LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client has a Deferred Annuity contract from years ago. The assessment should identify:
- Its guaranteed rate, maturity options, surrender charges, tax treatment and registration
- BOnly the issuing insurer's name and the policy number, since the terms were fixed long ago
- CNothing in particular, since an old deferred annuity has no bearing on today's recommendation
- DThe client's age at purchase, since that fixed the payout rate that will apply at maturity
Correct answer: A) Its guaranteed rate, maturity options, surrender charges, tax treatment and registration
Existing annuity contracts have features that may be valuable (old guaranteed rates) or costly (surrender charges). Non-registered deferred annuities are taxed on accrual annually.
Why the other options are wrong
- BThe insurer's identity is the least important fact about the contract.
- CAn old annuity's rate, charges and options matter a great deal to planning.
- DThe client's current situation and the contract's terms matter, not the purchase age alone.
Exam tip
Existing deferred annuity: rate, maturity options, charges, tax status.
Common mistake
Surrendering an old annuity with an above-market guaranteed rate.
What this tests
CISRO competency component 1.2 — 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
Timed sets weighted like the exam, and review of every question you miss. Free to start.