LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client asks how much she needs to have saved to retire. The agent's approach is to:
- Estimate desired income, subtract government and pension income, and calculate the capital to fund the gap
- BQuote a round figure based on the rule of thumb that retirees need a multiple of their final salary
- CUse the figure her friend was given, since the two households have similar incomes
- DDecline to answer, since projecting retirement needs is beyond the scope of an insurance agent
Correct answer: A) Estimate desired income, subtract government and pension income, and calculate the capital to fund the gap
Capital needs analysis converts an income gap into a savings target. Assumptions must be explicit and conservative.
Why the other options are wrong
- BRound numbers ignore her facts.
- CA friend's number reflects the friend's situation, not the client's.
- DThis is a core service of the needs analysis.
Exam tip
Income gap × lifetime, adjusted for inflation, returns, tax → capital target.
Common mistake
Ignoring inflation in the capital calculation.
What this tests
CISRO competency component 1.3 — 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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