LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's existing mutual funds differ from segregated funds mainly in that mutual funds:
- AAre insurance contracts issued by a trust company rather than by a life insurer
- Have no guarantees or beneficiary designation, no creditor protection, and lower fees
- CBypass probate automatically, since the fund company pays the estate directly on death
- DCarry stronger guarantees, since securities regulators require capital protection at maturity
Correct answer: B) Have no guarantees or beneficiary designation, no creditor protection, and lower fees
Assessing existing investments includes explaining the structural differences. The choice depends on the value the client places on insurance features.
Why the other options are wrong
- AMutual funds are securities regulated as investments, not insurance contracts.
- CNon-registered mutual funds pass through the estate and probate.
- DMutual funds have no guarantees at all.
Exam tip
Mutual fund vs seg fund: guarantees, beneficiary/probate, creditor protection, cost.
Common mistake
Recommending a switch to seg funds without weighing fees against features.
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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