LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client's greatest fear is losing her savings in a bad market year. This behavioural need can be met by:
- ALeverage, since a borrowed investment will grow faster and rebuild any losses quickly
- BReassuring her that markets recover, so there is no reason to change the portfolio
- CSetting the fear aside, since emotional reactions are not part of the investor profile
- Segregated fund guarantees, guaranteed withdrawal features, or a conservative mix
Correct answer: D) Segregated fund guarantees, guaranteed withdrawal features, or a conservative mix
Behavioural risk — abandoning a plan at the wrong time — is real. Guarantees have psychological as well as financial value.
Why the other options are wrong
- ALeverage magnifies losses and would deepen the fear.
- BReassurance alone does not address the behaviour; she may still sell at a low.
- CFear leads to bad decisions and is a legitimate profile element.
Exam tip
Guarantees help fearful clients stay invested.
Common mistake
Dismissing the emotional value of a 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.