FCA business plan 19/20

FCA Business Plan 2019/2020

The FCA has just published it’s Business Plan for 2019/20. Anyone who is involved in running a business – as a senior manager or as a supervisor – needs to identify the future risks the firm might face and create a culture where the interests of clients are foremost in the thoughts of staff. The FCA Business Plan 2019/20  provides a useful insight on what you need to focus on.

Click here to download the FCA Business Plan 2019/20

What’s on the FCA radar?

It’s perhaps worth just asking yourself why you think that the FCA goes to the effort of publishing its business plan every year. There is a simple answer. If you are aware of what the FCA sees as a major concern, you’ll do something about it within your own firm before the FCA potentially forces you to. It is designed to give you an insight into what the FCA will be looking at so there shouldn’t be any surprises.

There’s a sense of veja vu with the FCA Business Plan 2019/20. There have been two recurring themes that have run through the last three FCA Business Plans.  These are ‘culture’ and ‘value for money’.  They are pretty prominent again in this year’s Business Plan so clearly, there is no intention that these will go away anytime soon.

The FCA ‘cross-sector priorities’

Some of the FCA priorities potentially apply to all of the 59,000 or so regulated firms. There are eight cross-sector priorities but those that will have the greatest impact on adviser firms are:

  • Firms’ culture and accountability, e.g. the role-out of SM&CR to a wider audience and remuneration arrangements. To quote the FCA: ‘We want firms to have the leadership capability to create and maintain healthy cultures. We believe that a healthy culture is good for business as well as for consumers and for markets as a whole’.
  • Financial crime, e.g. AML, raising awareness of frauds and scams.
  • Data security, resilience and outsourcing, e.g. cyber attack, due diligence on out-sourcing arrangements.
  • Technological resilience and innovation, e.g. how well is new technology improving competition and benefiting clients?
  • Treatment of existing customers, i.e. don’t treat them differently or as second class citizens, and don’t use income from them to cross-subsidise acquiring new clients.

There are also other areas that apply to a particular sector. They are also issues which the FCA sees as being deep seated, i.e. they aren’t going away anytime soon.

Sector specific risks

Here is our brief analysis of the areas that are of most interest to people in advice firms. These key issues include the following:

  • Reducing costs (advice and product charges) to offset potential future reductions in investment returns. To quote the FCA, they want firms that ‘offer products and services that are better value for money for consumers, and actively and honestly compete to keep them’.
  • Protecting the needs of vulnerable customers. There is likely to be a huge emphasis on this going forward as FCA figures suggest that most of your clients will be vulnerable at some stage of their life. How do you define vulnerable clients – particularly those with temporary vulnerability such as depression, rather than their characteristics, e.g. deaf, or those with some serious illness? What does your training, processes and oversight look like? In other words, how would you know?
  • Defined benefit pension transfers – not a huge surprise.
  • High-risk investments. The FCA hasn’t defined what these are but I guess you will be able to make an educated guess. These will continue to be a FCA priority in their supervision work. Again, there are potential implications for your firms training and oversight in this area.
  • The suitability of advice. Despite finding that 93% of advice was suitable in 2017, the FCA still has concerns over charges and how these are explained to clients. Don’t regard this as being in the ‘sorted’ file.
  • Transparency of features risks and charges (especially ongoing charges).
  • Scams in retail investments, particularly in discretionary portfolios, pension scams, and poor conduct from wealth managers who make unsuitable investments in high risk assets for their clients.

The FCA’s Retirement Outcomes Review provides some interesting data on the pensions market.  Click here for further details.

The FCA’s Financial Advice Market Review (FAMR) provides some interesting information about how the current regulatory environment could be simplified.  Click here for further details.

Read our blog on SM&CR. who it applies to and what to do to prepare for it, click here.

To quote the FCA: ‘…we have prioritised areas where we consider both that the risks of harm to consumers, market integrity or competition are greatest and where we assess our intervention will have the most impact’. (2017/18 Business Plan)

With best wishes

Ian Patterson

cii exam revision

CII exam revision: the most important tip ever?

With a CII exam – be it an R0 or AF exam – you’ll need to retain a wide range of information.  Despite numerous tips and techniques that can help study to be more effective, most people find studying for any exam to be hard work. But if you just had to pick just one tip that will make the biggest difference, what would it be?

We’re happy for you to disagree. Using past exam papers runs it pretty close. But here’s what gets our vote.


