LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A client compares a segregated fund with a guaranteed investment certificate held at a bank. A genuine advantage of the segregated fund is that it:
- Apays a higher guaranteed rate of interest than the certificate over any chosen term
- offers growth potential with guarantees at maturity and death, plus a beneficiary designation
- Ccannot fall in value at any point during the term the client has chosen to stay invested
- Dis covered by the Canada Deposit Insurance Corporation for the full amount deposited
Correct answer: B) offers growth potential with guarantees at maturity and death, plus a beneficiary designation
The certificate gives a known rate and no growth beyond it. The segregated fund can participate in markets while guaranteeing a percentage of deposits at maturity and death, and it can pass directly to a named beneficiary.
Why the other options are wrong
- AA segregated fund has no guaranteed rate of interest; its return depends on markets.
- CThe market value moves daily and can certainly fall between the guarantee dates.
- DDeposit insurance covers bank deposits; segregated funds are covered by Assuris instead.
Exam tip
Compare a fund with a certificate on growth, guarantees, beneficiary and protection scheme.
Common mistake
Claiming deposit insurance coverage for an insurance contract.
What this tests
CISRO competency component 2.2 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
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