LLQP Segregated Funds & Annuities · Component 3.2 · 25% of the exam
A client asks how the agent is paid for arranging the segregated fund contract. The agent should:
- Adecline to answer, since compensation arrangements are confidential between agent and insurer
- explain the compensation received and any related conflicts, clearly and without evasion
- Canswer only if the client submits the question in writing to the insurer's head office
- Dstate that the advice is free because the insurer rather than the client pays the agent
Correct answer: B) explain the compensation received and any related conflicts, clearly and without evasion
Clients are entitled to understand how the agent is paid and what might influence a recommendation. The explanation should cover commissions, any trailing payments and any incentive that could create a conflict of interest.
Why the other options are wrong
- ACompensation disclosure is an obligation to the client, not a confidential matter.
- CThe client is entitled to an answer directly from the agent.
- DDescribing the advice as free is misleading because the cost sits inside the fees.
Exam tip
Compensation questions get a direct answer, including any conflicts it creates.
Common mistake
Telling a client that advice paid for through fund fees costs them nothing.
What this tests
CISRO competency component 3.2 — 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.