LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's objective is 'growth' but she needs to draw 6% per year from the investment. The agent should recognize:
- ANo conflict, since a growth fund earning more than 6% can support the withdrawal indefinitely
- BThat annuities are required, since a 6% withdrawal can only be guaranteed by an insurer
- A tension between growth and income that must be reconciled around a sustainable withdrawal
- DThat 6% is always sustainable, since long-run equity returns comfortably exceed that rate
Correct answer: C) A tension between growth and income that must be reconciled around a sustainable withdrawal
Conflicting objectives are common. The agent must surface them and adjust either the objective or the expectation.
Why the other options are wrong
- AThe objectives conflict; a high withdrawal rate erodes capital in down years.
- BAnnuities are one possible response, not a requirement.
- DSustainability depends on returns, sequence and horizon.
Exam tip
Surface conflicts between growth and withdrawal rates.
Common mistake
Accepting incompatible objectives without discussion.
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.