LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client's only stated goal is to hold money he may need at any moment for household emergencies. The appropriate recommendation is:
- Aa specialty equity fund, because emergencies are rare and the money can be left to grow
- Ban immediate life annuity so that the client receives a dependable monthly payment for life
- Ca balanced segregated fund with a full maturity guarantee taken over a fifteen-year term
- a money market or short-term fund, or a high-interest account, held outside any long contract
Correct answer: D) a money market or short-term fund, or a high-interest account, held outside any long contract
Emergency money must be available without loss or penalty. A long guarantee term, a deferred sales charge or an annuity would all defeat that purpose, whatever their merits for other goals.
Why the other options are wrong
- AEquity funds can be down precisely when the emergency arrives.
- BAn annuity converts capital into income and removes access to the money entirely.
- CA long guarantee period is irrelevant to money that may be withdrawn tomorrow.
Exam tip
Emergency reserve equals liquidity and stability, never a guarantee with a long term.
Common mistake
Recommending a guaranteed product for money that must be available immediately.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 3
- A client's spouse must sign for:
- When the insurer requests additional information after the application (for example, source of wealth for a large deposit), the agent should:
- The implementation of a recommendation involving a switch from one seg fund to another within a contract requires:
- A client wishes to designate a charity as beneficiary of a segregated fund. Implementation should:
- For a deferred annuity implemented for a client, the agent should confirm:
- The agent's record of the implementation should be retained:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.