LLQP Segregated Funds & Annuities · Component 3.2 · 25% of the exam
A 'replacement' or transfer of an existing segregated fund contract to a new one requires the agent to:
- Compare the contracts, disclose what the client gives up, obtain informed consent, and follow replacement procedures
- BNothing beyond the new application, since the client's decision to move is a personal one
- CTransfer immediately, so the client is not exposed to market movement between the two contracts while the paperwork is completed
- DLeave the old guarantee out of the discussion, since it will no longer apply once the transfer is complete
Correct answer: A) Compare the contracts, disclose what the client gives up, obtain informed consent, and follow replacement procedures
Transferring resets the guarantee clock and may forfeit locked-in guarantees. Replacement disclosure protects the client.
Why the other options are wrong
- BAnalysis and disclosure are required.
- CInformed consent must precede any transfer.
- DHiding the old contract's guarantee from the client is misconduct.
Exam tip
Seg fund replacement: compare, disclose lost guarantees/resets, consent.
Common mistake
Moving a contract with a high locked-in guarantee into a new one at market value.
What this tests
CISRO competency component 3.2 — 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
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