I’ll start with an exercise that should make this point. Here are 20 different numbers between 1 and 75. I’ll ask you to look at these for 30 seconds, turn away, and see how many numbers in sequence you can remember. Here they are:

5,   18,   3,    9,   44,   11,   16,    36,    31,    72,    24,    9,    32,    41,    4,    59,    1,    63,    25,    71

How did you do? People tend to remember around six numbers in the correct sequence – typically the first three and the last three. You might have remembered slightly more or slightly less than this. Usually it will be the numbers at the beginning and the end of the list that you’ll remember. So why is this so important?

Primacy and recency

What you’ve just experienced is known as primary and recency.  When you take in any information, you tend to remember the bits at the beginning and the end. The bit in the middle becomes a blur or gets forgotten. And this is something that we all do. So if you are studying for an R0 or AF exam, how can you use this?

Small chunks

At the Patterson Group, we believe that exam success is about working smarter, not harder. And that is why this principle is so important when you revise. Let me explain. Many people tend to block out a prolonged period of time to revise, often close to the exam date. Most people will have done at least some ‘cramming’ in the past. But just how effective is it?

The following  diagram looks at concentration levels and how these change with time.

The important thing to remember is that it’s not how much study you do, but how much information you retain as a result.  If we apply primacy and recency to this, it suggests that a two hour block of revision is unlikely to be effective for many people. Like the exercise you’ve just done, you are likely to remember the beginning and the end, and not much in the middle. That’s great for the 15 minute periods at the start and end. It also means that much of the 1 ½ hours in between is wasted for most people.

What does good look like?

Now, you might know people who are good at cramming. If so, they are either gifted, or they probably still break their revision into smaller chunks. In other words, it’s not a solid undiluted period of revision – but a two-hour period with a number of breaks built in. It’s these breaks that are important. We would recommend a 10 minute break every 20-30 minutes of study. And when we say break, it should be just that. Walk around,  talk to people, listen to music –  anything; but give your brain a break from your exam study.  Give yourself a proper break and give yourself regular breaks.

How does this impact on your concentration levels? If we look at this as a diagram, it should look like this:

You are still benefiting from primacy and recency. By studying for shorter periods, you’ve managed to cram more beginnings and ends into the your study time. As a result, your overall level of concentration is that much higher and you will remember more. More learning and the same amount of study time.  What’s not to like?

20 minutes of study isn’t worth it

This is a comment we hear regularly. And nothing could be further from the truth. 20-30 minutes is probably the optimum period of time. You get high levels of concentration and better retention. Part of this is due to concentration levels being maintained. Part is also due to the fact that you will probably only focus on two or three core concepts in this period of time. The brain likes small chunks of information nearly as much as having short study periods.

We are the leading producer of audio exam material for the CII exams and we are convinced that small chunks are best. Our audio material allows you to learn, in small chunks, fitting it in around the rest of your life. Simple and effective.

Click on R0 material or AF material to see why over 6,000 people have bought this study material over the last year.

Want to learn more?

Click here to access our dedicated R0 exam technique and study hub.

Click here to access our dedicated AF exam technique and study hub.

Both of these unique sites include a free video on our top 5 revision tips and links to specific R0 or AF exams about how you can work smarter, rather than harder.

Preparation is the key.

The Diploma Doctor


CII AF1 exam: how to pass it

So you want to pass the CII’s AF1 exam first time? The good news is that this is a very doable AF exam as long as you prepare in the right way. And the stats bear this out – of the four ‘technical’ AF exams (AF1, 2, 4, 7), AF1 is statistically the easiest with a pass rate of 55.58% (in 2018).

To see the full pass rates and how these have changed over the years, go to this page.

What can we learn from past AF1 exam papers?

We all know that working through past exam papers is one of the best ways to prepare for the CII’s AF1 exam.

Tip: Don’t just skim through them, start off with a blank sheet of paper and complete at least two of them under exam conditions.

Tip: Start this process towards the beginning of your study, not at the end. Learn about the technical aspects and also about how the examiners’ expect you to set your answers and apply your knowledge. Sure, you’ll make lots of mistakes but view this as a way of learning, not to assess whether you are ready for the exam or not.

What technical areas are covered?

