LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client in a high tax bracket with all registered room used has surplus savings each year. The need this creates is:
- AAdditional registered contributions, since surplus savings always create new room
- BAn immediate annuity, since guaranteed income is the most efficient use of a client's surplus savings
- CNothing further, since a client with full registered room has no remaining planning need
- Tax-efficient non-registered growth, favouring deferred gains over fully taxed interest income
Correct answer: D) Tax-efficient non-registered growth, favouring deferred gains over fully taxed interest income
Once the shelters are full, the tax character of the return becomes the main lever, which favours growth-oriented holdings over interest-bearing ones held outside a plan.
Why the other options are wrong
- ARoom is created by earned income, not by saving more.
- BAnnuity income is fully taxed and locks up capital the client does not yet need.
- CHow surplus savings are held materially affects the after-tax return.
Exam tip
When the shelters are full, character of income is the lever.
Common mistake
Holding interest-bearing investments outside a registered plan.
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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