You are pleased to see all of a client's GICs were purchased before a significant fall in interest rates. What action should you recommend?

You are pleased to see all of a client's GICs were purchased before a significant fall in interest rates. What action should you recommend?

• A. Cash in GICs.
• B. Eliminate the emergency fund.
• C. Refinance the mortgage.
• D. Review the insurance policy.

Answer: (C)

The most appropriate action to recommend in this situation would be to review the insurance policy. When a significant fall in interest rates occurs, the value of Guaranteed Investment Certificates (GICs) that were purchased earlier may be higher than current market rates. This means the client could benefit more by keeping the existing GICs rather than cashing them in, as they would earn a better interest compared to new investments at the lower rates. While refinancing a mortgage could be a consideration in a lower interest rate environment, it may not be the best immediate step if the client is currently benefiting from higher GIC rates. Additionally, eliminating an emergency fund would not be advisable as having liquidity for unexpected expenses is essential. Therefore, reviewing the insurance policy becomes critical as this can help the client evaluate their overall financial protection and ensure it aligns with their current financial status, potentially optimizing their financial plan in light of changing interest rates.

The most appropriate action to recommend in this situation would be to review the insurance policy. When a significant fall in interest rates occurs, the value of Guaranteed Investment Certificates (GICs) that were purchased earlier may be higher than current market rates. This means the client could benefit more by keeping the existing GICs rather than cashing them in, as they would earn a better interest compared to new investments at the lower rates.

While refinancing a mortgage could be a consideration in a lower interest rate environment, it may not be the best immediate step if the client is currently benefiting from higher GIC rates. Additionally, eliminating an emergency fund would not be advisable as having liquidity for unexpected expenses is essential. Therefore, reviewing the insurance policy becomes critical as this can help the client evaluate their overall financial protection and ensure it aligns with their current financial status, potentially optimizing their financial plan in light of changing interest rates.