LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's 'net worth statement' helps the agent:
- ADetermine risk tolerance on its own, since a large net worth proves a client is comfortable with volatility
- BSet the unit price the client will pay, since insurers price contracts according to the investor's wealth
- CConfirm that no further profiling is needed, since the statement already shows everything relevant
- See assets, liabilities and the distribution of wealth, which shows capacity for risk and liquidity
Correct answer: D) See assets, liabilities and the distribution of wealth, which shows capacity for risk and liquidity
Assets and liabilities are part of the financial situation. A client with high debt and few liquid assets has different needs from one with a paid-off home and large savings.
Why the other options are wrong
- ANet worth informs capacity for loss but not psychological willingness.
- BFund prices are market-based and identical for every investor.
- CA net worth statement is one input; objectives, horizon and tolerance still need to be assessed.
Exam tip
Net worth shows capacity for risk and liquidity needs.
Common mistake
Recommending an illiquid long-horizon product to a client with no emergency reserve.
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.