LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client whose essential expenses exceed her government pensions has a need best described as:
- AMaximum growth, since only growth can close a gap between income and expenses
- BEstate preservation, since the shortfall will reduce what her heirs eventually receive
- A guaranteed income floor, since the shortfall must be met whatever markets do
- DCreditor protection, since a client spending more than she receives may face claims
Correct answer: C) A guaranteed income floor, since the shortfall must be met whatever markets do
Expenses that must be paid every month cannot be left to market outcomes, which is the argument for annuitizing or guaranteeing that portion of the income.
Why the other options are wrong
- AGrowth assets cannot be relied on to fund a fixed monthly obligation.
- BThe estate is a secondary consideration behind the client's own security.
- DA shortfall in income does not itself create creditor exposure.
Exam tip
Essential expenses call for guaranteed income.
Common mistake
Funding a retiree's essential costs from a variable portfolio.
What this tests
CISRO competency component 1.3 — 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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