AF5 March 2021

AF5 exam

AF5 March 2021

The fact find for the CII March 2021 AF5 exam is now available. If you haven’t yet seen this, click here.

As a training business, we don’t have any products that we can sell you that will help with this specific exam.  But we’re here to help people on the road to Chartered status so we will still try to help you as much as we can. If this isn’t your last AF exam, then remember us next time when you need support with an R0 or AF exam.

How do I prepare for this AF5 exam?

The exam is on the 2nd March. There is a reason why the  fact find is issued in advance of the exam – so you can prepare for it. So if you have a limited knowledge of investment trusts and testing against the LTA, for example, then now is the time to work on this.  In addition, most people need to work hard to practice their exam technique.

The exam will test across a range of different aspects of financial planning that are based on the two clients. You will not know the actual questions you will face until the exam day but it makes sense to prepare for a broad range of outcomes before then. The information provided in the fact find is exactly the same information that you will be given in the exam.

What areas should I focus on in the CII’s AF5 March 2021 exam?

The questions in an AF5 exam are based on the client’s immediate objectives and long-term objectives. These will be provided to you in the exam. Based on the fact find, you should be prepared to answer questions on the objectives that follow. Note that it is possible that some of the topics listed here as immediate objectives may actually be longer-term objectives (and vice versa), or may not actually be in the exam at all. But the better prepared you are, the better your chances of passing AF5.

Potential immediate objectives for Harry and Pauline:

  • To adjust their  income to meet their needs, or to adjust the income from Harry’s SIPP to meet their retirement income needs
  • To ensure their existing investments remain suitable for their needs (think here primarily about tax and their attitude to risk)
  • To assess the suitability of their existing life protection

In meeting these objectives, you may need to:

  • Provide advice on how they can improve the tax efficiency of their investments, e.g. reduce tax by making a ‘no loss no gain’ spousal transfer of the investment trust (or part of it) or other assets. Remember that she is a non-taxpayer and is not using her annual CGT allowance or dividend allowance
  • Provide advice on how they can make their retirement income more appropriate, e.g. reduce his SIPP withdrawals to a more sustainable level
  • Explain the income options available to Harry when taking further income from his SIPP
  • Explain how an investment trust works, e.g. what does ‘net asset value’ mean?
  • Explain how the use of a platform would help meet their needs
  • Understand what Harry’s current asset allocation is compared to their attitude to risk
  • Explain why Harry’s existing portfolio is not in line now with his attitude to risk and  provide advice on how this could be improved
  • Describe how a reviewable protection policy works and what impact Harry’s recent illness will have on this, or not
  • State the information you would need from Harry to establish how much LTA he has used. Remember that he is approaching age 75 and has an uncrystallised SIPP

Potential longer-term objectives for Harry and Pauline:

  • To mitigate their Inheritance Tax liability (IHT) whilst ensuring that their estates pass to their intended beneficiaries.
  • To ensure that their financial affairs can be managed in the event of future ill-health

In meeting these objectives, you may need to:

  • Calculate their IHT liability if they were to die today (calculations in AF5 are rare but not unknown)
  • Provide advice on how to minimise their IHT, e.g. how they can use trusts with their existing investments to minimise IHT (or gift using their existing investments)
  • Explain the position of Harry and Pauline’s pensions in the event of death
  • Explain what a LPA is, how it is set up, and/or the benefits of them both of having one

What do I need to do to pass the CII’s March 2021 AF5 exam?

  1. Most people who fail AF5 do so because of poor exam technique. Click here to register (if you aren’t already a member) and get our FREE AF5 preparation guide. This looks at the all-important technique you will require.
  2. Familiarise yourself with the client’s circumstances. If you are provided with information, you will be expected to use it in some way. You should be able to apply your knowledge to their circumstances – generic answers will not usually score well.
  3. Revise and read around the technical aspects. Google is a good place to start.
  4. The exam will be sat under remote invigilation. If you have not experienced this before, here is the link to the CII website. Make sure everything works before the day of the exam.
  5. Be familiar with the technique and style of answers the CII will want. This is NOT just about applying your day job to an exam paper. Click here for a FREE copy of the last CII AF5 exam to see what a past paper looks like. Pay particular attention to the style of questions and model answers provided.

Important note

Please note that these initial thoughts are provided to give you some assistance in understanding the exam, and an indication of what may be examined. We regret that we are not able to respond to any individual queries.

Prepare well and be successful.

Ian Patterson

Ex-examiner and author of the CII’s study texts for CF8, J07 and AF6

Marie Patterson
Ian Patterson