LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
'Rebalancing' a portfolio of segregated funds means:
- AChanging the guarantee level to match the portfolio's current risk
- Periodically restoring the target mix by moving money from classes that grew to those that lagged
- CSelling the whole portfolio and buying back the original funds at current prices to start the mix again
- DResetting the beneficiary designations so they match the current asset mix
Correct answer: B) Periodically restoring the target mix by moving money from classes that grew to those that lagged
Drift after a bull market raises risk. Rebalancing disciplines it. Within a single seg fund contract, fund switches are typically not dispositions for tax.
Why the other options are wrong
- AGuarantees are unaffected by rebalancing.
- CRebalancing is partial, not a full liquidation.
- DBeneficiaries are unaffected.
Exam tip
Rebalance to target mix; seg fund switches usually not taxable.
Common mistake
Never rebalancing after a long equity run.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.