CISI IAD Financial Planning Process

Question 1

What is the correct order of the financial planning process as outlined by the CISI?

Accepted Answer

Establish relationship, gather data, analyse and evaluate, develop recommendations, implement, review

Answer

Implement, review, establish objectives, gather data

Answer

Gather data, establish objectives, construct portfolio, implement, review

Answer

Recommend products, gather data, implement, charge fees

Question 2

When conducting a fact-find for a new client, which of the following is LEAST likely to be relevant?

Accepted Answer

The make and model of the client's car

Answer

The client's current income and expenditure

Answer

The client's attitude to risk and capacity for loss

Answer

The client's existing investment holdings and pension provisions

Question 3

What is the difference between 'attitude to risk' and 'capacity for loss'?

Accepted Answer

Attitude to risk is the client's willingness to accept risk; capacity for loss is their financial ability to absorb losses without affecting their standard of living

Answer

They are the same concept measured differently

Answer

Attitude to risk applies to equities only; capacity for loss applies to bonds

Answer

Capacity for loss is always higher than attitude to risk

Question 4

A client aged 55 wants to retire at 60 with a target income of £40,000 per year. Which of the following is the MOST important factor to assess first?

Accepted Answer

The client's total retirement provision including State Pension entitlement, defined benefit schemes, and defined contribution pots

Answer

The current performance of the FTSE 100

Answer

The latest fund management charges across all platforms

Answer

Whether the client qualifies for a Junior ISA

Question 5

Under FCA rules, what is the difference between 'independent' and 'restricted' financial advice?

Accepted Answer

Independent advice considers all retail investment products across the whole market; restricted advice is limited by product type, provider, or both

Answer

Independent advice is free of charge while restricted advice incurs fees

Answer

Independent advice is only available to high-net-worth clients

Answer

There is no regulatory distinction between the two

Question 6

What is the purpose of a 'cash flow forecast' in the financial planning process?

Accepted Answer

To project the client's income, expenditure, and capital over time to determine if their financial objectives are achievable

Answer

To predict stock market movements over the next 12 months

Answer

To calculate the tax liability on a specific investment

Answer

To determine the ideal asset allocation for a portfolio