LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client will need a substantial sum in three years for a business expansion. For that money the profile records:
- AAn income objective, since the investment should generate cash flow to fund the expansion
- BA long horizon, since the business will continue to operate for decades after the expansion
- A safety and liquidity objective with a short horizon, whatever the client's general risk tolerance
- DA growth objective, since three years is long enough for markets to recover from an ordinary decline
Correct answer: C) A safety and liquidity objective with a short horizon, whatever the client's general risk tolerance
Horizon is a property of the money's purpose rather than of the client's temperament, so a dated commitment governs how that portion is invested.
Why the other options are wrong
- AThe purpose is a lump sum at a date, not a stream of income.
- BThe business's lifespan is not the horizon of the money set aside for it.
- DThree years is too short to rely on a market recovery.
Exam tip
Profile the money's purpose, not just the person.
Common mistake
Applying one risk profile to every dollar a client holds.
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.