The really useful bit is that the AF1 exam does tend to cover similar areas from one exam to another. If we look at the last AF1 exam paper (which
at the time of writing was the October 2018 paper ), you’ll see that:

  1. The three main personal taxes were all covered. In this paper, the marks were split between them approximately: Income tax (around 26%), CGT (around 7%) and IHT (around 10%).
  2. Around 26% of the marks were awarded for undertaking a calculation on these three taxes (or explaining the steps required to do the calculation).

Tip: To be successful with AF1, you’ll need to be comfortable with undertaking calculations, so practice doing these before the exam for the 3 key personal taxes. In particular, make sure you are comfortable with undertaking an income tax calculation which includes things like the treatment of VCT and pension contributions.

Tip: Whenever you undertake a calculation in an AF1 exam, marks are awarded for demonstrating the correct process. So make sure that your calculation is laid out clearly. One way of doing this is to ‘label’ each step of the process. Believe it or not, you can get most of the marks for doing this even if you get the answer wrong.

AF1 exam: question types

I’ll mention the types of question that are used in AF1. In the October 2018 paper, the following instructions (or verbs) were used:

  1. List or state. There were four questions/part questions that used these totalling 7.5% of the marks.
  2. Detail/describe/explain. These amounted to a whopping 51% of the marks.
  3. Calculate. 26% of the marks.
  4. Benefits (6 marks) and factors (9 marks).

Tip: In the AF1 exam, the instruction is the examiner telling you what to do. List or state does not need any amplification; a couple of words or short sentence will be fine.

Tip: Over half of this paper needed you to describe or explain. With this type of question, the examiner wants you to show what you know, and link this back to the information you have been given. A one or two word answer will not be enough to score well.

AF1: the technical knowledge you will need

Past performance isn’t a guide to future performance. We know this just like we know that a technical exam like AF1 will test across the broad syllabus. Although some of the broad areas that will be tested can be predicted in advance, they will also test some more peripheral areas of the syllabus.

So in addition to the 3 personal taxes, these areas have also historically been frequently tested in AF1:

  • Trust taxation: income tax, CGT and IHT
  • Bankruptcy
  • Taxation of investments – both direct and indirect
  • Use of trusts / role of trustees
  • Wills / intestacy
  • Powers of attorney / LPA
  • NI contributions
  • Employed/self-employed status
  • Residency status

Getting to the point where you can pass

You know that you are going to have to put in some hard yards with AF1. The CII suggest 150 hours of study is required and unfortunately, many people will need approaching this amount of study. Which begs the question, what will this look like? These are all areas that I’ve looked at in other blogs so click onto them if these are of interest:

For study tips, click here

If you think that your revision technique can be improved, click here for our dedicated exam technique and revision hub.

Study whilst on the go. Our unique audio material gives you 6 hours of AF1 content that helps you to fit your learning in around the rest of your life. Click here for details.

Best wishes. Prepare well and past first time.

The Diploma Doctor

CII Af exams

CII exam dates: 2019

Want to know when the CII AF exam dates are in 2019? What’s the last date for entering the exam without having to pay a late entry fee? Which is the the easiest exam – statistically? If you want the answers to these questions, then read on.

The CII 2019 exam dates

The CII written April AF exams are held between the 8th and 10th April. The specific times and dates for each exam are:

The CII April 2019 AF exam dates:

8th April 9.30 AF1.

9th April 9.30 AF4. 2.00 AF7.

10th April 9.30 AF2 and AF5.

The CII October 2019 AF exam dates:

7th October 9.30 AF1.

8th October 9.30 AF4. 2.00 AF7.

9th October 9.30 AF2 and AF5.

Late payment charge

An additional charge is payable if you register for an AF exam after the following dates. Changes after these dates are not generally allowed.

April exams: 27th February 2019

October exams: 28th August 2019

Written exams v coursework?

Of course, the CII now offer AF6 and AF8 on a coursework basis. This means that you have to submit assignments and there isn’t a specified exam date. But you do need to complete all three assignments within a 12 month period so if you intend to sit one of these subjects and a written AF exam, schedule the writing of your assignments. Avoid writing assignments during March when you will need to study for the written exam.

Which is the easiest CII AF exam?

In theory, this might be a sensible way to select an exam. In practice, it might not quite work-out this way. We always suggest selecting an exam that is of most use to your work and to your business. If you work in a specialist area, then your day-job may help to give you a head start in a subject where others struggle.

