LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
When recommending a segregated fund to replace an existing mutual fund, the agent should:
- ALeave fees out of the comparison, since the client has already decided that the guarantees are worth having
- Consider the tax on disposing of the mutual fund, redemption charges, whether the features justify the cost, and document
- CSet tax aside, since a move between two funds of the same type is not a disposition
- DSwitch immediately, since the sooner the guarantee is in place the sooner the client is protected
Correct answer: B) Consider the tax on disposing of the mutual fund, redemption charges, whether the features justify the cost, and document
Replacement recommendations require a cost–benefit comparison and tax awareness. Registered-to-registered transfers avoid tax.
Why the other options are wrong
- AFee disclosure is required.
- CNon-registered switches trigger tax.
- DThe tax and feature analysis must come before any switch.
Exam tip
Mutual fund → seg fund: tax on disposition, charges, feature-cost test, documentation.
Common mistake
Triggering a large capital gain to move into a seg fund without discussing it.
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.