LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's stated objective is to 'beat inflation with no risk'. The agent's most professional response is to:
- ARecord the objective as stated and search for a product that delivers both simultaneously
- BRecommend an equity fund with a full guarantee and describe the combination as entirely risk-free
- Explain that guaranteed products carry inflation risk, then agree which objective takes priority
- DRecommend a guaranteed interest option and describe it as an inflation-proof investment
Correct answer: C) Explain that guaranteed products carry inflation risk, then agree which objective takes priority
The two goals pull against each other, and the client's plan depends on which one they are prepared to compromise once the trade-off is explained.
Why the other options are wrong
- ANo product delivers real growth with no risk of any kind.
- BA maturity guarantee does not make an equity fund risk-free before that date.
- DA guaranteed rate can still lose purchasing power over a long horizon.
Exam tip
No risk and beating inflation cannot both be guaranteed.
Common mistake
Promising a client a product that removes every kind of risk.
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.