Here are the latest CII pass rates for the AF exams (current as at summer 2018 – the latest published figures at the time of writing):

AF1 – 49.10%

AF2 – 48.28%

AF4 – 48.96%

AF5 – 64.60%

AF6 – 60.00%

AF7 – 43.74%

AF8 – figures not available as this is a new exam

Click here for the figures for previous years and to see the trends

Want to know more?

CII exam handbook – click here

Free AF exam preparation guide. Click here

Blogs on choosing your AF exam. Click here

Prepare well and be successful.

The Diploma Doctor

CII AF7 exam

CII AF7: Free preparation guide

If you are thinking of sitting the CII’s AF7 exam, then go into it with your eyes open. If you want to know about important dates, exam technique and what study options are available, click here for our FREE AF7 preparation guide.

You will also find preparation guides for AF1, 2, 4 and 5 on the same link.

AF7 is a popular exam. Safeguarded benefits is a big area for many financial advisers and if you are involved in the transfer of safeguarded benefits in some way, then this might be the subject for you. In practice, it’s the only current pension-specific Advanced Diploma exam available from the CII.

What does the AF7 exam look like?

The AF7 exam is 2 hours long. It consists of 3 or 4 short answer questions and then two additional case studies. These both have three to four questions making 9-12 questions in total. Overall, the paper will have 100 marks with the short answer questions accounting for around 30 to 35 of the marks, and the case study questions accounting for 30-35 marks each.

With a pass mark of around 60%, this means that you will normally need 60 marks to pass the exam.  The 60% pass mark applies to the exam overall so you could bomb on one case study and still pass if you get the marks elsewhere.

What’s been tested in the past?

AF7 is a relatively new exam that was only launched in October 2017. So there have only been 3 past papers at the time of writing. Like any new exam, it takes a few sittings to see what the examiners are choosing to focus on. The best way to spot these areas is to look at the past exam guides.

These exam guides are now provided via the CII’s on-line RevisionMate as part of the enrolment package. You should ensure you spend time studying these.

But of course, these are past CII AF7 exams and going forward, you can expect to see far more content on the changes to transfers introduced by the FCA in 2018. These didn’t receive much coverage in the October AF7 exam. Don’t be too surprised if this changes in the April 2019 AF7 exam and beyond.

There is a free link to a CII AF7 exam paper if you want to take a look before you enroll. Click here for the link to the CII website.

How much revision will I need?

The CII suggest around 100 hours of study for this exam. Whether you need this amount – more or less – will depend on your existing knowledge of the area. Even if you have good knowledge of transfers already, there are likely to be areas of the syllabus that you are NOT familiar with. You will still need to practice that all important exam technique, if nothing else.

The current pass rate for AF7 is a measly 44% so one thing is clear – relying on just your day job is unlikely to prove successful. Don’t under-estimate this exam.

Do I need to read the CII’s AF7 study text from cover to cover?

Unless this is a brand new area for you, the answer will probably be ‘no’. For many people, just reading a study text is not likely to be an effective method of revision. You’re unlikely to remember much, especially if you just read without taking notes.

Most people sitting this exam will have some knowledge. Some will have quite extensive existing knowledge. So just use the study text as a reference source – focus on using past exam papers and top-up your knowledge by reading about the bits you are not familiar with.

Click here for a link to our exam technique.

Click here for more details about how you can learn on the go.

If you want to access our FREE preparation guides for other CII AF exams, they are available on our site for AF1, 2, 4 and 5. Just click here.

Prepare well and be successful.

The Diploma Doctor


SM&CR: the countdown begins

The Senior Management and Certification Regime (or SM&CR) will become part of everyday life for thousands of smaller regulated firms on the 10th December 2019. So, what’s it all about?  What is the impact of this likely to be? Read on to understand more about this important change; what it is and how you might be affected.

What is SM&CR?

After the dust settled on the Financial Crisis in 2008, the Government looked long and hard about what caused it to understand how such a melt-down could be avoided in the future. They concluded that the primary fault didn’t lie with regulation, but in a failure of the culture within authorised firms. In some cases, the actions and messages being communicated by senior managers undermined, rather than supported, good regulation and good business practice.

The result is SM&CR, also increasingly (and accurately) referred to as the ‘accountability regime’. This is designed to make the people who run authorised firms – of all types – personally responsible for their actions and for failings that lead to significant customer detriment. The intention is to put individual responsibility at the heart of how regulated firms conduct themselves. The banks and insurers have been subject to these requirements for over 2 1/2 years and on the 10th December 2019, it will also apply to all solo-regulated firms, i.e. FCA-only regulated firms.

