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G up and leave the competition behind

Just as fund managers have not felt the squ eeze in the same way as ins urers, so investment IFAs have not been squeezed as much as traditional life and pension outfits, which must throw up a number of question for those in life and pensions.

For non-investment IFAs, perhaps now is the time to consider a change in business emphasis. But, first, the neces sary exams need to be attained.

The CII recommends people get their AFPC exams if going down the investment adviser route. The IFA has to pass three exams. The G10 exam on taxation and trusts is mandatory but the candidate can choose from a range of opt ions for the other two.

Those wanting to specia lise in investment are recommended to choose the G20 on perso nal investment planning and G70 on investment portfolio management.

IFAs should start with G20 which aims to give candidates a fuller knowledge of investments and an ability to advise individual clients on the construction of investment portfolios to meet both their current and foreseeable future needs. The exam focuses on four main areas of investment starting with the fundamental principles of portfolio construction, which goes through the factors IFAs need to consider when building a portfolio as well as terminology and Stock Exchange practice.

The second section covers different forms of investment ranging from deposit-based investment and fixed-interest securities to offshore funds and property.

The next section focuses on analysing a client&#39s situation, where candidates are expec ted to be able to deal with cli ents whose overall levels of income and capital require a more sophisticated scheme of investment than is normally prepared by an FPC-level adviser.

The final part of the exam is the practical application of personal investment planning. This section teaches an IFA to construct a suitable portfolio and looks at pensions in investment planning, presenting reasoned recommendations and monitoring clients&#39 circumstances.

The G70 exam builds on the knowledge in G20 so candidates can describe investment markets and the main types of financial investments, explain how investment markets are affected by economic, technological and political conditions, explain the theory and practical implications of investment risk and portfolio theory, evaluate the success of investment strategies and asset allocation models and describe the regulatory requirements for investment portfolio management.

This exam is made up of 10 components and includes the economic environment, direct financial investments, collective investments and investment trusts, the interpretation of accounts, dealing in investment markets, portfolio design, performance assessment and financial calculations, as well as the regulatory environment.

To assist IFAs through these courses, the CII offers handbooks matching the syllabus and provides training courses. Exams are held twice a year.

The section on the econ omic environment aims to teach candidates to outline the main political, economic and social factors which affect investment values and returns. It looks at the role of governments in determining monetary and fiscal policy, interest rates, public sector finance, government borrowing, regulation of financial markets and other businesses.

The section on direct financial investments focuses on the various forms of investment starting with cash, moving through venture capital markets and finishing with derivatives. IFAs will study the characteristics, risk and return and methods of analysis for each topic.

Two other sections of the exam also cover different forms of investment. Collective investments and investment trusts looks at life-insurance based investments and Oeics among others. Other investments such as unlisted securities, enterprise investment schemes and physical assets and commodities are also examined.

The section on interpretation of accounts is meant to help IFAs learn how to interpret company accounts in an investment context, explain how accounts and annual rep orts are relevant to investment decisions and the limitations of such information, compare different company profiles and describe the use of acc ounting ratios, which will be helpful in making investment decisions.

Dealing in investment markets requires IFAs to be able to describe the mechanics of dealing in UK equity and fixed-interest investments, including the roles of market-makers and agency brokers, commission structures and other dealing costs, registration and settlement procedures.

They must also outline the nature of dealing in UK markets, including the Alternative Investment Market, compared with that of dealing in other international markets.

Managing investment risk and asset allocation and the role of the investment mana ger and adviser are both covered in the section on portfolio design.

Portfolio investment management, pensions, Peps, Isas and the management of other investments including unit trusts, offshore funds, funds of funds and pooled investments make up the fund management services part of the exam.

The section on performance assessment and financial calculations is about the principle of the time value of money, benchmarks and indices, und erstanding and using statistical data, investment criteria, switching and risk indicators.

The final section is on the regulatory environment and explains the conduct of investment business as it applies to investment managers and advisers . It includes the main FSA, SIB, PIA, SFA and Imro rules. If that is not enough, it also covers the responsibilities and expertise of investment managers and advisers as well as the investment services directive.

Investment exams are also offered by the Security Institute. Whereas the AFPC focu ses on collective investments, the Security Institute exams cover the various aspects of equities and bonds. There are two exams, the basic investment advice certificate and the higher level investment management certificate.

If you do decide to shift emphasis to capitalise on the better margins available on investment business, remember that the competition is tough. The bigger investment outfits have already cornered a substantial portion of the market and establishing a presence could prove difficult and costly.


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