LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client holds segregated funds bought with a deferred sales charge seven years ago. The review should establish:
- AThat the charge applies for life, so the contract can never be moved without incurring a penalty
- Whether the schedule has expired, since a transfer after that point carries no redemption charge
- CThat the charge is refunded in full once the contract has been held for five years
- DThat the deferred sales charge is deducted annually from the contract's market value
Correct answer: B) Whether the schedule has expired, since a transfer after that point carries no redemption charge
Deferred charges decline to nothing over the schedule, so a contract held beyond it can be moved freely and the client's options are wider than they may assume.
Why the other options are wrong
- AThe schedule expires; the charge does not last for life.
- CCharges already paid are not refunded.
- DThe charge applies on redemption, not annually.
Exam tip
Check where the client sits on the redemption schedule.
Common mistake
Assuming a deferred sales charge still applies after the schedule has run.
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
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