The new rules will replace and expand the current approved persons regime. There are 3 key parts to the SM&CR:

  1. the Senior Managers Regime
  2. the Certification Regime
  3. Conduct Rules

Earlier this year, the Patterson Group conducted a survey that asked those preparing for SM&CR for their views. The results of this are shared with you to identify some of the likely key issues. It should also enable you to better understand what other smaller firms are thinking and how of people perceive the potential impact of SM&CR.

Click here and here for further details of SM&CR from the FCA website

Click here for the very useful CII SM&CR resource hub

Prepared for SM&CR?

This article was written on the 11th December 2018 so we know that SM&CR will be extended to all authorised firms in a years time. The next few months will be crucial in planning the implementation of this.  A year sounds like a long time but not when you look more deeply at what it entails.

SM&CR will apply to firms irrespective of size. 76% of those who responded worked for larger firms, 24% for medium sized firms and, interestingly, there were no responses from small firms.  This could  possibly indicate that their awareness of SM&CR is lower and they felt less able to comment on it.

Reassuringly, the survey found that most respondents felt senior management understood the key issues. A respectable 82% of respondents agreed or strongly agreed that management grasped the key issues; only 18% of respondents did not.  Many appeared to already be making plans for the introduction of SM&CR.

What will SM&CR cost?

We asked about the perceived expense of meeting SM&CR. Significantly, 65% believe that SM&CR will represent a significant cost to their business. This is broadly in line with what the existing banks and insurers have found. That said, these larger organisations already have many of the processes that are necessary such as performance management systems and appropriate record keeping. The costs for smaller firms – in terms of time and expense – may well be higher.

Finally, we asked respondents what they thought the three main challenges would be in introducing SM&CR in their firm.  Four key areas stood out:

  1. How to define the competence of people within the business and evidence this
  2. Communicating and educating staff about SM&CR
  3. Allocating prescribed responsibilities
  4. Defining who is covered by the ‘significant harm’ function

It was slightly surprising that record keeping and the lack of money or resource didn’t feature more highly. Whether this turns out to be the  case (or misplaced optimism), we’ll have to wait and see.


SM&CR is intended to strengthening consumer protection by increasing the personal accountability of staff across the organisation and through strengthened governance processes.  Whatever the potential benefits, it’s clear that many firms expect SM&CR to come at a cost. The research flags up four areas that are most likely to challenge firms. Overall, the research suggests a generally positive picture but with work still to do.   Time will tell.

Click here for details of our services.

Ian Patterson

Founder of The Patterson Group and author of the CII’s AF6 study text on Senior Management and Supervision, and J07 study text Supervision in a Regulated Environment.

T&C Supervisor: House of Change

As a senior manager or T&C supervisor, dealing with change is an important part of the job. But why do people react to change in different ways and, as a people manager, what can we do to manage this? These areas will be explored in more detail in this article.

Let’s face it, change is just part of the process in financial services. On the face of it, that’s pretty negative comment as most people mistakenly regard change is a threat. In practice, we’d go backwards without it.

If you are a business owner or a T&C supervisor, one of your key tasks is to help ensure that working with change becomes part of your culture. People need to be willing and able to work through change. In reality, people experience different reactions to change at different times. So everyone who is managing this process needs to be able to recognise these different reactions and respond accordingly.

One way of doing so is sometimes referred to as the house change. When faced with change, people tend to go through four responses to it. These ‘states’ to change can be represented as different rooms in a house. This is represented below.

The four stages of change

The house change helps to develop our understanding of how people deal with change. For this to be successful, people need to work through the rooms or contentment, resistance, exploration and commitment. But as I mentioned, they will react in different ways and at different speeds. Some people, unfortunately, never complete the journey.

The first task is to identify where your people are. So how do you know which room people are in? (See below).

Strategies for managing people through change

Once you recognise where each individual is, the next step is to adapt your approach to help them move through the rooms from contentment through resistance, exploration and on to commitment. Here are some brief ideas on the actions a T&C supervisor could take.

For someone who is cosily tucked away in the room of contentment, it’s important to create awareness. Describe the problem and the reasons for the change. The key focus is that the ‘status quo’ will or must change and describe why.  At this stage, there’s no point talking about the benefits of changing because someone in this room doesn’t yet accept that there will be any change. The individual has to accept that change will affect them in some way before they will move on.  Provide information, acknowledge that is is normal to have some concerns and treat them with respect. Give them time to think about the position but recognised that their views may need to be confronted.

