LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
'Inflation risk' is relevant to a conservative client's profile because:
- Guaranteed low-return investments can lose purchasing power over a long horizon
- BInflation only affects equities, so a client who holds guaranteed products is fully protected from it
- CIt is not relevant, since a conservative client has chosen to accept lower returns for safety
- DGuarantees remove inflation risk, since the guaranteed amount is indexed to the cost of living
Correct answer: A) Guaranteed low-return investments can lose purchasing power over a long horizon
Profiling includes explaining the risks of excessive conservatism. Long-horizon clients need growth to beat inflation.
Why the other options are wrong
- BInflation erodes fixed returns most, not equities.
- CInflation is a real long-term risk the client should understand before choosing safety.
- DGuarantees protect nominal value, not purchasing power.
Exam tip
Explain inflation risk to conservative clients with long horizons.
Common mistake
Letting a 40-year-old keep all retirement savings in guaranteed deposits.
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.