LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client is the sole trustee of a family trust and wants to invest its funds. The profile must be built on:
- AThe settlor's original intentions only, since the trust was created to carry them out
- BThe beneficiaries' individual risk questionnaires, averaged to produce a single profile
- CThe trustee's own objectives and risk tolerance, since the trustee makes all of the decisions
- The trust's terms and the beneficiaries' interests, within the trustee's investment powers
Correct answer: D) The trust's terms and the beneficiaries' interests, within the trustee's investment powers
A trustee invests for the beneficiaries under the powers the trust document confers, so the deed and the beneficiaries' circumstances govern rather than the trustee's own preferences.
Why the other options are wrong
- AThe trust document governs, and the beneficiaries' current needs matter.
- BAveraging questionnaires does not reflect the trust's terms.
- CThe trustee acts for others and not on personal preference.
Exam tip
Read the trust deed before you profile the trustee.
Common mistake
Profiling a trustee as if the money were their own.
What this tests
CISRO competency component 1.1 — 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.