LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client's tolerance for fees should be discussed because:
- Segregated funds usually cost more than comparable mutual funds because of the guarantees
- BFees are hidden inside the unit price, so the client will never see them unless the agent explains
- CFees are the same across insurers and funds, so the only choice is whether to invest at all
- DFees do not affect the client, since the guarantee is calculated before any fees are deducted
Correct answer: A) Segregated funds usually cost more than comparable mutual funds because of the guarantees
Cost awareness is part of informed choice. Guarantees cost money; clients who do not value them may be better served elsewhere.
Why the other options are wrong
- BFees are disclosed in the information folder and fund facts.
- CFees vary widely across funds, guarantee levels and insurers.
- DFees directly reduce the client's net returns.
Exam tip
Explain that guarantees raise MERs; match cost to the value the client places on them.
Common mistake
Not disclosing that a seg fund costs more than the equivalent mutual fund.
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.