Free Practice Questions for CSI IFC Exam

Guaranteed Income Supplement (GIS) and Allowance for the Survivor are both income-tested benefits that are part of the Old Age Security (OAS) program. They are designed to provide financial assistance to low-income seniors who meet certain eligibility criteria. GIS is a monthly payment that supplements the OAS pension for seniors whose income is below a certain threshold. Allowance for the Survivor is a monthly payment for low-income seniors aged 60 to 64 whose spouse or common-law partner has died and who have not remarried or entered into another common-law relationship. The benefit amounts for both GIS and Allowance for the Survivor depend on the income level of the recipient and are adjusted quarterly based on the Consumer Price Index. The higher the income, the lower the benefit amount, until it reaches zero at a certain income limit. Therefore, eligibility for both GIS and Allowance for the Survivor depends on income level.

Canadian Investment Funds Course, Chapter 5: Registered Plans1

Discussing questionable personal experiences in a public setting can harm the representative’s professional image, relating to the aspect of other personal endeavors. The feedback from the document states:

"The representative must take care to ensure that any publicly visible activity in which he participates is conducted responsibly and moderately so as not to present an unfavorable public image."

 According to the Canadian Investment Funds Course, different types of investment income are taxed differently in Canada. Interest income is fully taxed at the marginal rate, while dividend income is favourably taxed with a dividend tax credit. Capital gains are taxed on 50% of the gain at the marginal rate, and foreign income is subject to withholding tax. Therefore, a tax-efficient strategy is to include interest paying investments, such as bonds or GICs, in the registered plan, where they can grow tax-deferred until withdrawal. Dividend paying investments, such as Canadian stocks or ETFs, should be included in the non-registered plan, where they can benefit from the lower tax rate and the dividend tax credit. Foreign income should also be avoided in the non-registered plan, unless it is held in a U.S. dollar account or a foreign currency hedged ETF, to reduce the impact of withholding tax and currency fluctuations.

 1: Canadian Investment Funds Course - IFSE Institute 2 (Unit 9: Retirement)

A registrant adds value by helping clients match mutual fund solutions to their needs and objectives, not by making promises or pushing products.

B (low MERs) is one factor, but not the entire scope of advice.

C (guaranteeing performance) is unethical and prohibited.

D (cross-selling) prioritizes the dealer, not the client.

Given Jeff’s low wealth level and strong emotional biases, the advisor should moderate and adapt to these emotional biases to ensure suitable investment recommendations. The feedback from the document states:

"Jeff has a relatively low level of wealth and strong emotional biases; that’s why the advisor should moderate and adapt to Jeff’s emotional biases."

Standard equity funds focus on capital gains and may include dividend income, but unlike dividend funds, they do not prioritize capital preservation. The feedback from the document states:

"A standard equity fund seeks to earn some combination of dividend income and capital gains from investment in Canadian common stocks. This objective appears to be similar to that of a preferred dividend fund. The difference between the two is that an equity fund usually has a much stronger capital gains focus. Note as well that equity funds make no specific attempt to preserve capital; in other words, equity funds are willing to put capital at substantially greater risk than preferred dividend funds."

The life-cycle hypothesis suggests that as people move through different life stages, their objectives, financial circumstances, risk tolerance, and investment knowledge change. Advisors can use this framework to make general assumptions about investment objectives based on age and stage (e.g., younger investors focus on short-term goals, older investors on retirement and estate building).

Therefore, the correct answer is C.

A position of influence is an outside activity that places the Dealing Representative in a position of power or influence over a client or potential client, such as a trustee, executor, or director of a charitable organization. A position of influence may create a conflict of interest or a potential conflict of interest between the Dealing Representative and the client. Therefore, the MFDA rules require that a Dealing Representative must report any position of influence to the dealer and obtain the dealer’s approval before engaging in such activity. The dealer must also ensure that the position of influence does not impair the Dealing Representative’s ability to act in the best interests of the client and that the client is aware of the nature and extent of the position of influence12

References = Canadian Investment Funds Course (CIFC) - Module 1: The Financial Services Industry - Section 1.3: Know Your Client (KYC)3 and web search results from search_web(query="positions of influence and mutual fund dealers association rules")12

3: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-1.pdf