All this week the Brand Financial Training team will be answering questions paraplanners have submitted regarding the upcoming exams, including specific exam questions, study tips and general questions on exam technique. Make sure you check our daily email every day for their help and insight.
Question: Do you have any tips on where to begin / which areas to look at that regularly appear/focus on for the AF4 exam, and how best to prepare in the first instance – e.g. past questions, memorising equations/ratios etc?
Answer: As with most CII exams, the exam guides will help you to understand what has come up in the most recent exam sittings and if you study enough of the guides you will start to see some common trends in the topics that are tested.
As with the other CII investment exams AF4 will test asset classes, investment advice, portfolio construction, investment ratios and analysis, and investment performance and reviews.
The specific topics that should form part of any AF4 revision programme include how to calculate Sharpe ratio, information ratio and alpha (and be able to explain how and why they are used) as well as dividend yields, price earnings ratio, net asset value etc. Money weighted and time weighted rates of return are also frequently tested and so it’s worth practising both of these as within the lower-level CII exams it is often just the theory that is tested rather than the actual workings out. Investment theory should also be studied; the efficient frontier, CAPM and behavioural finance have all been tested in the past.
Investment products will also appear in the AF4 exam and can often be the slightly less mainstream products such as REITs or EISs. Be prepared to be tested not only on the technical detail of the product but also how these would suit clients with the appropriate risk profile. Questions on risk generally should also be expected and you will need to use the information in the case study to work out the risks the clients are exposed to and refer to this in your answers.
Often the CII will throw in a question on current economic conditions, and this seems to be becoming more popular so you should keep abreast of what is happening with inflation and interest rates and understand how these impact the different asset classes.
AF4 does have a lot of cross-over with R02 and in particular J10 (in fact a lot of students choose to sit J10 close to AF4 due to the overlapping content) and these lower-level exams will provide good grounding, but it’s become increasingly obvious that candidates will need to read and research beyond this as well for the AF exam.
We always recommend mock papers as part of an exam revision plan as it will test your current knowledge and identify areas of weakness for you to focus on. Calculation workbooks are also available for the AF4 exam and provide vital practise for the types of calculations from the exam syllabus and many candidates find practical application help with memorising formula.
Whatever is covered in your exam you’ll need to be prepared and ensure you understand the different investment products, investment theory as well as the numerous formulas that form part of the AF4 syllabus.
Information in this article is correct as at 28 March 2022.
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