In this article we look at the imprtance of being able to undertake a critical analysisi. The level of education, training, and experience that a professional has will make a big difference in the quality of the advice you receive. A Financial Adviser must provide accurate, timely financial analysis and advice to their clients in order to create an understanding of how well their financial plans will perform and measures their success relative to that projection. The process is ongoing and should serve as an astute guide to managing their finances.
Critical analysis allows you to have greater clarity on the issues and information you process whilst maintaining an objective position. When you think critically, you weigh up all sides of an argument and evaluate its strengths and weaknesses. You should actively research all sides of an argument, testing the feasibility of the claims made, as well as testing the feasibility of the evidence used to support the claims.
This is why being able to perform a critical analysis will crop up in many of your financial services exams within the CII, CISI and LIBF. A key skill, if hoping to pass a level 6 paper, is that of critical analysis. Basically, the objective analysis of facts to form a judgement. This can be broken down into three basic components:
A key skill, if hoping to pass a level 6 paper, is that of critical analysis
- State – As if you were listing. What is the factor you are considering?
- Analyse – What are the broad implications of the factor? What other information in the case study comes into play?
- Evaluate – What does it mean in the context of the person in the case study?
So, let’s look at the CII’s AF8 exam that it is assessed entirely via coursework. There are 3 assignments you need to complete within 12 months from the date of enrolment. With concepts such as financial objectives, estate planning, taxation, cash flow modelling, risk profiling, asset allocation, vulnerable clients, and investment risk all featuring in the syllabus. It is fair to conclude that this is (very much like the AF7 exam), not just a technicians’ technical qualification, but is a practical, pragmatic assessment of the ability to provide sound retirement income planning advice. In particular, the coursework structure allows for critical analysis of the subject matter being tested AND requires the ability to give sound recommendations.
The CISI PCIAM exam also requires candidates to undertake a critical analysis of something in the exam, such as a concept like CAPM, or the suitability of an investment portfolio. One question type that candidates have found difficult is the analysis of the client’s portfolio. Even though financial advisers do this on day-to-day basis but when faced with exam conditions and the clock is ticking we can often ‘forget’ how to apply this skill onto paper.
The LIBF PETR (award in Pension Transfers) is a twice-yearly exam, where 50% of the marks are based on a case study. It is a 3 hour written exam, partly focused on the critical evaluation of a pension transfer case study. We can see a common theme with the CII, LIBF and CISI exams and that is critical evaluation and critical thinking are KEY.
This is an important skill to master. By applying a few basic rules and understanding what to ‘critically analyse’ means you will approach your exam paper with improved confidence:
- Identify the significance
- Evaluate strengths and weaknesses
- Weigh one piece of information against another
- Make reasoned judgments
- Argue a case according to the evidence
- Shows why something is relevant or suitable
- Indicate why something will work best
- Identify whether something is appropriate or suitable
- Weigh up the importance of the component parts
- Evaluate the relative significance of details
- Structure information in order of importance
- Show the relevance of links between pieces of information
- Draw conclusions
When you write your assignment or answer that exam question, make sure you don’t simply describe what you are evaluating. You will get more marks for analysis, that is, clearly providing your judgement, and supporting it.
- To critically analyse or evaluate means to break something down; provide your opinion on each part by asking the right type of analytical questions; and support your opinions with evidence. [State, Analyse, Evaluate]
Critical Analysis was historically up at Level 7, but with the exam bodies introducing it into their Level 6 exams, this is now the world in which we live! Time to embrace this concept, apply it and prepare yourself to pass.
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