LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client agrees to move gradually from a money market fund into equity funds within the same contract. The agent should confirm that:
- Aeach scheduled switch is a redemption from the contract and reduces the guaranteed amounts
- Bthe arrangement requires a new application and a fresh rescission period on each transfer
- Cthe insurer guarantees that the transfers will be made at the lowest prices of the year
- the switches occur within the contract, so the guarantees continue on the amounts held
Correct answer: D) the switches occur within the contract, so the guarantees continue on the amounts held
Scheduled transfers between funds in one contract are switches, not withdrawals, so the guarantees are unaffected. The agent should set the schedule and review it, explaining that the aim is discipline rather than better timing.
Why the other options are wrong
- AA switch keeps the money inside the contract and does not reduce the guarantees.
- BNo new application is needed for transfers within an existing contract.
- CNo one can guarantee that transfers will occur at favourable prices.
Exam tip
Within-contract transfers are switches; only money leaving the contract cuts guarantees.
Common mistake
Warning a client about guarantee reductions on a transfer that never leaves the contract.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 3
- A client's spouse must sign for:
- When the insurer requests additional information after the application (for example, source of wealth for a large deposit), the agent should:
- The implementation of a recommendation involving a switch from one seg fund to another within a contract requires:
- A client wishes to designate a charity as beneficiary of a segregated fund. Implementation should:
- For a deferred annuity implemented for a client, the agent should confirm:
- The agent's record of the implementation should be retained:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.