LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's most important objective is that his portfolio never falls below what he invested. In the profile this records:
- A safety of capital objective, which points to guarantees and away from volatile holdings
- BA growth objective, since only growth assets can recover a decline and restore the original value
- CAn income objective, since regular distributions return the original capital over time
- DA high risk tolerance, since a client focused on the original value is not troubled by volatility
Correct answer: A) A safety of capital objective, which points to guarantees and away from volatile holdings
Preservation of the amount invested is the classic safety objective, and it drives both the guarantee level and the underlying fund selection in a segregated fund recommendation.
Why the other options are wrong
- BRelying on a recovery is the opposite of protecting the original amount.
- CDistributions are not a guarantee of the original capital.
- DThe stated priority signals low tolerance for loss.
Exam tip
Never losing the deposit is a safety objective, not a growth one.
Common mistake
Selling an equity fund to a client whose stated priority is preservation.
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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