LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client keeps six months of expenses in a savings account and asks whether to invest it. The analysis should conclude:
- That the reserve's purpose is availability, so it belongs in liquid, stable holdings
- BThat the reserve should be annuitized, converting an idle balance into guaranteed income
- CThat no emergency reserve is needed once a client holds a guaranteed investment contract
- DThat the reserve should be invested in a balanced fund to avoid losing value to inflation
Correct answer: A) That the reserve's purpose is availability, so it belongs in liquid, stable holdings
An emergency fund exists to be drawn at a moment of the client's choosing rather than the market's, which rules out anything whose value or access is uncertain.
Why the other options are wrong
- BAnnuitizing removes access entirely, which defeats the purpose.
- CA guarantee at maturity does not help with an emergency today.
- DA balanced fund can be down at exactly the moment the money is needed.
Exam tip
Emergency money is for availability, not return.
Common mistake
Investing an emergency reserve in a fund with a maturity guarantee.
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
Timed sets weighted like the exam, and review of every question you miss. Free to start.