5 Types of Licenses for Financial Advisors

Financial advisors help individuals make informed decisions about their finances, but it’s also important to ensure that anyone you trust to manage your finances is properly licensed. Everyone can call themselves a Financial Advisorbut not everyone has the credentials to back it up.

While financial professionals do not have one set licensing requirement, some advisors must become registered representatives if they want to have the necessary securities licenses to sell investment products.

The specific products they plan to sell and their desired method of compensation determine the licenses needed.

What licenses do financial advisors need?

Fiduciary financial advisors in the United States typically hold a Series 6, Series 7, Series 63, Series 65, or Series 66 license. Let’s examine each license and the products it covers:

1. Series 6 license

The Series 6 license is an important certification for financial advisors who want to sell certain types of investment products. It is usually obtained after a financial professional has earned a bachelor’s degree and secured employment at an investment firm.

Managed by the company Financial Industry Regulatory Authority (FINRA), Series 6 license is designed to allow financial advisors to sell bundles of securities. These securities typically include mutual funds and variable annuities.

Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of assets. These funds are managed by professional investment managers.

On the other hand, variable annuities are insurance products that combine investment features with insurance coverage. They provide investors with the potential for investment growth and a guaranteed lifetime income stream.

It’s worth noting that advisers with only a Series 6 license are not allowed to sell to individuals shares gold bonds.

Financial advisors often begin by obtaining a Series 6 license before moving on to more complex licenses such as Series 7. This strategy allows them to gain hands-on experience in the industry and sell a limited range of investment products while preparing for the more challenging Series 7 exam.

2. Series 7 License

The Series 7 license is one of the most sought after licenses for financial advisors and stock brokers, which authorizes them to sell a wide range of investment products. This license is administered by the Financial Industry Regulatory Authority (FINRA) and is considered the gold standard in the industry.

The Series 7 license allows financial advisors to sell most investment products available on the market, including:

  • jumps
  • supplies
  • options
  • future
  • mutual funds
  • variable annuities

With a Series 7 license, advisors are able to provide their clients with a a comprehensive offer of investment options. With this license, advisors can tailor investment strategies based on their clients’ unique financial goals and risk tolerance.

Although the Series 7 license provides extensive coverage, there are several types of securities that it does not cover. Specifically, commodity trading requires a Tier 3 license, and property and life insurance have their own separate licensing requirements.

It is important that financial advisors are aware of these restrictions and obtain the necessary licenses if they intend to offer such products to their clients.

SIE exam

In 2018, FINRA introduced the Securities Industry Essentials (SIE) exam as a co-requisite to the Series 6 and 7 exams. Financial advisors are now required to pass both exams to obtain a general securities registration.

The SIE exam covers basic industry knowledge, including fundamental concepts related to securities, products, regulatory agencies, and industry regulations. Successful completion of the SIE exam confirms that the advisor understands basic information about the securities industry.

Financial advisors can demonstrate their expertise in a wide range of investment products and industry regulations by combining the comprehensive coverage of the Series 7 license with the core knowledge tested in the SIE exam.

Remember that the Series 7 license is highly valued for its versatility and broad authority in the field of financial advice. Advisors who hold this license have the ability to provide their clients with a diverse selection of investment options help them achieve their financial goals.

3. Series 63 License

A Series 63 license is a requirement for financial advisors to conduct business within their state borders in the United States. In addition to holding a Series 7 or Series 6 license, counselors must pass the Series 63 exam.

The Series 63 exam is designed to test an advisor’s understanding of state-specific securities laws and regulations. It focuses on protecting investors and ensuring that financial advisors have the necessary knowledge to operate ethically and responsibly within their states.

The exam is 75 minutes long and covers a wide range of topics. It may seem shorter and easier than other licensing exams, but it delves into the intricacies of state securities and laws that can sometimes trip up test takers.

Each state requires financial advisors to hold a Series 63 license to legally do business within their jurisdiction. This license is in addition to a Series 7 or Series 6 license. It is an important credential for advisors who want to provide investment advice and sell securities within a specific state.

A Series 63 license demonstrates an advisor’s knowledge of government securities laws, regulations and ethical practices. It ensures that advisors can handle the unique requirements and responsibilities of serving clients in a particular state.

