LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's 'time horizon' for an investment is:
- AThe number of years she has been investing, which shows how much experience she brings to the decision
- The period until she expects to need the money, which sets how much fluctuation she can ride out
- CHer age at the time of the investment, since insurers set horizon by age band for guarantee purposes
- DThe number of years since the fund was launched, which shows how much of a track record it has
Correct answer: B) The period until she expects to need the money, which sets how much fluctuation she can ride out
Time horizon is central to asset mix and to segregated fund maturity guarantees, which typically require holding to a maturity date (often 10 or 15 years) to apply.
Why the other options are wrong
- APast experience is investment knowledge, not horizon.
- CAge influences the horizon but does not define it; the purpose of the money does.
- DThe fund's history is irrelevant to when the client needs the money.
Exam tip
Horizon = when the money is needed; match it to guarantee maturity dates.
Common mistake
Recommending a 15-year maturity guarantee to a client who needs the money in five years.
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:
- '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?
- A client with little investment knowledge and no experience with market fluctuations should be:
Practice the whole Segregated Funds & Annuities module
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