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Catriona Standingford: Prove your business financial planning credentials

Are you missing an opportunity to offer planning to clients
who run their own business?

Business financial planning is an area that does not experience a huge take-up in terms of exam entry. But how many individuals in search of personal financial planning also run their own business and may not be aware of the benefits of financial planning for that business? Is this an opportunity being missed?

If this is an area that interests you, the business financial planning exams offered by the Chartered Insurance Institute may be worth a look. The CII offers two units in this area: J03, The Tax and Legal Aspects of Business; and AF2, Business Financial Planning.

J03 is a Level 4 unit examined via a two-hour paper consisting of 15 short-answer questions whereas AF2 is a Level 6 unit consisting of a three-hour paper with a case study structure. Pass rates are relatively low although not as low as for other exams at their level. In 2018 J03 had a pass rate of 59.09 per cent, up from 50 per cent in 2017, and AF2 had a pass rate of 51.66 per cent, up from 48.28 per cent in 2017. It is clear that both units require a great deal of work to secure a pass and should not be underestimated.

This could be an opportunity for those looking for another string to their bow

Syllabus similarities

If you look at the syllabus for each of J03 and AF2, you will see many similarities. Perhaps this is why some candidates choose to sit both. J03’s objective is to “develop an understanding of corporate taxation and business” and the unit covers the main legal forms of business in the UK:

  • Business accounting and the interpretation of accounts
  • Options for financing a business
  • Taxation and allowances
  • Employment law
  • Business protection
  • Pensions

AF2’s objective is to “develop in-depth financial planning skills related to business”. It looks at the main legal forms of business:

  • Bankruptcy and insolvency
  • Business financing
  • Accounts and financial controls
  • Sale and purchase of businesses
  • Taxation
  • Legal responsibilities to employees
  • Suppliers and customers
  • Business protection
  • Pensions

We review each J03 and AF2 paper set in the yearly April and October sittings and, over the years, bankruptcy has been a common J03 question, with ratios also appearing frequently.

The October 2018 paper tested working capital ratio and the quick ratio, so it is important candidates know all the formulae that could come up. Staying with J03, buy-and-sell agreements and cross-option agreements are also tested often, as are key person insurance and knowledge of The Partnership Act 1890. These areas need to be carefully studied and revised.

One area regularly found challenging to revise is the chapter in the manual on employment law; many candidates will not necessarily be dealing with large employers and some of the detail may be new to them.

Catriona Standingford: CII exam on securities and dealing is a real asset

You don’t see quite as much overlap between one paper and the next for AF2 so it is always useful to review exam guides going back a good few sittings.
However, as with J03, the AF2 paper normally has a question that includes business protection, but bear in mind with AF papers it is all about the application of technical knowledge, not just a repetition of facts. Answers should, where possible, be related to the case study.

In AF2 there is often a question on pensions. In October 2018 candidates were tested on: the rules governing a SSAS loan to the business; a calculation to work out the pension contribution needed to buy a property with maximum borrowing; and finally, the tax treatment of the required pension contribution. This question was worth more than 30 per cent of the 80 marks on offer so was significant.

With the number of advisers studying for J03 and/or AF2 being low, this could be an opportunity for those looking for another string to their bow. The J03 manual is the core resource for both J03 and AF2 and, with sittings of both exams in April and October each year, it may be worth considering entering both at the same time.

Catriona Standingford is managing director at Brand Financial Training



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