 CII AF5 Exam
We now have the actual questions from last October’s AF5 exam so we can now compare what came up to what we predicted would come up in our analysis – useful information for CII AF5 candidates.
As any student of AF5 will tell you, the client objectives are split between immediate and longer term. We predict these but also look at other potential areas, which we might not consider specific objectives but could come up and did.
The first question is usually around identifying the additional information you’d need as an adviser to help them with their immediate and longer term objectives. 30 marks are available here, and using our analysis would have helped pick up at least half of these.
The second question was around the risks that apply to the AIM shares the client held. 12 marks were up for grabs here. We gave 5 risks and gave a brief explanation of each, which could easily have been adapted to the actual question, to pick up 10 out of the 12 marks.
This was testing knowledge on VCTs and specifically the client using his PCLS to invest tax efficiently. As the client was a higher risk investor, we had given a lot of information regarding VCTs with 5 bullet points specifically on the tax advantages. 12 marks were available for this question, and delegates should have picked up the majority of these.
The second part of the same question was on EISs and specifically the income tax and CGT advantages – this was covered in detail in our analysis as well and would easily have meant students should have achieved the full 10 marks.
This questions was on the tax efficiency of the client’s savings and investments. We covered the tax efficiency of the share portfolio and collectives as well as the investment bond. The well prepared student should have been able to use the information to suggest ways to improve the tax efficiency and pick up the 14 marks on offer.
Next, delegates were asked to identify 6 benefits and 6 drawbacks of investment trusts. We had 5 benefits of using them and didn’t specifically cover any drawbacks so only 5 out of the 12 marks were covered.
Testing knowledge of IHT, delegates had to comment on the client’s current situation and identify any weaknesses. We had a lot of information on what they should do. If this information had been used and tweaked to answer the question, delegates should have been able to pick up the majority of the points.
Covering business protection, the information we provided in this area should have meant at least half if not more of the marks should have been achieved.
This question was around placing investments into a discretionary trust and how using a spousal bypass trust would help mitigate IHT. We mentioned both these areas but unfortunately not in enough detail to achieve full marks.
Finally, this question was the review question. Specifically it was ‘identify 7 areas that should be taken into account at future reviews for their investment portfolio’. Our review question was ‘list the key events which should trigger a review’. However, within our model answer we had 7 points that related specifically to the investment portfolio so were equally relevant to the actual exam question asked; so top marks again.
The Curve Balls
There is usually a curve ball or two within the AF5 exam paper that is hard if not impossible to predict; this paper was no exception. The questions that haven’t been detailed already were those curve balls; delegates were asked to state the benefits of using a DFM and benefits of using a platform. There were also 6 marks for having knowledge of the Pension Protection Fund. Most delegates sitting this exam would have had some knowledge of these areas to have had a reasonable stab at an answer.
We believe that if delegates were well prepared on all of the other areas, these curve ball questions, if poorly answered, should not have meant a fail. The nominal pass mark for AF5 is 55% and delegates using our analysis should have achieved this.
Grab the resources you need!
If you’re studying for your AF5 exam, and you’re not feeling 100% confident, grab our free fact-find analysis, from an earlier exam sitting, to see the analysis layout and content style for yourself. Click the link to download the AF5 free fact-find analysis now!
Over to you…
If you’re sitting the exam in April, what worries you most about taking the exam?