Once in the room of resistance, there is an acknowledgement that they can’t ignore change. But they’re far from having bought into it or decided to change anything. Be clear about the reasons for their resistance and allow them to let off steam. Discuss the position regularly and continue to reassure them that some people will find it difficult to change. Identify some quick wins, encourage, and focus on the positive side of change.

Offering coaching is unlikely to succeed in these two rooms as the need, first and foremost, is to change the individual’s mindset. As a minimum, they need to accept the change will happen and that it will have an impact on them. Without this, they may never move on and performance management – not development – may be required.

In the room of exploration people looking to get to grips with the change. Build on the quick wins, reward successes and encourage the sharing views on how improvements can be made. Offer reassurance, support and provide regular development and guidance where required. Work on a ‘one step at a time’ basis and keep things simple.

As people become more comfortable and familiar with the change, people will move into the room of commitment. By now, the benefits of the change should be more obvious. Measure progress and demonstrate business benefits. Provide support and development (but in a less directive way). In this room, identify longer term goals and continue to provide positive reinforcement. Don’t ignore these people because they may still slip back into the other rooms, especially if the change has not yet become ‘business as usual’, or they are left to their own devices.

These final two rooms are on the right hand side of the house. People in these rooms usually recognise the need to refresh or develop their skills and are generally positive about appropriate coaching, support and development from a T&C supervisor.

Going forward

The house of change provides a simple representation of the stages people typically go through when faced with change. It is also important to remember that people will go through these rooms at different speeds so just because you are in the room of commitment, doesn’t mean that everyone else will be.

If you want to know more about our services for T&C supervisors, click here.

Interesting article on dealing with change. Click here

If you want to know more about SM&CR, click here.

Remember, identify which room people are in and then determine how to tailor your approach. At a time when change is increasing regarded as the norm is – not the exception – there should be plenty of chances arriving shortly to practice this.

Ian Patterson

Author of the Chartered Insurance Institute’s J07 study text (Supervision in a Regulated Environment) and AF6 (Senior Management and Supervision)


IDD and T&C

To those people who provide advice on general insurance products such as critical illness, life assurance and insurance-based investment products, the forthcoming changes to T&C requirements are something that you need to be aware of.

From the Insurance Mediation Directive (IMD) to the Insurance Distribution Directive (IDD)

Acronyms abound! The IMD will be replaced by the IDD from 1st October 2018. This introduces an updated EU-wide ‘level playing field’ for insurance distribution. This applies to all regulated firms: insurers, aggregators and importantly, anyone who provides advice on ‘insurance’.

In simple terms, ‘insurance’ is anything that is covered under the FCA ICOBS rules. As I mentioned earlier, this includes the likes of critical illness, term, mortgage protection, and income protection insurance. Any retail investment adviser who advises on protection from time to time, will also fall under these rules.

What are the changes?

The IDD introduces a number changes covering disclosure requirements, inducements, advised and non-advised sale standards and complaints. These extend the current ICOBS requirements.  They also introduce changes to the current T&C regime: anyone who advises on insurance products will need to meet them.

T&C changes

Under IDD, all staff involved in insurance distribution must have the appropriate knowledge and ability to perform their duties.  This is, of course, something that we are all familiar with within financial services. Note that this says all staff so this includes those who are already subject to T&C requirements because they provide advice, and others who aren’t currently covered by T&C because they don’t. This will also impact on those who supervise those that provide advice on insurance.

Specifically, the IDD requires the completion of at least 15 hours of relevant CPD.  This can be structured or unstructured.

For those in Financial Services, three specific areas must be covered by the CPD;
1. the insurance market, laws, new products, taxation and state benefits;
2. claims handling, complaints handling, assessing customer needs, appropriate financial competency; and
3. business ethics standards/conflict of interest management.

In each area, the CPD content should cover generic core knowledge, product-specific knowledge, and terms and conditions.

There has been relatively little coverage of this topic.  For a link to what the CII offer via their Insurance Assess site, click here.

What are the implications?

