The Series 7 license is a certification for professionals looking to trade securities in the United States. Issued by the Financial Industry Regulatory Authority (FINRA), this license requires candidates to pass a challenging exam that tests their knowledge of various financial and investment-related topics, such as equities, bonds, options and regulatory practices. Most financial services firms mandate this license for their employees, as it qualifies them to sell a broad range of securities products, including stocks and mutual funds. If you’re seeking a financial advisor who holds a Series 7 certification, you can use our free financial advisor matching tool to connect with qualified professionals in your area.
What Is the Series 7 License?
In order to sell any type of security besides commodities and futures, financial services practitioners must pass the Series 7 Exam. Officially, it’s called the General Securities Registered Representative Exam (GSRE). It covers various topics such as financial industry regulations and client communications, as well as different types of securities and their associated risks.
If you’re working with someone holding a Series 7 license, you can expect them to have expert knowledge of the following topics:
- Retirement plans
- 529 college savings plans
- Stocks
- Bonds
- Mutual funds
- Exchange-traded funds (ETFs)
- Annuities
- Life insurance
- Taxes
- Financial industry regulations
Series 7 financial advisors and other practitioners also specialize in building diversified, risk-assessed investment portfolios for their clients. Because the Series 7 Exam weighs heavily on portfolio building and asset-allocation concepts, it’s best to seek these professionals when considering serious investing or retirement planning decisions.
Series 7 Education Requirements
Before someone can take the Series 7 Exam, they must pass the Security Industry Essentials (SIE) Exam. This tests a plethora of financial topics, including investment products and risks, the structure of the securities market, regulatory agencies and more. The SIE Exam has four sections with a total of 75 questions. These sections are titled:
- Knowledge of Capital Markets
- Understanding Financial Products and Their Risks
- Understanding Trading, Customer Accounts and Prohibited Activities
- Overview of Regulatory Framework
Series 7 Exam Structure
Once they pass the SIE Exam, they will gain eligibility for the Series 7 Exam. This test is quite a bit longer at 125 questions, it costs $300 and test takers have three hours and 45 minutes to complete it. All 125 questions are multiple-choice. Once this exam is passed, the test taker will become a Series 7-certified professional.
Below is an overview of what’s covered on the Series 7 Exam:
- Reviewing clients’ investment needs and goals
- Recommending investments to clients
- Initiating investment purchases
- Transferring assets for clients
- Work as the middleman between broker-dealers and clients
Why Is the Series 7 License Necessary?
Financial professionals holding Series 7 certifications must adhere to higher standards compared to those without licensure, supported by strict regulations enforced by FINRA. These regulations are designed to ensure that Series 7-licensed professionals uphold the highest levels of service and compliance in their work.
Before even sitting for the Series 7 exam, candidates are required to pass the Securities Industry Essentials (SIE) exam. As stated by FINRA, the SIE “assesses a candidate’s knowledge of basic securities industry information, including essential concepts such as types of products and their risks, the structure of securities markets, regulatory bodies and their functions, and prohibited practices.”
Professionals with a Series 7 license are held to rigorous standards and are authorized to sell nearly all securities. However, this license does not cover the sale of commodities, futures, real estate or life insurance products. Brokers wishing to offer these additional types of investments and insurance must obtain separate licenses.
Other Important Financial Advisor Licenses
If you’re looking to work with a financial advisor, you may be confused by the different types of licenses and certifications they hold. Below, we list some common ones as well as what these credentials allow advisors to do.
- Series 31: This permits advisors to sell managed futures, which are pooled commodities futures.
- Series 26: This allows practitioners to supervise those who sell funds, variable annuities and life insurance.
- Series 24: This is required to manage branch activities at a broker-dealer.
- Series 6: This allows professionals to sell packaged investment products, like mutual funds, variable annuities and unit investment trusts (UITs).
- Series 3: This permits brokers to sell commodity futures contracts, generally considered among the riskiest publicly traded investments.
Bottom Line
When you’re shopping around for a financial advisor, you should always seek what kind of licensing he or she holds. The Series 7 license stands out in the industry because practitioners must pass one of the longest and most rigorous exams in the industry to obtain it. This license not only allows them to sell most securities, but it also means they have extensive knowledge of financial topics. FINRA administers the exam. Thus, those who hold this title must live up to strict standards when it comes to client relations.
Tips on Searching for a Financial Advisor
- A financial advisor can help you build a financial plan or manage your investments for you. If you don’t have a financial advisor, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When it comes to seeking a financial advisor, licenses aren’t everything. Some also have special certifications that help them stand above the pack. One of the most popular ones is the certified financial planner (CFP) designation.
- Always pay attention to an advisor’s fee structure. Some make commissions based on the products they sell, while others earn no such commissions. These are called fee-only advisors, and they operate in your best interest at all times.
Photo credit: ©iStock.com/Jacob Wackerhausen, ©iStock.com/Wavebreakmedia, ©iStock.com/gpointstudio