LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
The first step before recommending a segregated fund or annuity is to:
- Establish the client's situation, objectives, horizon, risk tolerance and knowledge
- BIdentify the fund with the strongest returns over the past three years, since performance drives suitability
- CHave the client sign the application so the contract can be issued while the analysis is completed
- DQuote the maturity and death guarantees, since those are the features that distinguish the product
Correct answer: A) Establish the client's situation, objectives, horizon, risk tolerance and knowledge
The curriculum's first competency component is assessing the client's needs and situation. KYC information is both a regulatory requirement and the foundation of suitability.
Why the other options are wrong
- BPast returns are not a basis for suitability; the client's profile is.
- CThe application follows the recommendation, never precedes it.
- DGuarantees are a product feature considered after the client is understood.
Exam tip
KYC first: situation, objectives, horizon, risk tolerance, knowledge.
Common mistake
Starting with the product instead of the client.
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
- 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?
- A client with little investment knowledge and no experience with market fluctuations should be:
Practice the whole Segregated Funds & Annuities module
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