  1. Anyone who is already required to complete 35 hours of CPD will  need to ensure that part of this time (i.e. not in addition) is devoted to meeting the new IDD requirements.  This would apply to CF30 investment advisers, mortgage advisers and any qualified member of the CII that are involved in the distribution of insurance.
  2. The IDD requirements are there to ensure a minimum level of competence. Staff who are affected by these requirements should be able to demonstrate they are IDD competent no later than the 1st October 2018. 
  3. The supervisors of those that distribute insurance will also need to undertake appropriate CPD to meets the IDD requirements.
  4. Anyone who just advises on insurance products may have to complete 15 hours CPD as a minimum for the first time under T&C rules.
  5. T&C procedures need to be amended and there needs to be appropriate oversight of the changes.
  6. Record keeping requirements must be amended so they demonstrate that these requirements have been met.

Click here for details of our T&C services

Ian Patterson

12th September 2018

cii chartered status

CII exams: getting to CII Chartered status (part 2)

CII Chartered status

If you are sitting exams on the road to CII Chartered status, one of the questions that we frequently get asked is ‘which CII exams should I sit next?’. Likewise, we also sometimes get asked about ‘what exams should I take to get CII Fellowship?’ Some exams could be considered for both. This is a big area – and it’s one that I’ve started to look at in two previous articles:

  1. Which CII AF exam should I sit next? Click here
  2. CII exams: getting to Chartered. Click here

The road to CII chartered status is a long journey and that also means that many people want to select the subjects that help them to shorten this journey. So in this article, I’ll look at a few more ideas that will help you to decide.

Investment subjects

In our article ‘which CII AF exams should I sit next?’, we looked at AF4 and the associated underpinning level 4 exams: R02 and J10. We also said that it is worth also considering J11 (Wrap and platform services) and J12 (Securitised advice and dealing). Taken together, they could be worth a whopping 110 credits. The important point is that there is also a significant amount of overlap between each of them which makes revision for them that little bit less onerous.

Let me continue on a similar theme as there are also other investment-related subjects that you could also consider.

FA4, FA5 and/or FA6

Collective investment scheme administration (FA4), Individual savings account administration (FA5) and Investment client servicing (FA6) are all level 3 exams that are worth 10 credits. This means that they are each one hour exams that comprise of 50 multiple-choice questions. But this doesn’t mean that they can’t also be used to get credits towards Chartered and Fellowship.

In simple terms, the content of FA4 and FA5 overlaps with much of the content of R02. FA5 is the pick of the bunch as ISAs (and their various reincarnations) are central to the financial planning process for many advisers. The content of FA6 can also be found in J12, but at a lower level. So if you need an extra 10 credits or so, these would be worth considering.

Details of the syllabus for each can be found here.

LP1 and/or LP2

Other options that are definitely worth looking at are Life and pensions customer operations (LP1) and Financial services products and solutions (LP2). These are worth 15 and 20 credits respectively and are again level 3 exams that test using multiple choice questions.

LP1 isn’t a technical paper. Instead it focuses on the fair treatment of customers, effective communication and  teamwork. In contrast, LP2 looks at the basics of life and health insurance products, mortgages, the key asset classes and tax wrappers (investment bonds, ISAs and pensions). As this is level 3, these are all areas that are covered at a relatively basic level.  This could be the easiest 20 credits you’ll ever get!

Details of the syllabus for each can be found here.

AF6 and J07

The final combination I’ll look at is AF6 (senior management and supervision) and J07 (supervision in a regulated environment). If your current or future role might involve managing people (which is what J07 is all about) or managing a regulated firm (that’s AF6), then this combination also has some overlap. Both might provide a welcome break from the ‘technical’ subjects. AF6 is worth 30 credits at Level 6 so it can count towards the four AF subjects that are required to get to Chartered.  J07 is worth another 20 credits. People sometimes think that J07 is all about training and competence; it’s not so don’t let that put you off!!


We believe that the purpose of exams is to make people more knowledgeable and effective. Sensibly, people who are on the road to CII Chartered status would choose the exams that are most useful to both themselves, and their business. That said, it pays to know what your exam options are and how to use this knowledge to your benefit.

Remember, work smarter, not harder. Until the next time.

The Diploma Doctor

af7 exam

Spotlight on the AF7 exam

If you are preparing for the CII’s AF7 exam, here’s what you need to know about the exam.

What does the AF7 exam look like?

The AF7 exam is 2 hours long. It consists of 3 or 4 short answer questions and then two additional case studies. These both have three to four questions making 9-12 questions in total. The CII’s October 2018 AF7 exam had 10 questions in total (which might vary between papers). Overall, the paper will have 100 marks with the short answer questions accounting for around 30 to 35 of the marks, and the case study questions accounting for 30-35 marks each.

