LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
Which question best uncovers a client's true risk tolerance?
- A'Which fund would you like to hold?', since the client's own choice reveals how much risk she wants
- B'How old are you?', since age is the most reliable indicator of how much volatility a client can accept
- C'Do you consider yourself a risk-taker?', since a direct question produces the most honest answer
- 'If your investment fell 20% in a year, would you sell, hold or buy more?'
Correct answer: D) 'If your investment fell 20% in a year, would you sell, hold or buy more?'
Behavioural scenarios reveal willingness more reliably than abstract questions. Standard risk questionnaires use them.
Why the other options are wrong
- AFund preference is not tolerance; it may reflect marketing or a friend's tip.
- BAge is a fact, not a measure of tolerance.
- CAbstract questions about risk produce unreliable answers.
Exam tip
Use loss scenarios to test risk tolerance.
Common mistake
Accepting 'moderate' without probing what the client would do in a downturn.
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
- The first step before recommending a segregated fund or annuity is to:
- 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?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.