LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's existing segregated fund contract shows both a market value and a guaranteed amount. On a statement these represent:
- ATwo separate accounts, either of which the contract holder may withdraw from at any time
- BThe value before and after the deduction of the management expense ratio for the year
- The current value available on withdrawal, and the floor applying at maturity or death
- DThe value of the contract and the value of the insurer's reserve supporting it
Correct answer: C) The current value available on withdrawal, and the floor applying at maturity or death
Only the market value is accessible during the contract, and the guaranteed amount is a contractual floor that becomes relevant on the maturity date or at death.
Why the other options are wrong
- AThe guaranteed amount is not an account that can be withdrawn.
- BBoth figures are shown net of fees.
- DThe insurer's reserving is not reported on a client's statement.
Exam tip
Market value is what you can take; the guarantee is what you may get.
Common mistake
Quoting the guaranteed amount as the client's current value.
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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