LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client's savings are already dominated by shares of the employer she works for. A sound recommendation for new money would be to:
- choose funds with little exposure to that company or sector, reducing the overall concentration
- Bbuy more of the same shares, since she understands that business better than any other
- Cplace everything in a money market fund until she has sold the employer shares completely
- Dignore the existing holding, since only the new deposit is within the agent's responsibility
Correct answer: A) choose funds with little exposure to that company or sector, reducing the overall concentration
Her salary and her savings already depend on one employer, so a setback could hit both at once. New money should diversify away from that exposure rather than deepening it, which is a judgement the agent must record.
Why the other options are wrong
- BFamiliarity with an employer is not diversification and increases the concentration.
- CParking everything in cash is an overcorrection that creates a different problem.
- DSuitability is assessed against the client's whole situation, not the deposit alone.
Exam tip
Employer shares plus employment income equals a concentration the new money should offset.
Common mistake
Assessing a new deposit in isolation from what the client already owns.
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
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