LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's monthly cash flow shows a small surplus. This suggests:
- A regular contribution plan sized to the surplus, after an emergency reserve
- BThat no investment is possible, since a client needs a substantial lump sum before a contract can be opened
- CA large lump-sum investment funded by the surplus accumulated over the coming years
- DBorrowing to invest, since the surplus can service the loan while the investment grows
Correct answer: A) A regular contribution plan sized to the surplus, after an emergency reserve
Cash flow analysis is a listed element. Regular contributions suit a modest surplus and add dollar-cost averaging.
Why the other options are wrong
- BSmall regular amounts are investable through pre-authorized contributions.
- CThere is no lump sum to invest; the surplus arrives monthly.
- DLeverage is unsuitable for a client with a small surplus and no reserve.
Exam tip
Cash flow surplus → PAC contributions after the emergency fund.
Common mistake
Recommending leveraged investing to a client with tight cash flow.
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
Timed sets weighted like the exam, and review of every question you miss. Free to start.