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CII R01 exam: the 5 myths

Like any exam, it helps if you understand the type of exam it is. Here are five common myths about the CII R01 exam. If you want to pass R01 first time, read on and go into the exam with your eyes open.

Myth 1. R01 is a nice easy introduction to the R0 exams.

Er, i don’t think so. Although the latest CII statistics show that the pass rate for R01 is ‘middle of the road’, it won’t feel like that when you are studying for it. People tend to find the R01 exam difficult because:
1. ‘regulation’ isn’t everyone’s cup of tea.  Yes, there are easy bits like the advice disclosure requirements – most people who have a little experience will know this. But there are also other bits with a bewildering array of acronyms such as MiFID, FIT and SYSC. You will need a high-level understanding of these but the challenge for some will be staying awake long enough to learn this; and
2. around 13 out of the 100 questions are multiple response questions. This means that there will be more than one correct answer to get a mark. These are much more difficult than the one from four standard question.  Work on the basis that if you get 50% of these correct, you are doing well.  The easiest R0 exam – statistically and from people’s feedback – is R05. Amongst other things, there are no multiple response questions at all in this subject.

Tip: The CII recommend 100 hours of study for R01. If you are new to the profession, you’ll need this and more. If you have some experience, you’ll probably need less than this but focus your study on those areas you are least familiar with.

Tip: Don’t feel you have to make this the first R0 exam you sit. In practice, many people sit it last as there is no serious overlap between R01 and the other R0 subjects.

Myth 2. It’s all about the FCA and regulation.

I have some sympathy with this view. Although the CII R01 exam ISN’T all about the FCA, it will probably feel like it is!  Let me explain.  The R01 syllabus has 11 elements. The first three of these account for 27 out of the 100 marks for the CII R01 exam and have no real  ‘FCA’ content.

Chapter 2, in particular, has little to do with the ‘FCA’ as it tests you – at a high level – on insurance-based products. This chapter requires a knowledge that is ‘broad but shallow’. Chapter 3 is all about legal concepts such as intestacy and powers of attorney so, again, this has nothing to do with ‘regulation’.

Tip: if you have purchased the CII’s R01 study text, then you automatically get access to RevisionMate online. Use the end-of-chapter test questions and find out how good your knowledge is in the areas you think you know. You might only have to do a bit of ‘topping-up’. More about RevisionMate in our 4th myth.

Myth 3.  The R01 exam tests each area of the text book with an equal number of questions

This is definitely incorrect. There are 11 elements to the CII R01 exam syllabus which are broadly reflected in the chapters in the CII study text. The three most heavily examined areas are:

  • Chapter 5 – which has a whopping 29 questions (all of them on the standard format basis)
  • Chapter 6 – which has 9 questions; 4 standard format and 5 multiple response; and
  • Chapter 7 – which has 13 questions; 5 standard format and 8 multiple response

Between them, these three chapters account for over half the total questions in R01. They also account for for all of the multiple response questions – and these are much harder to answer. It is almost impossible to pass the CII R01 exam without scoring well on these chapters.

Tip: If your revision time is short, focus on these key areas. For many people, chapter 8 is a doddle and chapters 9 and 10 just need a healthy dose of common sense. Invest your time revising chapters 5, 6 and 7 instead.

Click here for the link to the R01 exam syllabus

Myth 4. I need to know the detail.

Not usually. Accept that there will be some questions that are based on just one or two words in the text. For the remainder, R01 typically tests the broader application of knowledge. For example:

Chapt 2 – this includes a sizeable section on social security benefits. The good news is that there is unlikely to be more than 1 or 2 questions on these. Where questions are asked, they’ll tend to test what benefits someone would qualify for, rather than a monetary amount or the ‘bells and whistles’.

Chapt 5.2 -this covers each of the nine sections that make up the FCA rule book. You are unlikely to get a question along the lines of ‘in which section of the FSA rule book would you find the T&C rules?’ This would be dull and not very relevant. You are much more likely to get a question along the lines of: ‘A mortgage adviser is subject to which of the conduct of business rules?’. The answer would be MCOB and this is much more relevant because most of what a mortgage adviser does face-to-face with a customer is governed by these rules.

Tip: Do practice questions on RevisionMate (or otherwise) to get a feel for the level of detail you will need when studying the text.

Myth 5. I should read the R01 study guide from cover to cover.

Really?!  For many people, this could be the worst piece of advice they ever get. Anyone with some industry experience should usually do practice questions first, and use the text as a reference source. Sure, you will make loads of mistakes but you will learn from these. Even if you read the text from cover to cover, in isolation, most people will not remember much of it.

Click here for a link to effective revision techniques.

Click here for a students point of view on R01.


If you like learning on the go, click here for details of our audio material

For FREE practice papers and summary notes, click here

Until the next time…

The Diploma Doctor

CII exam results

R01 exam – 3 key technical areas you should know

A student’s perspective:

I’m Sam, I passed all of my R0 exams (including the R01 exam) within the last year and this is my view as a student.  Please bear in mind that I am writing this from the perspective of a 23 year old. I had little previous knowledge of the financial services industry prior to completing my diploma exams.

