LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
A prospective client chooses a fund solely because it had the best return of any fund on the insurer's list last year. The agent should:
- Aswitch the client automatically into whichever fund leads the list at the end of every year
- Bconfirm the choice, since last year's leader is the most likely leader again next year
- explain that past returns do not predict future results and review the fund's risk and mandate
- Drefuse to process any deposit until the client has passed an investment knowledge test
Correct answer: C) explain that past returns do not predict future results and review the fund's risk and mandate
Ranking tables reward whichever mandate suited last year's conditions, often a narrow or volatile one. Suitability depends on the client's objectives, horizon and risk tolerance, so the agent must place the return in context before acting.
Why the other options are wrong
- AChasing last year's leader every year is a recipe for buying high and selling low.
- BLeadership rotates with market conditions and does not persist in any reliable way.
- DThere is no such test; the agent's duty is to explain and to assess suitability.
Exam tip
Every performance discussion must return to mandate, risk and the client's horizon.
Common mistake
Letting a one-year ranking drive the recommendation instead of the client profile.
What this tests
CISRO competency component 2.1 — 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.