Free CISI Intro Practice Questions: Financial Advice

Use this focused CISI Intro page as a short practice test for Financial Advice. The items are original Finance Prep sample exam questions built for scenario-based practice, not trivia, puzzle questions, official CISI questions, copied live-exam content, or exam dumps.

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Sample questions

These are original Finance Prep practice questions aligned to this topic area. They are not official CISI questions, copied live-exam content, or exam dumps. Use them to preview question style and explanation depth before continuing with topic drills, mixed sets, and timed mock exams in Finance Prep.

Question 1

Topic: Financial Advice

An adviser suspects that an investment opportunity may be a scam. What is the most appropriate immediate response?

• A. Pause the transaction and follow the firm’s escalation procedures
• B. Check whether FSCS cover would apply before deciding
• C. Proceed if the client signs a disclaimer
• D. Wait until a financial loss is confirmed

Best answer: A

What this tests: Financial Advice

Explanation: When a scam is suspected, the key principle is prevention and prompt escalation. The adviser should pause any transfer, subscription, or other instruction and follow the firm’s internal reporting or financial-crime process so the concern can be reviewed properly. A client disclaimer does not remove the adviser’s responsibility to act appropriately, and possible FSCS protection is not a reason to continue with a doubtful investment. Waiting until money has actually been lost is also wrong, because the aim is to prevent harm before it happens. The best response is therefore to stop and escalate the matter immediately.

• A signed disclaimer does not make it appropriate to continue when there are scam concerns.
• Waiting for an actual loss is too late; suspicion should be acted on promptly.
• Checking possible FSCS protection is not the deciding step, because compensation is not a substitute for preventing harm.

A suspected scam should trigger an immediate pause and internal escalation rather than reliance on waivers, compensation, or hindsight.

Question 2

Topic: Financial Advice

Hannah wants to invest £300 each month into a stocks and shares ISA holding a UK equity OEIC. She says she is comfortable with stock market falls and does not expect to need the money for at least 15 years. After essential household spending, she has only £120 a month left. What is the adviser most likely to identify as the key issue?

• A. The investment horizon is too short.
• B. The £300 monthly contribution is unaffordable.
• C. A stocks and shares ISA is the wrong wrapper.
• D. Her attitude to risk is too adventurous.

Best answer: B

What this tests: Financial Advice

Explanation: Affordability asks whether a client can realistically make and maintain the investment without harming their day-to-day finances. Here, Hannah wants to invest £300 per month but has only £120 left after essential spending, so the planned contribution is not affordable.

Suitability is broader and looks at whether the investment matches the client’s objectives, time horizon, and circumstances. A 15-year horizon can support long-term equity investing, so suitability based on time horizon is not the main problem in this case. Attitude to risk is the client’s willingness to accept volatility; Hannah has said she is comfortable with market falls, so that is not the key concern either.

A product can be suitable in principle and still be inappropriate if the contribution level is unaffordable.

• Risk willingness: Being comfortable with market falls describes attitude to risk, not whether the monthly payment can actually be sustained.
• Time horizon: A 15-year horizon is generally long enough for equity-based investing, so short-term suitability is not the issue here.
• Wrapper choice: A stocks and shares ISA can be a sensible wrapper for long-term investing; the problem is the amount she wants to contribute.

With only £120 left after essential spending, committing £300 a month is not affordable even if she accepts investment risk and has a long horizon.

Question 3

Topic: Financial Advice

An adviser receives a call from Daniel about his mother, Mrs Evans. Her ISA and its cash balance are in Mrs Evans’s sole name. Daniel asks the adviser to invest £12,000 of the cash in an income share. Mrs Evans has not given written dealing authority for Daniel, and no lasting power of attorney is on file.

Which response is most appropriate?

• A. The yield is 5%, but the adviser should first establish Daniel’s legal authority to act for Mrs Evans.
• B. The yield is 5%, so the adviser may accept Daniel’s instruction because he is a close family member.
• C. The yield is 0.5%, so the adviser should leave the ISA cash uninvested on product grounds.
• D. The yield is 20%, so the adviser should recommend the share as the higher-income choice.

Best answer: A

What this tests: Financial Advice

Explanation: A simple yield calculation does not remove the need to confirm who can give instructions. The dividend yield is the annual dividend divided by the share price: 10p / 200p = 5%. However, the decisive issue is that the ISA and cash are in Mrs Evans’s sole name. Daniel’s family relationship does not automatically make him her agent. Before acting on any instruction, the adviser should confirm suitable authority, such as valid dealing authority or a lasting power of attorney where relevant.

• A correct yield calculation alone is not enough to accept instructions from someone without authority.
• Dividing the price by the dividend gives 20%, which reverses the dividend-yield formula.
• Treating 10p / 200p as 0.5% misplaces the decimal point and misses the legal authority issue.

The dividend yield is 10p / 200p = 5%, but Daniel cannot instruct on a sole-name account unless he has authority to act.

