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Level 4

Overview

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Investment Principles and Risk (R02)

Investment Principles and Risk (R02) develops your knowledge and understanding of investment products and the application of the investment advice process.

The default Enrolment option for this unit includes:

  • Latest version of the core learning content, in digital format only.
  • Additional revision aids.
  • Assessment entry.

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An adviser requires a thorough knowledge of the various investment products available in the marketplace when providing advice. The circumstances of every individual are unique, and it is essential that an adviser considers which investment products are appropriate to meet the varying needs of a client before making any recommendations. The adviser must be able to explain fully to the client, in a way that they will understand, how each product that is recommended meets the identified financial goals and objectives of the client. Options need to be fully described and the relative advantages and disadvantages of alternatives pointed out.

We start by looking at the characteristics, inherent risks, behaviour and correlation of asset classes before considering the macro-economic environment and its impact on asset classes. We then look at the merits and limitations of the main investment theories and the principles of the time value of money. 

The unit looks at the characteristics, risks, behaviours and tax considerations of investment products before looking at the investment advice process, the principles of investment planning and the analysis of performance of investments.

Building a successful career in personal finance

Investment Principles and Risk (R02) is a core unit for the Diploma in Regulated Financial Planning which meets the FCA’s qualification requirements for retail investment advisers. This unit is relevant for paraplanners, technical consultants and those in financial planning support roles. It is also relevant for those seeking additional CII credits towards completion of the Diploma in Financial Planning. those who do not hold additional CII credits counting towards completion of the Diploma in Financial Planning.

Purpose

At the end of this unit, candidates will have investigated the:

  • characteristics, inherent risks, behaviour and correlation of asset classes, and investment products;
  • macro-economic environment and its impact on asset classes;
  • merits and limitations of the main investment theories;
  • nature and impact of the main types of risk on investment performance;
  • performance of investments.

Assessment

  • 2 hour exam
  • 100 multiple choice questions
  • The nominal pass mark is 65%
  • The 2020 pass rate for this unit was 64%

Study material - editions available

2020-21 edition (applicable to exams sat 01 Sep 2020 to 31 Aug 2021).