LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client wants to invest her entire emergency fund in a segregated fund because of the guarantee. The agent should explain:
- The guarantee applies only at maturity or death, so emergency money belongs in liquid vehicles
- BThat an emergency fund is unnecessary once she holds a guaranteed segregated fund
- CThat withdrawals are always at the guaranteed value, so the emergency fund is fully protected
- DThat it is a sound idea, since the guarantee gives her both growth potential and safety
Correct answer: A) The guarantee applies only at maturity or death, so emergency money belongs in liquid vehicles
A common misunderstanding: guarantees do not protect interim withdrawals. Emergency funds require liquidity and stability.
Why the other options are wrong
- BEmergency reserves are basic planning; a guarantee does not replace them.
- CInterim withdrawals are at market value, possibly less sales charges.
- DIt conflicts with the liquidity objective that emergency money must meet.
Exam tip
Guarantees apply at maturity/death only; keep emergency funds liquid.
Common mistake
Selling the guarantee as protection for money that may be withdrawn early.
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
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