LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client who is a corporate director with personal guarantees asks about protecting savings from business creditors. The profile should record:
- AThat he is uninsurable, since a director carrying personal guarantees presents a moral hazard
- BThat his objective is speculation, since a client exposed to creditors has little to lose
- A creditor protection objective, which points toward insurance contracts with qualifying designations
- DNothing at all, since creditor exposure is a legal question that falls outside an investment profile
Correct answer: C) A creditor protection objective, which points toward insurance contracts with qualifying designations
Creditor exposure is one of the stated reasons a client chooses a segregated fund over a mutual fund, so it belongs in the profile alongside the financial objectives.
Why the other options are wrong
- AInsurability is unrelated to a director's guarantees.
- BExposure to creditors is a reason for caution, not for speculation.
- DCreditor concerns drive product selection and must be recorded.
Exam tip
Creditor exposure is a recorded objective, not an afterthought.
Common mistake
Recommending a segregated fund's protection without documenting why it was needed.
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.