LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client's main concern is that a future long-term care need will consume the family's savings. The analysis should treat this as:
- AAn estate risk only, since care costs arise at the very end of the client's lifetime
- A liquidity and funding need, addressed by reserving capital or by insurance against care costs
- CA matter outside the investment plan, since provincial programs fund the whole cost of long-term care
- DA market risk, addressed by choosing funds with a higher guarantee level on the contract
Correct answer: B) A liquidity and funding need, addressed by reserving capital or by insurance against care costs
Care costs are large, uncertain in timing and paid from capital, so they belong in the plan as a reserved amount or as an insured risk rather than as an afterthought.
Why the other options are wrong
- ACare costs are paid while the client is alive and reduce the capital directly.
- CProvincial funding covers only part of the cost of care.
- DGuarantee levels do nothing to fund the cost of care.
Exam tip
Care costs come out of capital, not out of returns.
Common mistake
Planning retirement income without reserving anything for care.
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
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