Pass the IFSE Institute Life License Qualification Program LLQP Questions and answers with Dumpstech

In the LLQP Segregated Funds and Annuities curriculum, a client’s net worth is determined using a net worth statement, which is a snapshot of financial position calculated by listing all assets at their market value and subtracting all liabilities. The manual provides the direct formula: Net worth = value of all assets – value of all liabilities. It further explains that assets are anything owned that has cash value (including the home, savings, and the cash value of life insurance), while liabilities are debts and financial obligations that must be repaid.

Applying those LLQP rules to Irma:

Assets include (1) condo at market value $372,000, (2) savings $22,000, and (3) whole life insurance cash value $133,000. The Segregated Funds and Annuities text explicitly treats life insurance with cash value as an asset because the value can be accessed (cash surrender value or policy loan). Therefore, the correct value to include in net worth is the cash value, not the death benefit. Total assets = 372,000 + 22,000 + 133,000 = $527,000.

Liabilities include (1) reverse mortgage $90,000 and (2) income tax owing $1,070. The manual specifically identifies a reverse mortgage as a liability that must be repaid when the home is sold or at death. Total liabilities = 90,000 + 1,070 = $91,070.

Therefore, Irma’s net worth is:

$527,000 − $91,070 = $435,930, which matches Option B.

Since Caleb is looking for a fund that mirrors the S&P/TSX Composite index, an index fund would be the best choice. Index funds are specifically designed to track the performance of a specific index, providing broad market exposure at a low cost. This aligns with Caleb’s objectives of long-term investment with a strategy that matches a known market benchmark, as emphasized in LLQP’s sections on investment options​.

Other options like equity, dividend, and target date funds do not directly track an index in the way that an index fund does, making them less suitable for Caleb’s stated preference.

According to the LLQP Group Savings and Pension Plans curriculum, a Defined Benefit Pension Plan (DBPP) represents a significant long-term obligation for an employer. In a DBPP, the employer guarantees a specific retirement benefit to employees, typically based on years of service and earnings. As a result, the employer bears the investment risk and funding responsibility. Because of this obligation, pension legislation places strict limits on when and how such a plan may be terminated.

The most clear-cut circumstance under which a defined benefit pension plan may be terminated is when the employer becomes insolvent or goes bankrupt. In this situation, the employer is no longer financially capable of maintaining the plan. Pension standards legislation recognizes that continuing the plan is no longer feasible, and the plan may be wound up. This is why Option C is correct. Even in bankruptcy, however, employee pension rights are protected to the extent possible, and pension assets must be distributed according to legislated priorities.

Options A and B are incorrect because business growth—whether faster company growth or a rapid increase in plan membership—does not justify terminating a DBPP. In fact, growth often strengthens a company’s ability to support pension obligations rather than undermining it. Pension plans are designed to accommodate changes in workforce size and business expansion.

Option D is also incorrect. When a company is sold to another employer with an identical or comparable pension plan, pension legislation generally allows the plan to be continued or transferred, rather than terminated. The intent of pension regulation is to preserve employees’ accrued benefits, not eliminate them due to corporate restructuring.

The LLQP curriculum emphasizes that DBPPs are highly regulated precisely because employees rely on them for retirement security. Termination is therefore permitted only in exceptional circumstances, with employer insolvency being the most definitive example.

Accordingly, the most accurate and LLQP-compliant answer is Option C.

Upon retirement, funds from a Deferred Profit Sharing Plan (DPSP) can be transferred on a tax-deferred basis to certain registered accounts, such as a Locked-In Retirement Account (LIRA). This option allows Aadi to defer taxes while preserving the funds for future retirement income. LLQP guidelines indicate that DPSP funds can be transferred to a LIRA or similar locked-in accounts under the tax-deferred status until they are eventually converted into income-paying vehicles, like a Life Income Fund (LIF) or a Registered Retirement Income Fund (RRIF)​​.

Options such as a TFSA or group RRIF are incorrect in this context because TFSAs do not permit direct DPSP transfers and RRIFs are typically used as income-producing accounts rather than transfer vehicles. A LIRA is specifically designed to hold locked-in funds from employer pension plans, allowing Aadi to keep the funds tax-sheltered until he needs to draw income from them during retirement.

Since Hana is not highly knowledgeable about investments and prefers a simple approach that includes both stocks and bonds, a Balanced Fund would be appropriate. Balanced funds are designed to provide a mix of stocks and bonds, which offers both growth potential and income stability. This aligns well with Hana’s objectives for a diversified and easy-to-understand investment suitable for retirement. LLQP materials note that balanced funds offer simplicity and diversification, making them suitable for investors who seek moderate risk and diversification without the need for detailed investment knowledge​.

