LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client wants to invest money set aside for a house down payment in 18 months. The profile suggests:
- AEquity segregated funds, since the maturity guarantee protects the down payment against any decline
- BA 15-year guarantee, since the longer the guarantee period the safer the money will be
- Safety and liquidity objectives with a short horizon, pointing to conservative liquid vehicles
- DA life annuity, since it converts the savings into guaranteed payments that can fund the mortgage
Correct answer: C) Safety and liquidity objectives with a short horizon, pointing to conservative liquid vehicles
Horizon defines the profile. Money needed soon cannot bear volatility or lock-ins.
Why the other options are wrong
- AAn equity decline could derail the purchase; the guarantee does not apply at 18 months.
- BThe guarantee would not mature in time to protect the down payment.
- DAnnuities are irreversible income products, not short-term savings.
Exam tip
Short horizon = safety and liquidity, regardless of the client's general risk appetite.
Common mistake
Profiling by the client's personality rather than the money's purpose.
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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