Here are three key technical areas that everyone sitting the R01 exam should know. These are three areas of the R01 exam that I, and others I have spoken to, found either technically difficult or confusing.

R01 exam: monetary vs fiscal policy – know the difference!

I found that questions on monetary and fiscal policies can be confusing when asked under the pressure in an exam. The government can influence how quickly the economy grows by using monetary policy, fiscal policy, or a combination of both. Here are the main differences between monetary and fiscal policy:

Monetary policy

  • This is concerned with the management of interest rates and the supply of money.
  • The increase of interest rates will generally reduce an individual’s ability to spend because if they have borrowing, this will cost more. A reduction in interest rates will do the opposite.
  • The government can also increase the supply of money through quantitative easing as a method to increase spending.
  • If the government were to reduce interest rates and increase money supply, these will incentivise individuals and businesses to borrow and spend more money. As a result, the economy will grow.

Fiscal policy

  • This is about the level of tax and spending.
  • The government can increase or reduce tax levels, to increase or decrease growth in the economy.
  • Government spending also has a big impact on the economy. Building a new railway, for example, uses concrete and steel. It also means more people are employed who then have money to spend which increases economic growth.
  • If the government wanted to increase economic growth using fiscal policies, it could reduce taxes and/or increase government spending.
  • The government usually has to borrow to fund this extra spending which it does by issuing gilts.

Tip: In the R01 exam, read the question closely to see whether it refers to monetary or fiscal policy.

R01 exam: COBS, ICOBS and MCOB

COBS, ICOBS and MCOB are found within the Business Standards part of the FCA handbook. These requirements govern most of the day-to-day (or conduct) rules that you will have come across in a regulated firm.

COBS (Regulatory rules for investment advice)

  • Apply to firms that deal in regulated life, pensions and investment actions, as well as deposit-taking businesses.
  • It places obligations on firms, such as a the disclosure requirements, suitability reports and on inducements and indirect benefits.

ICOBS (Regulatory rules for non-investment insurance advice)

  • ICOBS apply to firms conducting protection and general insurance business.
  • Before offering advice, the client must be supplied with various documents such as the Initial Disclosure Document (IDD) and Demands and Needs Statement, and clients must also be made aware of the cancellation periods, which is 14 days for general insurance and 30 days for pure protection contacts and PPI.

MCOB (Regulatory rules for home finance advice, i.e. mortgages)

  • MCOB apply to firms conducting mortgage lending and advising, home reversion plans and sale and rent back agreements.
  • How individual firms operate will have an effect on how MCOB rules affect them, with the 3 different compliance levels being Direct Authorisation, Appointed Representative and Introducer Status.
  • The difference between information and advice is also covered within MCOB, with information being accurate and neutral facts, whilst advice involves giving an opinion on the merits of a particular product.

Tip 1: the rules that apply to each of the three regimes are broadly similar, but the detail is different, reflecting the fact that investment business is more of a risk than the other two regulatory regimes. For example, investment advisers use a suitability report to confirm the advice they give. This is more detailed than the suitability letter that a mortgage adviser would give. This, in turn, more detailed than the demands and needs statement provided by a general insurance adviser. Each is intended to explain what the advice is and why it is suitable, but vary in terms of depth.

Tip 2: in the R01 exam, don’t try and remember which ‘block’ of the FCA handbook a rule can be found in or, for example, what ICOBS 5 is. The exam questions tend to test the use of the information, not if you can remember where to find it.

R01 exam: MiFID client categorisation – retail clients, professional clients and eligible counterparty

  • Any individual who receives advice must be classified by the firm into one of these three categories:

Retail client

  • A retail client could be classed as anyone who does not fit the criteria of being labelled a professional client or an eligible counterparty.
  • This will probably be 99%+ of the clients you deal with.
  • Retail clients get the most consumer protection, e.g. FSCS

Professional client

  • A professional client could be more experienced and knowledgeable by way of qualifications and/or their experience.
  • A professional client could be either ‘per se’ or ‘elective’.
  • A per se professional client is by virtue of their characteristics. For example, they would be a public authority, a company, national government or bank.
  • An elective professional client is therefore any client who is not one of the above per se clients, and is also not a retail client.  They must sign documentation acknowledging that they understand that they qualify for lower levels of investor protection.

 Eligible counterparty

  • A typical investment adviser is unlikely to ever come across this category. Whether someone is an elective or per se counterparty depends largely on the nature of the business transaction (not the experience or otherwise of the investor).
  • For example, arranging a deal at the request of the client would make that client an eligible counterparty.
  • You can also have a per se eligible counterparty, which would be a national bank, government or other financial institutions.

If you would like to study for your R01 exam whilst on the go, click here for details of a talking book

I hope that you find the focus on these three areas useful.

Sam Patterson