LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
Which statement about the relationship between age and risk tolerance is most accurate?
- AYoung clients always have high tolerance, since they have decades to recover from any loss
- BOlder clients always have low tolerance, since they cannot replace losses from earnings
- CAge determines tolerance completely, so a standard age-based formula is sufficient for profiling
- Age influences horizon and capacity, but tolerance varies by individual
Correct answer: D) Age influences horizon and capacity, but tolerance varies by individual
Age is a factor, not a rule. Purpose of the money and capacity matter more.
Why the other options are wrong
- ASome young clients are highly risk-averse despite a long horizon.
- BSome older clients invest for heirs with long effective horizons.
- CTolerance is individual; formulas miss the person.
Exam tip
Age is an input; purpose and capacity define the horizon.
Common mistake
Applying an age-based formula without individual assessment.
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
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