LLQP Segregated Funds & Annuities · Component 2.4 · 30% of the exam
Under the guidelines for capital accumulation plans, the sponsor's responsibility to members includes:
- Areimbursing any member whose chosen investment option loses value in a given calendar year
- Bselecting investments for each member individually based on a personal risk assessment
- Cguaranteeing a minimum rate of return on every investment option offered under the plan
- providing investment information and decision-making tools, and reviewing the options periodically
Correct answer: D) providing investment information and decision-making tools, and reviewing the options periodically
Sponsors must give members enough information to make decisions, including descriptions of each option, fee disclosure and tools such as calculators and risk questionnaires. Sponsors must also review the options and the service providers from time to time.
Why the other options are wrong
- AInvestment losses are borne by members in a capital accumulation plan.
- BMembers make their own choices; the sponsor provides the framework and information.
- CNothing in the guidelines requires a sponsor to guarantee investment returns.
Exam tip
The sponsor supplies options, information and review; the member makes the choices.
Common mistake
Assuming the sponsor bears responsibility for a member's investment outcome.
What this tests
CISRO competency component 2.4 — 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.