Bond funds, dividend funds, and target date funds each have unique advantages, but they do not offer the same balanced exposure to both stocks and bonds that Hana seeks. Bond funds focus primarily on fixed-income assets, dividend funds on equity income, and target date funds adjust over time rather than maintain a fixed allocation of stocks and bonds throughout the investment period.

The LLQP Segregated Funds and Annuities curriculum explains that an investor profile is shaped not only by financial assets and goals, but also by personal factors that can materially affect an individual’s ability to tolerate and manage investment risk. Among these factors, personal risks often have the most immediate and significant impact because they directly threaten income stability, cash flow, and financial security.

In Gertrude’s situation, several elements clearly fall under the category of personal risks as defined in the LLQP study materials. First, her employer’s announcement of possible layoffs introduces a risk of job loss, which is explicitly identified in the LLQP curriculum as a major personal risk. Employment uncertainty reduces an investor’s capacity to withstand market volatility, as a loss of income may force liquidation of investments at an inopportune time.

Second, Gertrude borrowed $50,000 to invest in an international stock portfolio. The LLQP materials identify leveraging (borrowing to invest) as a significant personal risk factor. Leveraging increases both potential gains and losses, magnifying downside risk. If markets decline or Gertrude’s employment situation worsens, she may still be required to service the debt regardless of investment performance. This substantially increases her financial vulnerability and lowers her true risk tolerance.

While Gertrude’s expectation of longevity relates to health and longevity considerations, it does not introduce immediate financial instability. In fact, longevity often supports a longer investment horizon, which can allow for greater exposure to growth assets, provided other risks are controlled. Personal values are not clearly indicated, and legal considerations such as wills or marital property are not central to this scenario.

According to the LLQP framework, when multiple personal factors are present, those that threaten income continuity and debt obligations take precedence in shaping the investor’s risk profile. Therefore, Gertrude’s employment uncertainty and leveraged investing position make personal risks the dominant factor influencing her risk profile, making Option D the correct answer.

A specialty fund would be the most suitable option for Hussein, given his specific interest in the pharmaceutical sector. Specialty funds focus on specific sectors or industries, allowing investors to capitalize on particular market views and trends. Hussein's belief in the potential growth of the pharmaceutical sector and his comfort with market fluctuations over a long investment horizon aligns well with a specialty fund. According to LLQP, specialty funds are suited for investors seeking exposure to specific industries and who are willing to accept the higher risk associated with concentrated investments​.

Option A (Bond fund) does not align with Hussein’s interest in the equity market, particularly in the pharmaceutical sector. Options C and D (Balanced and Target date funds) are not focused on a specific sector and instead offer broader diversification across asset classes.

As a plan administrator for a defined contribution pension plan (DCPP), Josie’s primary responsibility is to manage the pension plan, which includes overseeing day-to-day operations, ensuring regulatory compliance, and handling communications with plan members. According to LLQP, plan administrators are tasked with ensuring the effective management and administration of the plan, rather than setting benefit structures or addressing funding issues, which are typically responsibilities of the employer​​.

Options B, C, and D describe responsibilities typically held by the employer or plan sponsor, not the administrator.

An accumulation annuity offers flexibility in terms of access to funds. According to LLQP guidelines, accumulation annuities permit both periodic withdrawals and the option for full surrender, though withdrawals are generally subject to minimum and maximum limits, depending on the contract. Furthermore, such annuities often allow for flexibility in accessing funds without the need for strict schedules, unlike some other products that may restrict surrenders to specific times​​. Therefore, option A accurately describes the flexibility associated with accumulation annuities, making it the correct answer.

Option B is incorrect because surrenders in accumulation annuities are not usually restricted to specific times. Option C is inaccurate as accumulation annuities are designed for flexibility. Option D is incorrect as market value adjustments are not automatically applied; these depend on the contract terms and market conditions.

Creditor protection is a significant advantage of segregated funds over other investment types, especially for business owners like Dakota, who may face potential liability or creditor claims. According to LLQP guidelines, segregated funds, when properly structured with a designated beneficiary, can protect invested assets from creditors in the event of bankruptcy or other financial difficulties. This protection is often a critical benefit for small business owners seeking to shield personal assets​.

While options A, B, and C offer benefits of segregated funds, they are not as directly valuable to Dakota’s situation as creditor protection, which offers security specific to her needs as a business owner.