Segregated funds carry a higher MER than comparable mutual funds. This reflects the cost of the insurance guarantee and, in some cases, the reset option. The exam may test whether a candidate understands this trade-off: the investor pays more in fees to receive the guarantee protection. Whether the extra cost is justified depends on the client's risk tolerance, time horizon, and estate- planning objectives.
Recall test: State the two conditions that must be true simultaneously for the maturity guarantee to pay out above market value. Then explain what happens to the maturity date when a reset is exercised.