CIIN Certificate CF1 cheat sheet

The FCA is the statutory regulator for UK financial services; the PRA regulates prudential matters for banks and insurers.

The Financial Ombudsman Service handles complaints against firms and can award compensation up to its published limit per complaint.

The Financial Services Compensation Scheme protects deposits, investments and insurance at separate per-person limits per firm.

Firms must apply the Consumer Duty: act in good faith, avoid foreseeable harm, and enable customers to pursue their financial objectives.

Vulnerability: firms must identify and respond to customers with health, life-event, resilience or capability characteristics that raise harm risk.

Advice versus guidance: a personal recommendation is regulated advice; generic information without a recommendation is guidance.

The FCA's six consumer outcomes under TCF include products, price and value, consumer understanding and post-sale support.

A regulated firm must hold appropriate permissions; acting outside permissions is a criminal offence under FSMA 2000.

The six-step process: establish relationship, gather data, analyse, develop recommendations, implement, review and monitor.

Know Your Client requires facts on goals, time horizons, attitudes to risk, capacity for loss, dependants, income and existing arrangements.

Capacity for loss (ability to absorb falls) is distinct from risk tolerance (willingness to accept risk); both must be assessed.

The suitability report must explain the recommendation, why it suits the client, costs, and any disadvantages or risks.

Attitude to risk is measured with a consistent risk-profiling tool; the tool output must be checked against client discussion.

Ongoing service agreements define review frequency, scope and cost; without them, no ongoing advice charge is justified.

Vulnerability, capacity and conflicts of interest must be recorded; disclose any commission or third-party payment in cash terms.

Record-keeping: retain client files and suitability evidence for the period required by the regulator, typically at least five years.

Net worth = total assets − total liabilities; it measures wealth at a point in time, not cash flow.

Assets are listed at current market value, separated into liquid, investment and use (personal) assets.

Liabilities are split into short-term (under 12 months) and long-term; mortgage balance is the outstanding principal, not the original loan.

A cash flow statement records income and expenditure over a period; surplus or deficit is the net cash flow.

Net cash flow = total income − total expenditure; a negative figure means spending exceeds income and must be funded from assets or borrowing.

The current ratio = liquid assets ÷ current liabilities; a low ratio signals weak short-term liquidity.

The savings ratio = savings ÷ gross income; it shows the proportion of income retained rather than spent.

Exclude the family home from investment asset calculations when assessing income-producing capital, but include it in net worth.

Budgeting compares planned expenditure with actual expenditure; variances are analysed as favourable or adverse.

Emergency fund target is typically three to six months of essential expenditure, held in accessible cash.

Fixed costs (rent, insurance) do not vary with activity; variable costs (fuel, food) change with usage.

Prioritise debt repayment by interest rate: clearing the highest-rate debt first minimises total interest.

A budget surplus should be allocated in order: emergency fund, high-interest debt, then medium- and long-term goals.

Cash management keeps day-to-day funds in instant-access accounts while surplus cash moves to higher-yielding deposits.

Inflation erodes cash purchasing power; holding excessive cash beyond the emergency fund is a real-return risk.

Direct debits and standing orders automate saving and bill payment, reducing missed-payment charges.

Total return = income (dividends or interest) + capital growth; real return = nominal return − inflation.

Risk and return are positively related: higher expected return requires accepting greater volatility and potential loss.

Diversification across assets, sectors and geographies reduces unsystematic (specific) risk but not market (systematic) risk.

Asset allocation is the main driver of portfolio return variability; it should reflect time horizon and capacity for loss.

Equities suit long horizons; bonds and cash suit short horizons and capital preservation.

A Stocks and Shares ISA shelters capital growth and dividends from UK tax; a Cash ISA shelters interest.

Compound growth: future value = present value × (1 + r)^n, where r is the periodic rate and n the number of periods.

Correlation between assets drives diversification benefit; assets moving in opposite directions reduce portfolio volatility.

Risk treatment options: avoid, reduce, retain, transfer (insure) and share; insurance transfers specified risks to an insurer.

Insurable interest means the policyholder benefits from the subject's continued existence or suffers loss from its loss.

Indemnity restores the insured to their pre-loss financial position; it prevents profit from a claim.

Utmost good faith requires full and accurate disclosure of material facts at proposal and renewal.

Sum assured should reflect need: for life cover, debts plus income replacement less existing cover and assets.

Term assurance pays only on death within the term; whole-of-life cover pays whenever death occurs and has no fixed end date.

Critical illness cover pays a lump sum on diagnosis of a specified condition; income protection pays a proportion of income while unable to work.

Excess is the first part of a claim borne by the insured; a higher excess usually lowers the premium.

State Pension is based on National Insurance qualifying years; a minimum number of qualifying years is required for any payment.

Defined benefit schemes promise a set income based on salary and service; defined contribution schemes build a pot invested for retirement.

Money purchase annual allowance restricts tax-relieved contributions once flexible pension benefits have been accessed.

The annual allowance caps tax-relieved pension contributions; unused allowance can be carried forward for up to three years.

At retirement, options include annuity purchase, flexi-access drawdown and uncrystallised funds pension lump sums.

Pension commencement lump sums are typically tax-free up to a capped percentage of the fund; the remainder is taxable as income.

An annuity converts a pension pot into guaranteed income for life; rates depend on age, rates and health.

The lifetime allowance regime has been replaced; check current rules for any lump sum allowances applying to benefits.

Income tax is progressive: personal allowance, basic, higher and additional rates apply to bands of taxable income.

Taxable income = gross income − allowable reliefs − personal allowance; savings and dividend income have separate rate structures.

Capital gains tax applies to gains above the annual exempt amount; the rate depends on the asset and the taxpayer's income band.

Inheritance tax is charged on the estate at the standard rate above the nil-rate band; transfers to spouses are exempt.

The residence nil-rate band adds relief when the main home passes to direct descendants, subject to a taper for large estates.

Potentially exempt transfers become exempt if the donor survives seven years; taper relief reduces tax on the excess over the nil-rate band.

Gifts out of income are exempt if regular, made from surplus income and not reducing the donor's standard of living.

Pensions are generally outside the estate for inheritance tax, making them an efficient estate-planning vehicle.

The FCA's Principles for Businesses include integrity, skill and care, and treating customers fairly.

Client money must be held in a separate designated client account, segregated from the firm's own funds.

Conflicts of interest must be identified, managed and disclosed; personal account dealing is restricted.

Confidentiality applies to client information; disclosure is permitted only with consent or where required by law.

Inducements must not impair the duty to act in the client's best interests; banned commission on advised sales in the UK.

Fitness and propriety: individuals in controlled functions must be approved and meet conduct rules.

Whistleblowing and reporting breaches of rules are obligations; concealment of errors is a conduct breach.

Professional bodies' codes require competence, confidentiality, integrity and objectivity in client dealings.