LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A recommendation for a very conservative client with a long horizon should still address:
- AA speculative allocation, since a conservative client with a long horizon can afford to take a chance on high returns
- BNothing beyond safety, since a conservative client has chosen to accept lower returns in exchange for certainty
- Inflation risk, recommending a modest growth allocation, perhaps with a high guarantee to make it acceptable
- DOnly safety of capital, since recommending any growth asset would contradict the documented profile
Correct answer: C) Inflation risk, recommending a modest growth allocation, perhaps with a high guarantee to make it acceptable
Overly conservative long-term portfolios risk failing the client's real goals. Guarantees can make growth palatable.
Why the other options are wrong
- ASpeculation is unsuitable for a conservative client.
- BInflation must be addressed over a long horizon.
- DSafety alone risks a loss of purchasing power.
Exam tip
Conservative + long horizon → some growth, high guarantee.
Common mistake
Leaving a 40-year-old entirely in guaranteed interest options.
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.