Question 4

Topic: Financial Advice

During an initial advice meeting, Mr Patel is accompanied by his adult daughter. She says he wants to invest £90,000 from a maturing deposit and asks the adviser to take all instructions from her. Mr Patel appears unable to explain why the investment is being made or what risk he is prepared to take. The daughter says she has a lasting power of attorney, but she has not brought any documents. What is the best next step for the adviser?

• A. Pause the investment recommendation until Mr Patel’s capacity and the daughter’s legal authority to act have been established.
• B. Proceed if the daughter signs the application and confirms the instructions in writing.
• C. Open the investment in the daughter’s name so she can manage it for him.
• D. Recommend a low-risk fund because Mr Patel appears uncertain about investment risk.

Best answer: A

What this tests: Financial Advice

Explanation: In financial advice, the adviser must know who the client is and who has authority to give instructions. Where a client may lack capacity, or where another person claims to act on the client’s behalf, the process should not move straight to product selection. The adviser should pause, verify the legal position, and obtain evidence of any valid authority such as a lasting power of attorney. Only after the adviser is satisfied that instructions can properly be accepted should the fact-find, suitability assessment, and recommendation proceed. A cautious product does not solve a capacity or agency issue, and written confirmation from an unauthorised person is not enough.

• Choosing a low-risk fund skips the safeguard of establishing whether valid instructions can be taken.
• Opening the investment in the daughter’s name changes ownership and is not justified by the facts.
• A signature from the daughter is not sufficient unless her legal authority to act has been verified.

The immediate issue is whether valid instructions can be accepted, so capacity and agency must be checked before product advice proceeds.

Question 5

Topic: Financial Advice

An adviser is comparing a cash deposit with a UK equity fund for a client. The client says she is comfortable with stock market volatility and does not expect to need the money for ten years. However, the money is also her only emergency reserve, and a significant fall in value would leave her unable to meet rent and essential bills. Which suitability factor is the decisive differentiator?

• A. Capacity for loss
• B. Communication preference
• C. Attitude to risk
• D. Affordability of contributions

Best answer: A

What this tests: Financial Advice

Explanation: Suitability involves separating a client’s willingness to take risk from their financial ability to bear loss. Here, the client’s stated comfort with volatility indicates a higher attitude to risk, and the ten-year period suggests a long time horizon. The decisive issue is that the capital is her only emergency reserve and a fall in value would affect essential spending. That points to limited capacity for loss, which can make a riskier investment unsuitable even where the client says they are comfortable with risk.

• Attitude to risk is the client’s psychological willingness to accept volatility; the stem says she is comfortable with this.
• Communication preference concerns how the client wants information provided, not whether losses would harm her finances.
• Affordability of contributions is about whether payments or costs can be met, not the impact of a fall in an existing capital sum.

Capacity for loss concerns whether the client could financially withstand a fall in value without damaging essential commitments.

Question 6

Topic: Financial Advice

Which activity is best classified as a tax-awareness point in the financial advice process, rather than a product recommendation, legal advice, or a consumer-rights matter?

• A. Advising a client to buy a named OEIC because it is suitable for their objectives and risk profile
• B. Drafting wording for a trust deed to ensure assets pass to chosen beneficiaries
• C. Explaining that an ISA can shelter investment income and gains from UK tax, while suggesting specialist tax advice if needed
• D. Telling a client how to refer an unresolved complaint to the Financial Ombudsman Service

Best answer: C

What this tests: Financial Advice

Explanation: A tax-awareness point means recognising and explaining a broad tax feature that may affect a client’s investment decision, such as the general tax sheltering benefit of an ISA. It should not be confused with recommending a specific investment product, which requires suitability assessment, or giving specialist tax advice, which may require separate expertise. Drafting legal documents, such as a trust deed, crosses into legal advice. Explaining complaint escalation or redress routes concerns consumer rights rather than tax awareness.

• Recommending a named OEIC as suitable is a product recommendation, not merely tax awareness.
• Drafting a trust deed is a legal-advice activity and is outside ordinary investment product explanation.
• Referring a complaint to the Financial Ombudsman Service concerns consumer rights and complaint handling.

This identifies a tax feature at a high level without recommending a specific product or giving specialist tax advice.

Question 7

Topic: Financial Advice

A client contacts an investment firm asking to sell a long-held portfolio and send the proceeds to a new account after being told by an online promoter that the opportunity is “guaranteed” but closes today. During the call, another person answers several questions for the client, but no power of attorney or other authority is recorded. Which high-level response best matches appropriate conduct?

• A. Refer the client directly to the Financial Ombudsman Service before taking any further internal action.
• B. Process the sale promptly because the client has requested it and investment timing is important.
• C. Accept the other person’s involvement as implied authority because they are helping the client communicate.
• D. Pause the instruction, verify the client’s authority and wishes, and escalate under the firm’s vulnerability and scam procedures.

Best answer: D

What this tests: Financial Advice

Explanation: Where there are signs of vulnerability, undue influence, suspected fraud, or unclear authority, the appropriate high-level response is to slow down and protect the client. A firm should verify who is authorised to act, confirm the client’s own wishes where possible, and follow internal escalation procedures for vulnerable clients and suspected scams. A time-limited “guaranteed” offer, a new payment destination, and an unauthorised third party speaking for the client are all warning signs. The firm’s role is not to block every unusual transaction automatically, but it should not proceed blindly when the facts suggest potential harm or invalid authority.

