LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A business owner client with an incorporated company asks about investing surplus corporate cash. The profile should note:
- AThat the owner's personal RRSP room applies, since the corporation's surplus is really the owner's money
- BThat corporations cannot hold segregated funds, since the contracts require an individual life insured
- That the corporation is the investor, with its own tax treatment, objectives and creditor considerations
- DThat nothing differs from a personal investment, since the owner controls the corporation's decisions
Correct answer: C) That the corporation is the investor, with its own tax treatment, objectives and creditor considerations
Corporate investors have distinct tax and objective profiles. Segregated funds' potential creditor protection is a consideration but not a guarantee.
Why the other options are wrong
- ARRSP room is personal; a corporation cannot use it.
- BCorporations invest in segregated funds routinely, with an annuitant named.
- DThe investor's identity changes the tax and suitability analysis.
Exam tip
Corporate investor: separate tax, objectives, creditor considerations.
Common mistake
Profiling the owner personally when the corporation is the investor.
What this tests
CISRO competency component 1.1 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
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