LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client says he wants 'high returns with no risk of losing money'. The agent should:
- ADecline to work with him, since a client with contradictory objectives cannot be served suitably
- BAssure him that a segregated fund delivers both, since the guarantee removes the risk of loss
- CPlace him in a money market fund, since it is the only product that never loses money
- Explain the risk–return trade-off and that guarantees apply only at maturity or death
Correct answer: D) Explain the risk–return trade-off and that guarantees apply only at maturity or death
Conflicting objectives must be reconciled during profiling. Segregated fund guarantees are often misunderstood as continuous protection.
Why the other options are wrong
- AEducation, not refusal, is the response to an unrealistic expectation.
- BPromising high returns with no risk is misrepresentation; guarantees do not cover interim declines.
- CA money market fund cannot meet the return objective, and the objective has not yet been clarified.
Exam tip
Reconcile conflicting objectives; explain that guarantees apply at maturity/death only.
Common mistake
Letting the client believe a segregated fund cannot decline in value.
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:
- 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
Timed sets weighted like the exam, and review of every question you miss. Free to start.