LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client insists on placing all her savings in one technology sector segregated fund after reading about its returns. The agent should:
- Aagree on condition that the client signs a waiver releasing the agent from all responsibility
- Bprocess the request without comment, since the client has given a clear and firm instruction
- explain the concentration risk, propose a diversified alternative and document the discussion
- Dincrease the guarantee level to the maximum so the sector holding becomes entirely safe
Correct answer: C) explain the concentration risk, propose a diversified alternative and document the discussion
The agent must give the advice the profile supports, explain why concentration is risky and offer a suitable alternative. If the client still insists, the file must record the recommendation, the warning and the client's own decision.
Why the other options are wrong
- AA waiver does not remove the duty to advise and would not be effective.
- BProcessing without advice abandons the agent's suitability obligation.
- DA higher guarantee does not make a concentrated equity holding safe in the meantime.
Exam tip
Advise, offer an alternative, then document if the client proceeds anyway.
Common mistake
Believing a signed acknowledgement replaces the duty to make a suitable recommendation.
What this tests
CISRO competency component 3.1 — 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.