You will normally need 60 marks to pass the exam.  The 60% pass mark applies to the overall exam so you could bomb on one case study and still pass if you get the marks elsewhere.

How easy is it?

The simple answer is ‘not very’. Based on the last published CII results (Summer 2018), the pass rate for AF7 is 44.23%. This makes it the second hardest AF exam subject. Forget about the fact it is only worth 20 credits – the majority of people currently fail this exam.

Why short answer questions and case studies?

In simple terms, the short answer questions will test your knowledge across the syllabus, and the cases studies will require you to apply your knowledge to the client scenario that is provided in the case study.  In other words, it’s regurgitation v application.

Click here to access the CII AF7 syllabus

Example 1

State the key documents that an adviser must keep on file having given advice to a client on a pension transfer from a DB scheme.

This is regurgitation because this is generic knowledge that applies to any client in this position. If you know your AF7 material, you should be able to answer this whilst you are reading this. You’ll either know it, or not.

Example 2

Outline the factors you would need to take into account before advising the client to transfer her deferred benefits in order to meet her financial objectives.

This is a bit harder isn’t it? That’s because you’d need to know about the client’s circumstances before you could answer it. The question or case study will provide this information – your job is to spot this and make sure you use the information you have been given.  If you don’t, you won’t score well.

What did the October 2018 AF7 exam test?

I’ll answer this question in two ways:

     1. The scope of the technical areas tested

Subject area Marks
Client risk warnings 10
Benefits/drawbacks of transferring GMP excess benefits 8
Sequencing risk and FAD 8
Explaining why a CETV has reduced 10
Features to consider when transferring a S32 9
Explaining why the client shouldn’t transfer their death benefits 11
Series of PCLS’s instead of UFPLS’s 10
Additional information 9
Benefits/drawbacks of transferring DB benefits to a PPP

Nominated death benefits and beneficiaries tax position



The October 2018 exam is the third AF7 exam so the content in this is likely to be typical of what you might expect in future exams. Certainly, it has focused on the key areas involved in transfers. The marks are also pretty balanced across each of the topics so you will need to know your stuff across key elements of the syllabus.

    2. The instruction in the question.

Each question in AF7 will use a verb.  Examiners like to describe these as ‘instructions’ because they tell the candidate what they want you to do. If you look at the verb and the number of marks for each question, this should give you a pretty good idea how much depth to go into when answering it.

In the October 2018 AF7 exam, the examiners’ used three types of instructions:

  Instruction  What it means
State, list or identify The examiners just want a short answer – no explanation is required. So if a ‘State’ question is worth 9 marks, work on the basis that you need 9 answers. Put down 11 if you can as this maximises your chances of getting full marks.
Outline This requires a little more than a ‘state’ question if you are going to get the marks. A sentence for each bullet point should do. A question that uses this verb will probably be worth between 3 and 6 marks.
Describe, evaluate or explain You’ll have to give even more in order to get a mark – perhaps a couple of sentences (especially if the instruction is ‘explain in detail’). Explain means give the examiners’ as much detail as you can that is relevant to the question. A one or two word answer isn’t going to get you many marks; it is the examiners’ way of saying: “go ahead, impress me”!

These types of question will normally account for many of the marks in an AF7 exam.

Don’t be afraid to state what you think might be ‘obvious’ and make sure you cover the detail. For example, when looking at death benefits, remember the position pre- and post- age 75. Also remember to mention the 2 year window.

In the October 2018 exam, there were 3 ‘state’ questions; 3 ‘outline’ questions and 5 ‘describe, evaluate or explain’ questions (if you include part questions). No other instructions were used. It was the same with the April 2018 AF7 paper. Future exams could introduce different instructions but a pattern does appear to be developing.

How do I use this to prepare of the AF7 exam?

  1. Familiarising yourself with the AF7 exam should be a key element of your preparation. Don’t just read past exam papers, complete them UNDER EXAM CONDITIONS.
  2. There are key topics that most (if not all AF7 exams) will cover. Make sure you know know your stuff on these.
  3. Section 1 of the exam will cover a range of technical areas across the syllabus so make sure you have broad knowledge. Try our MP3 audio – nearly 4 hours of material that will help you to learn around your work or family commitments. Click here for details.

Related blogs: AF7 study options. Click here

Prepare well and be successful.

The Diploma Doctor