• Processing the sale promptly ignores the scam and undue-pressure indicators.
• The Financial Ombudsman Service deals with complaints; it is not the first internal control for a suspected live scam.
• A helpful third party does not automatically have legal authority to instruct the firm.
• Verification and escalation are proportionate because the concerns relate to both client protection and authority to act.

The warning signs point to possible scam activity, undue pressure, and unclear authority, so the firm should not simply process the instruction.

Question 8

Topic: Financial Advice

A client with a young family asks an adviser for help because, if they died or became too ill to work, the household could not meet mortgage and childcare costs. They already have an emergency cash reserve and are not currently seeking capital growth from spare savings. Which advice area best matches the client’s primary need?

• A. Retirement planning
• B. Tax planning
• C. Investment planning
• D. Protection planning

Best answer: D

What this tests: Financial Advice

Explanation: Financial-advice areas are usually identified by the client need being addressed. Here, the decisive feature is the risk of the family losing income if the client dies or becomes too ill to work. That points to protection planning, which considers products such as life assurance, critical illness cover, or income protection. Investment planning would focus on using capital to seek growth or income, which the client is not currently asking for. Retirement planning would focus on pension income and later-life needs, and tax planning would focus on arranging affairs efficiently for tax purposes.

• Investment planning is less suitable because the client is not asking how to invest spare money for growth or income.
• Retirement planning is not the main area because the concern is an immediate family-protection risk, not retirement income.
• Tax planning may be relevant in wider financial planning, but tax efficiency is not the stated problem.

The need is to protect dependants against death or serious illness, which is a protection-planning issue rather than a capital-investment decision.

Question 9

Topic: Financial Advice

A client is considering a regular investment of £500 per month into an equity fund. She says she is comfortable with short-term falls in value and wants long-term growth. Her monthly cash-flow figures are:

Which adviser conclusion best distinguishes affordability from suitability and attitude to risk?

• A. It appears unaffordable by £50 per month; risk tolerance is separate and does not by itself make the investment suitable.
• B. It appears affordable with £450 left each month; risk tolerance then confirms the investment is suitable.
• C. It appears affordable with £950 left each month; the contribution should be added to available cash.
• D. It appears unsuitable solely because equities can fall in value; affordability is not relevant once risk tolerance is known.

Best answer: A

What this tests: Financial Advice

Explanation: Affordability is about whether the client can meet the payment from income and available cash flow. Here, available monthly cash before the investment is £3,000 - £2,100 - £450 = £450. A £500 monthly contribution would create a £50 shortfall, so the regular investment is not affordable on these figures. Attitude to risk is a separate assessment of how comfortable the client is with investment volatility. Suitability is wider still, covering objectives, risk, affordability, term and circumstances. A client may accept equity risk and want long-term growth, but that does not make an unaffordable contribution suitable.

• Treating the £450 surplus as money left after the contribution ignores the proposed £500 payment.
• Adding the contribution to available cash reverses the cash-flow effect and overstates affordability.
• Equity volatility is relevant to risk, but it does not replace the need to assess affordability and overall suitability.

The client has £450 available before the proposed £500 contribution, so there would be a £50 monthly shortfall.

Question 10

Topic: Financial Advice

A client meeting raises several separate matters: choosing between a stocks and shares ISA and a SIPP for new savings, preparing a cash-flow plan, deciding whether a disputed lasting power of attorney gives the client authority to sign for her father, understanding the general tax treatment of an ISA, and knowing how to pursue a complaint against a regulated firm. Which response best matches the boundary between financial advice and legal advice?

• A. Refer the cash-flow plan to a solicitor; treat the ISA tax treatment as consumer redress.
• B. Refer the ISA tax treatment to a solicitor; treat the complaint route as product advice.
• C. Refer the disputed power of attorney authority to a solicitor; treat the ISA/SIPP comparison as product advice.
• D. Refer the ISA/SIPP comparison to a solicitor; treat the disputed power of attorney authority as cash-flow planning.

Best answer: C

What this tests: Financial Advice

Explanation: A financial adviser may assess objectives, risk, affordability and suitability, then recommend an investment product or wrapper such as an ISA or SIPP. Preparing a cash-flow plan is financial planning. Explaining the broad tax features of an ISA is tax awareness, although detailed personal tax advice may require a tax specialist. Explaining how to complain about a regulated firm is a consumer-rights matter. By contrast, deciding whether a disputed lasting power of attorney is legally valid and gives authority to sign investment instructions concerns legal capacity and legal authority, so it should be referred to a solicitor.

• A product comparison does not become legal advice simply because investment wrappers have rules.
• Complaint routes are consumer-rights matters, not product recommendations.
• Cash-flow planning supports affordability and objectives; it is not a legal-capacity decision.

Legal authority under a disputed power of attorney is a legal-capacity issue, while recommending between wrappers after assessing needs is product advice.

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