LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A nervous client has a large lump sum and fears investing it just before a decline. A reasonable recommendation is to:
- Ainvest the entire amount immediately and tell the client not to look at the statements
- phase the money in over several months, accepting that it may cost some return
- Chold the entire amount in cash until the agent confirms the market has reached its bottom
- Dinvest the amount in a single sector fund so that any recovery will be especially rapid
Correct answer: B) phase the money in over several months, accepting that it may cost some return
Phasing a deposit reduces the chance of committing everything at an unfortunate moment and helps the client stay invested. It is a behavioural tool rather than a return enhancer, and the agent should say so plainly.
Why the other options are wrong
- AIgnoring statements does not address the anxiety and risks a panicked sale later.
- CNo one can identify a market bottom, and waiting in cash has its own cost.
- DConcentrating in one sector increases risk precisely when the client wants less of it.
Exam tip
Phasing in is about behaviour, not about improving the expected return.
Common mistake
Selling dollar-cost averaging as a way to earn more rather than to stay invested.
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.