LLQP Premium Exam Questions

Under the LLQP Segregated Funds and Annuities and Investment & Savings curriculum, assessing investment risk requires reviewing both the client’s sources of income and the composition of their portfolio. In Jonas’s case, his primary retirement income of $2,000 per month is indexed to the cost of living. This indexing significantly reduces his exposure to inflation risk, as increases in prices are offset by corresponding increases in income. Therefore, inflation risk is not his primary concern.

Jonas’s RRSP investments consist entirely of foreign-based assets: an international equity fund and a global bond fund. According to LLQP investment principles, investments that hold securities denominated in foreign currencies are subject to foreign exchange risk. This risk arises because fluctuations in exchange rates can affect the Canadian-dollar value of both investment returns and principal, regardless of the underlying performance of the assets themselves. For example, even if the international equity fund performs well in local markets, a strengthening Canadian dollar could reduce the value of those gains when converted back to Canadian dollars.

Interest rate risk is most relevant to portfolios heavily concentrated in fixed-income securities, particularly long-term bonds. While Jonas does hold a global bond fund, it represents only $20,000 of his $50,000 RRSP portfolio, and it is diversified internationally. As a result, interest rate risk exists but is not his dominant exposure. Liquidity risk is also minimal, as mutual fund investments within RRSPs are generally considered liquid and accessible, subject to normal settlement periods.

The LLQP curriculum emphasizes that international diversification introduces currency exposure, which can increase volatility, particularly for retirees who rely on portfolio stability. Since Jonas’s retirement income is already protected against inflation, the most significant remaining risk affecting his RRSP investments is foreign exchange risk.

Therefore, based strictly on LLQP-approved investment risk definitions and client profile analysis, the correct answer is Option B: Foreign exchange risk.

In the LLQP Segregated Funds and Annuities material, a LIRA (Locked-in Retirement Account) is clearly described as a locked-in, savings-phase vehicle used to hold pension money transferred from an employer-sponsored pension plan when an employee leaves before retirement. A key rule is that withdrawals cannot be made from the locked-in savings account. The curriculum explains that locked-in plans have two phases: a savings phase (LRSP/LIRA) and an income phase (such as LIF/LRIF/PRRIF/RLIF), and only the income-phase accounts permit withdrawals. The text explicitly states that when pension value is transferred into an LRSP/LIRA, the individual gains control over investment choices “except that withdrawals are not allowed.”

That is exactly Stéphane’s situation: his segregated fund investment is held inside a LIRA, meaning the insurer must administer it as locked-in pension money. Even though the segregated fund contract itself has a 10-year term-to-maturity, the maturity date is not the governing restriction here. The governing restriction is the locked-in legislation attached to the LIRA: Stéphane cannot simply “cash in” or redeem the contract to access a lump sum for personal needs such as a divorce settlement.

The LLQP curriculum also notes that unlocking is only permitted in a few specific circumstances (for example, certain cases of financial hardship, shortened life expectancy, or very small balances). Divorce equalization may allow a transfer under family law rules in some jurisdictions, but it does not mean Stéphane can redeem the LIRA for cash on demand; the funds generally remain within locked-in vehicles. Therefore, NRJ Insurance would refuse the redemption request because the assets are locked in.

Accordingly, the correct answer is D: NRJ Insurance cannot carry out the request because the funds are held in a locked-in account and cannot be cashed in right now.

According to the LLQP Segregated Funds and Annuities study materials, effective financial planning follows a clear hierarchy of priorities. Before focusing on investment growth or diversification, a client must address high-interest debt and stabilize their overall financial position. In Christie’s case, the most pressing concern is her $20,000 credit card debt, which typically carries very high interest rates compared to other forms of debt and investment returns.

The LLQP curriculum emphasizes that unsecured consumer debt, such as credit card balances, represents a significant financial risk. Credit card interest rates often exceed 18% annually, which can quickly erode cash flow and negate the benefits of investment returns. Even well-performing investments are unlikely to consistently outperform the guaranteed “return” achieved by eliminating high-interest debt. Therefore, from a suitability and prudence standpoint, eliminating credit card debt should be prioritized over investing or restructuring pension assets.

While Christie has substantial assets, including home equity and a DBPP, these are not liquid or appropriate to access prematurely. The LLQP materials caution against using long-term or registered assets, such as pension plans, to solve short-term financial issues unless no other reasonable alternatives exist. Receiving the commuted value of a DBPP is a major, often irreversible decision with tax, longevity, and retirement income implications, and it would be inappropriate as a first-line solution.

Establishing an emergency fund is important, but Christie already maintains modest liquidity through her chequing and savings accounts. Increasing emergency savings while carrying high-interest debt is inefficient, as interest costs continue to accumulate. Similarly, diversifying into equities is a secondary objective that should only be addressed after stabilizing debt obligations.

In line with LLQP principles, Christie’s financial priority should be to eliminate her credit card debt, thereby improving cash flow, reducing financial risk, and creating a stronger foundation for future investment and retirement planning.

Lily’s RRSP contribution room is reduced by her DCPP contributions. Her total income for Year 2 was $125,000, and she contributed 5% ($6,250) to the DCPP, matched by the employer, for a total of $12,500. The Pension Adjustment (PA) for her DCPP contribution would be $12,500, which reduces her RRSP contribution room.

Calculation:

RRSP limit based on previous year’s income (18% of $120,000): $21,600

PA reduction: $12,500

Remaining RRSP contribution room for Year 2: $21,600 - $12,500 = $9,100

Including her unused contribution room: $9,100 + $15,000 = $24,100

So, Lily can contribute $24,600 to her RRSP in Year 2​.