LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client with a short horizon (3 years) insists on a segregated fund for the guarantee. The suitable recommendation is:
- AA 15-year maturity guarantee, since the longest guarantee gives the client the most protection for her money
- BNo recommendation at all, since a client with a three-year horizon has nothing to gain from an insurance product
- CAn equity fund with a 100/100 guarantee, since the full guarantee makes an equity fund safe for any horizon
- Explain that the guarantee will not mature in 3 years, suggest conservative funds or GIAs, and document her decision
Correct answer: D) Explain that the guarantee will not mature in 3 years, suggest conservative funds or GIAs, and document her decision
A guarantee that cannot mature by the need date is not a guarantee for that need. Honesty and documentation are required.
Why the other options are wrong
- AA 15-year guarantee matures long after the client's 3-year need.
- BConservative funds and GIAs are available alternatives.
- CSame maturity problem plus equity volatility.
Exam tip
Guarantee term > horizon = no protection; advise and document.
Common mistake
Selling a guarantee the client will never benefit from.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 3
- A client's spouse must sign for:
- When the insurer requests additional information after the application (for example, source of wealth for a large deposit), the agent should:
- The implementation of a recommendation involving a switch from one seg fund to another within a contract requires:
- A client wishes to designate a charity as beneficiary of a segregated fund. Implementation should:
- For a deferred annuity implemented for a client, the agent should confirm:
- The agent's record of the implementation should be retained:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.