LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A young client has no creditors, no estate concerns, a thirty-year horizon and wants the lowest cost growth. The most honest recommendation is:
- Aa specialty sector fund, because a long horizon justifies concentrating in one industry
- Ba segregated fund at the highest guarantee level, because guarantees always add value
- Can immediate annuity, since locking in income early removes every form of uncertainty
- a lower cost investment, since the guarantees this client would pay for add little here
Correct answer: D) a lower cost investment, since the guarantees this client would pay for add little here
Guarantees, creditor protection and estate bypass are the features that justify the extra cost of a segregated fund. When none of them matters to the client, the agent should say so rather than sell the product regardless.
Why the other options are wrong
- AA long horizon does not justify abandoning diversification.
- BA guarantee tested in thirty years is very unlikely to pay and costs every year.
- CAn annuity at a young age forfeits growth and flexibility for no stated need.
Exam tip
If none of the insurance features is needed, the extra fee has nothing to buy.
Common mistake
Recommending a segregated fund by default without testing whether its features are needed.
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.