A Series 63 license is required regardless of whether advisors are compensated through fees or commissions. In order to practice as a registered financial advisor in the United States, it is essential to meet the regulatory requirements.

So if you want to become a financial advisor and do business in a specific state, get a Series 63 license to comply with state regulations and provide the best financial services to your clients.

4. Series 65 License

Series 65 license is a requirement financial advisors who are remunerated with fees rather than commissions. This license is required for advisors who provide financial advice for investments.

The Series 65 license, also known as the Uniform Investment Adviser Law Examination, is administered by the North American Securities Administrators Association (NASAA). Its primary objective is to ensure that financial advisors are knowledgeable about securities laws, regulations and ethical practices.

With a Series 65 license, financial advisors can legally provide investment advice to clients and act as investment advisors. This license is regulated at the state level and each state may have additional requirements or regulations that counselors must follow.

Request for fee compensation

One of the key differences of the Series 65 license is that it is mandatory financial advisors who receive compensation through fees rather than a commission.

Advisors who charge clients a percentage of assets under management or an hourly fee are usually required to hold a Series 65 license.

Advisors who are compensated solely through the sale of investment products on a commission basis do not need a Series 65 license. However, it is important to verify compliance with specific state regulations and requirements.

In other words, fiduciary advisors will be held to a higher standard than commission-based financial professionals.

Professional designation

Obtaining a Series 65 license demonstrates greater professionalism and competence in investment advice than other licensing exams. While this license is not a professional designation in itself, it is often held by individuals who also hold other professional certifications, such as the Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) designation.

Financial advisors with a professional designation, along with a Series 65 license, demonstrate a commitment to the financial well-being of their clients, a commitment to continuing education, and the highest ethical standards.

The Series 65 license is a valuable credential for financial advisors who are compensated by fees rather than commissions. It enables advisors to provide investment advice professionally. It also ensures that they have the necessary knowledge of securities laws and regulations.

5. Series 66 License

A Series 66 license is required for any financial advisor who hopes to serve as an investment advisor representative or investment advisor representative (IAR). Test takers must already hold a Series 7 license, but individuals can take a Series 66 license instead of the more demanding Series 65 exam.

Test takers have 2 and a half hours to answer 100 graded multiple choice questions and 10 pre-test questions. Candidates must obtain a minimum score of 73% to obtain a license. The exam covers important information on US Securities and Exchange Commission filings, financial reporting, and risk assessment.

It also includes the systems that give securities, alternatives and insurance-based products their value. The largest part of the exam covers the types of clients, the best strategies for advising them, and the laws, regulations, and guidelines for avoiding unethical business practices.

Simply put, the Series 66 exam combines the content of the Series 63 and Series 65 exams and is therefore often referred to as the Unified State Exam.

FAQs

What is the difference between CFA and CFP?

HAS CFP (Certified Financial Planner) generally focuses on individual and family finance, while CFA provides financial services primarily to institutional investors.

What are the requirements for a financial advisor license in the US?

While there is no specific licensing requirement for financial advisors in the United States, they are generally required to have securities licenses if they sell investment products. These licenses are determined by the specific products the consultant plans to sell and how they will be compensated.

Some common licenses that financial advisors hold include the Series 6, Series 7, Series 63, and Series 65 licenses. The Series 6 license allows advisors to sell packaged securities such as mutual funds and variable annuities. Advisors with a Series 6 license cannot sell individual stocks or bonds.

The Series 7 license is considered the gold standard for financial advisors. It allows advisors to sell almost any investment product, including stocks, bonds, options and futures. However, it does not apply to commodities, real estate or life insurance, which have their own specific licenses. Obtaining the Series 7 is challenging and requires passing the Series 7 exam and the Securities Industry Fundamentals (SIE) exam.

Financial advisors doing business in a particular state must also obtain a Series 63 license covering state-specific laws and regulations. In addition, advisors who are compensated by fees instead of commissions are required to hold a Series 65 license, which focuses on the rules and regulations for fee-based advisors.

INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NOT BANK GUARANTEED • MAY LOSE VALUE

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