LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A self-employed client worries about creditors. This is relevant because:
- ACreditors cannot reach any investment held by an individual, so the concern has no bearing on the choice
- Segregated funds with family-class or irrevocable beneficiaries may be creditor-protected
- CIt is not relevant, since creditor protection is a legal matter outside the scope of investment advice
- DOnly registered plans are protected, so the client should keep everything inside an RRSP
Correct answer: B) Segregated funds with family-class or irrevocable beneficiaries may be creditor-protected
Creditor protection is a distinctive potential advantage of insurance contracts. It depends on the designation and timing; it is not absolute.
Why the other options are wrong
- AMost investments are fully exposed to the holder's creditors.
- CIt is a key reason clients choose segregated funds; the agent must understand it.
- DProtection derives from insurance law, not from registered status alone.
Exam tip
Creditor protection: family-class or irrevocable beneficiary; not for deposits made to defeat creditors.
Common mistake
Promising absolute creditor protection.
What this tests
CISRO competency component 1.1 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.