LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client's need for growth with a defined floor — 'I want upside but cannot afford to lose my principal by retirement' — points to:
- AGICs, since they provide the only true guarantee of principal at a fixed date
- A segregated fund with a 100% maturity guarantee timed to retirement, at a higher fee
- CAn immediate annuity, since guaranteed payments remove any risk to principal
- DPure equities, since a long horizon makes a loss of principal by retirement unlikely enough to disregard
Correct answer: B) A segregated fund with a 100% maturity guarantee timed to retirement, at a higher fee
This is the defining seg fund use case: equity exposure with a guaranteed floor at a date.
Why the other options are wrong
- AGICs provide no upside.
- CAn annuity gives up growth and is premature before retirement.
- DPure equities offer growth but no floor for the principal.
Exam tip
Upside + floor at a date = seg fund maturity guarantee.
Common mistake
Not matching the maturity date to the retirement date.
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.