CeMAP FRE2 Advice Skills: Fact-Finding to Recommendation question: order of priorities

CeMAP FRE2Advice Skills: Fact-Finding to Recommendation

A couple with a new baby have £300 a month spare. They have no emergency fund, no life cover, a mortgage, and want to start investing for their child's university. Which order of priorities is most appropriate?

A Invest for university first, because starting early gives the most growth
B Overpay the mortgage first, because it is their largest debt
C Split the £300 equally between investing and overpaying the mortgage, so both goals move forward
D Protection and an emergency fund first, since those risks are the most serious, then university

Show the answer and explanation

Answer: D. Protection and an emergency fund first, since those risks are the most serious, then university

Advisers usually prioritise needs so that the most serious risks are covered first: protecting the family against death or illness of an earner and building an emergency fund come before long-term investment goals (FSRE LO6 AC6.1 assessment and analysis; MoneyHelper guidance). Overpaying a mortgage at a modest rate before having a cash buffer or protection reduces flexibility, and splitting the money between investing and overpaying still leaves the family unprotected.

Common mistake

Starting with the most exciting goal rather than the most important risk.

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Original practice material mapped to the published CeMAP FRE2 learning outcomes. Independent, not endorsed by Walbrook (formerly LIBF). Verify figures and rules against current guidance before relying on them.