LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
The sales charge options for segregated funds typically include:
- Front-end load, no-load or fee-based, and historically DSC and low-load, matched to holding period
- BDeferred sales charge only, since regulators require every segregated fund to recover its cost on early redemption
- CNone at all, since the management expense ratio covers every cost the client will ever pay on the contract
- DFront-end load only, since the deferred sales charge structure has always been prohibited for insurance products
Correct answer: A) Front-end load, no-load or fee-based, and historically DSC and low-load, matched to holding period
DSC has been banned for new mutual fund sales and largely discontinued for seg funds; existing schedules persist. Front-end and no-load are the current norms.
Why the other options are wrong
- BDSC is being phased out and was never the only option.
- CSales charges exist in one form or another on most contracts.
- DSeveral structures exist, and DSC was permitted for years.
Exam tip
Match sales charge to holding period and disclose it; DSC largely gone for new sales.
Common mistake
Recommending a charge structure without disclosing how the agent is paid.
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.