LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client with little investment knowledge and no experience with market fluctuations should be:
- AKept out of market-based products until she has completed a recognized investor education course
- BGiven the same portfolio as an experienced investor, since suitability depends on objectives and not on knowledge
- Educated about how fund values fluctuate and profiled conservatively at first
- DPlaced in the most aggressive fund available, since a novice has the longest time to recover from losses
Correct answer: C) Educated about how fund values fluctuate and profiled conservatively at first
Investment knowledge is part of the profile. Inexperienced clients may panic and sell at lows; education and appropriate products reduce that risk.
Why the other options are wrong
- ANovices can invest suitably once they understand the basics; no course is required.
- BExperience changes what is suitable and what needs explaining.
- DAggressive funds are unsuitable for a client who has never seen a decline.
Exam tip
Low knowledge → educate, profile conservatively, use guarantees where they fit.
Common mistake
Assuming a wealthy client is a knowledgeable one.
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.