LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's 'liquidity need' refers to:
- AHow much of her portfolio is held in cash and money market instruments at the time of profiling
- How readily she may need to convert investments to cash without penalty or loss
- CHer marginal tax rate, which determines how much of any withdrawal she keeps after tax
- DHer willingness to accept volatility, since liquid investments are the ones that fluctuate most
Correct answer: B) How readily she may need to convert investments to cash without penalty or loss
Liquidity is one of the four objectives. DSC schedules and guarantee maturity dates reduce liquidity; a client who may need funds soon should avoid them.
Why the other options are wrong
- ACurrent cash holdings are a fact about the portfolio, not the client's need for access.
- CThe client's tax rate is a separate profile element from liquidity.
- DRisk tolerance concerns volatility, not access to cash.
Exam tip
Liquidity need → avoid DSC and long guarantee lock-ins.
Common mistake
Placing an emergency fund in a DSC segregated fund.
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
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