LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client asks for a 'guaranteed 8% return' product. The agent should:
- ADecline to discuss it, since a client who asks for a guaranteed return has unrealistic expectations
- Explain that no fund or annuity guarantees a market return; guarantees apply to capital or withdrawals, and a GMWB bonus is notional
- CConfirm that an 8% return can be arranged, since some segregated funds have averaged more than that
- DSell a GMWB as an 8% guaranteed return, since the bonus credited to the base is a form of guaranteed growth
Correct answer: B) Explain that no fund or annuity guarantees a market return; guarantees apply to capital or withdrawals, and a GMWB bonus is notional
Misrepresenting GMWB bonuses as returns is a known compliance problem. Accuracy is essential.
Why the other options are wrong
- AEducation is the right response.
- CPromising a guaranteed 8% return is misrepresentation.
- DThe bonus increases a notional base, not cash.
Exam tip
No guaranteed returns; GMWB bonuses raise a notional base only.
Common mistake
Describing a GMWB bonus as 'a guaranteed 5% return'.
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.