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Reach an understanding

The Chartered Insurance Institute continues its guide to qualifications with exam tips on passing RO1 – financial services, regulation and ethics and why candidates must grasp how facts are linked together

In this unit, candidates must show that they understand:

  • The UK financial service industry in its European and global context
  • How the retail customer is served by the financial services industry
  • The Financial Services Authority’s regulatory framework, powers and responsibilities to protect the consumer
  • The legal concepts and considerations relevant to financial advice
  • The CII’s code of ethics and its impact on the business behaviours of individuals.

The R0 suite of qualifications was introduced in 2010 in response to the RDR and it is designed to offer a structured route to level four.

As such, two key factors differentiate R0 qualifications from other CII qualifications that candidates may have sat recently or may remember from the last time they took a financial services exam.

First, the learning requirement at qualifications and credit framework (QCF) level 4 is often focused on “understanding” as opposed to previous qualifications such as the financial planning certificate which focused on “knowledge”.

The difference is subtle, yet important.

Many candidates will need to attune themselves to the learning and assessment requirements that flow from this. They may often need to demonstrate more than the grasp of plain facts.

They need to grasp how certain facts are linked together or be able to identify causal relationships. Second, R01 contains both standard multiple choice and multiple response (true/false) questions. Candidates may remember true/false questions many years ago in FP2.

They present a sequence of options where the candidate has to select either true or false for all the options rather than just the one correct option.

A topic which would require several questions, such as the regulatory position for a given scenario or the requirements when providing regulatory advice, can be tested in one.

There can be between four and six responses in a question and several of these responses may be correct. The candidate has to identify all the correct options in order to get the mark. This requires candidates to revise the subject matter in more depth. Linkages between certain facts may also need to be understood.

With these points in mind, candidates should concentrate on specific areas in the unit.

1: Understand the UK financial services industry in its European and global context 

2: Understand how the retail consumer is served by the financial services industry 

Candidates should look beyond their own business or employer. The learning outcomes being examined are macro in their nature and take a top-down view of the whole sector, including how it works with Europe. Candidates should particularly focus beyond their own business when looking at EU regulations and the interaction between the EU and the UK.

3: Understand legal concepts and considerations relevant to financial advice 

At level 3, it may have been sufficient to know terms such as executor or trustee but in R01, candidates need to display an understanding behind these terms, particularly in respect of trust law and the administration of trusts.

4: Understand the regulation of financial services 

The focus of this learning outcome is wider than just the FSA’s rulebook. While the FSA is the sole regulator, there are other regulatory bodies that impact upon the provision of financial services. Candidates need a good understanding of the wider regulation of the sector.

5: Understand the FSA’s responsibilities and approach to regulation 

Again, candidates should look beyond their own regulatory status, as it tests many areas of regulation that candidates may have come across in their daily activities but which are central to the qualification. Remember, just because a candidate does not practise what they study in their present job role does not mean that this area will not be tested.

6: Apply the principles and rules as set out in the regulatory framework 

This area offers candidates an excellent opportunity to demonstrate their understanding as the content deals with specific rules and legislation. Candidates need to look beyond their own company’s interpretation and implementation of the rules and into the underlying legislation. Do not rely purely upon internal company training.

7: Apply the regulatory framework in practice for the consumer 

8: Understand the range of skills requirements when advising clients 

These outcomes are closely linked to the everyday activities of those involved in giving advice. Candidates should focus on the relationship between advisers and clients and identifying solutions that are adapted to client’s wants and needs.

9, 10, 11: Anything to do with ethics and in particular unit 11: Critically evaluate the outcomes that distinguish between ethical and compliance- driven behaviours 

It could be argued that testing on ethics introduces a degree of subjectivity into an objective testing qualification. Regardless, it means candidates expecting to see clear-cut, black and white outcomes to questions can be surprised by the content. As a consequence, they may struggle to grasp the concept being tested within ethical dilemmas and conflicts.

Ethical conduct is a recent addition to the regulatory landscape and some candidates need to be careful not to rely too often on the study text in the hope that questions in the examination will mirror it.

Our recommendation would be for candidates to focus on what actions in the financial services sector would be regarded by most observers as acting ethically.

Alternatively, candidates should consider what the proper and ethical course of action would be in typical scenarios found within the financial services sector.

The key is to consider what is required ethically, which may be more than what is meant by simply acting in a way that is compliant with regulation.

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