Traditionally, financial advisers would offer investment advice and trade in securities based on their experience. Presently, however, regulators require financial advisers to be registered and licensed. The two standard exams to acquire the licenses include the Financial Industry Regulatory Authority (FINRA) Series 7 and 66. Though one if not both are mandatory to practice in the field of securities and investment, the two differ regarding prerequisites, exam length, exam topics, study hours, and expected careers.
The Series 7 exam is considered a general securities representative exam offered by FINRA geared at evaluating the candidate's grasp of concepts in government and municipal securities transactions, investment products, annuities, and solicitations. The exam allows the candidate to undertake other activities and work with warrants, hedging, money markets, mutual funds, trusts, and venture capital.
The 225-minute exam consists of 125 questions, with an extra 10 experimental questions and a passing score of 72 percent. Before sitting for the exam, one must first take the Securities Industries Essential (SIE) exam. Series 7 requires an average of 80-100 hours of study for those with a background in finance and about 150 hours for those without.
FINRA restructured the Series 7 in 2018 to ease the process of acquiring the general securities representative registration and simplify entry into the securities industry. The Series 7 differs from Series 66 in that FINRA administers the former. Another difference is that the Series 7 qualifies the candidates for securities representative roles rather than investment advisers. The many questions also require more study time and practice than the Series 66 exam.
The Series 66 exam, also called the Uniform Combined State Law Examination, was developed by the North American Securities Administrators Association (NASAA) rather than FINRA. The development was in response to requests from the securities industry to streamline the certification for securities agents, wealth and asset managers, and investment adviser representatives.
The Series 66 exam contains 110 questions. Of the 110, 10 are pretest questions not included in the final score. The minimum pass rate is 73 percent. Those wishing to sit for the 150-minute closed-book exam apply through the FINRA website or Form U4( Uniform Application for Securities Industry Registration or Transfer), usually from the sponsoring firm.
The latter is useful for self-regulatory organizations, FINRA, and other entities that seek to know the employment and disciplinary history of the candidates, as it captures that information during registration. Once registered, the candidate has a window of 120 days to sit for the exam.
The standard questions covered in a Series 66 exam include economic factors and business information, client investment strategies, laws, regulations, and guidelines surrounding unethical business practices. However, one should note that the Series 7 is not a prerequisite to the Series 66. Both are required to become an investment advisor representative, so one can start with either exam but should complete both for licensure.
One can take the two exams concurrently to obtain the licenses more quickly. However, due to the intensive nature of the exams and the studying required, the majority opt to pursue them at different times.
Registered and licensed Series 66 holders typically earn more than their Series 7 counterparts, due in part to their more advanced qualifications. However, this may not always be the case, depending on the individual's experience, company, and nature of the position.
