LLQP Segregated Funds & Annuities · Component 2.4 · 30% of the exam
A group plan's 'default investment option' matters because:
- AIt is always a cash fund, so members who do not choose earn nothing on their savings
- BIt does not matter, since every member is required to make an active choice at enrolment
- CIt is the best fund in the line-up, chosen by the sponsor to maximize returns for the members
- Members who make no choice are placed in it; the Guidelines expect a prudent default
Correct answer: D) Members who make no choice are placed in it; the Guidelines expect a prudent default
Defaults shape outcomes for inert members. Sponsors and providers must choose them carefully.
Why the other options are wrong
- ACash defaults are discouraged; balanced or target-date funds are typical.
- BMany members never move from the default.
- CIt is a prudent, not necessarily best, choice.
Exam tip
Default option: prudent, often target-date; encourage active choice.
Common mistake
Leaving a young member in a money market default for years.
What this tests
CISRO competency component 2.4 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.