The Series 7 Exam: Qualifications & Preparation - SmartAsset

The Series 7 exam is one of two exams that registered representatives of broker-dealers must pass to sell and trade most securities as a financial services professional. The exam mainly covers information about investments, their suitability for different investors, record-keeping and asset transfers. This article explores the exam in-depth and provides tips on how to prepare for it.

What Is the Series 7 Exam?

The Series 7 exam is a test that brokers and other financial professionals must pass in order to be licensed to sell, trade and recommend most types of securities including stocks, bonds and mutual funds. However, the Series 7 license doesn’t allow you to sell or deal with real estate investments, life insurance products, commodities or futures.

Officially, the Series 7 assessment is known as the General Securities Representative Exam. It’s one of the many industry-regulated tests the Financial Industry Regulatory Authority (FINRA) administers. Every year, more than 43,000 individuals take this test to pursue a career in finance.

Series 7 Prerequisites

To be qualified to take the Series 7 exam, you must be employed by a firm that’s a member of FINRA and also pass the Securities Industry Essentials (SEI) exam. According to FINRA, this prerequisite “assesses a candidate’s knowledge of basic securities industry information including concepts fundamental to working in the industry, such as types of products and their risks; the structure of the securities industry markets, regulatory agencies and their functions; and prohibited practices.”

What’s on the Series 7 Exam?

You can expect the Series 7 exam to touch on basic types of investment products, their potential benefits and their associated risks. The test also covers industry regulations and best practices for establishing and maintaining client relationships.

Here are some topics you likely would encounter on the exam:

Equities
Fixed-income securities
Mutual funds and exchange-traded funds (ETFs)
Municipal bonds and options
Financial industry regulations and rules
Retirement plans
529 college savings plans
Taxes

Below is a quick glance at how the Series 7 exam is structured:

Test type – multiple choice
Number of questions – 125
Duration – 3 hours and 45 minutes
The score required to pass – 72%
Cost – $245

Brokers have four main job functions, according to FINRA. The Series 7 exam covers the material needed to perform these functions. Here are the functions – and how extensively the Series 7 exam covers them:

Methods in seeking business from customers – 9 questions
Opening accounts after analyzing customers’ financial profiles and investment goals – 11 questions
Educating customers about investment products, making proper recommendations and maintaining records – 91 questions
Confirming customers’ instructions and agreements; processing and completing transactions – 14 questions

How to Prepare for the Series 7 Exam

You can find test-prep books, videos and online content to help you prepare for the Series 7 exam. Some are more effectively structured than others, however. So do your research. Read reviews for test prep books before you purchase one and commit some serious study hours.

According to Wall Street Prep, a firm dedicated to providing training programs for financial services professionals, you should devote at least 100 hours to studying with around 20 to 30 hours spent on taking practice exams. Aim to answer at least 1,000 practice questions.

But this doesn’t mean cramming and memorizing as many answers as you can. Industry professionals with Series 7 licenses say the test is designed to trick you. So you need to understand the concepts and how they apply to your work in the real world.

In other words, passing doesn’t simply revolve around your understanding of regulations and investment products, but also why those rules exist and how those products may suit someone based on his or her financial profile and investment objectives.

Also, make sure you are using the most recent study material since industry regulations change frequently. To be safe, your test-prep material should be no more than a year. (At the time of the writing of this article, FINRA had most recently rolled out a new version of the exam after October 2018.)

Below, we list some of the larger financial services test-prep firms. You can expect the costs of programs offered by these organizations to range from $200 to $600, depending on how complex you want yours to be.

Kaplan
Pass Perfect
Knopman
Securities Training Corporation
Solomon Exam Prep

You should also take some live tests to prepare yourself for any external challenges you may face on test day. Overall, you should dedicate the time and take preparation seriously. Only 65% of test takers pass on their first run, according to Wall Street Prep.

What to Expect on Test Day

When at the testing lab to take the Series 7 exam, you won’t be allowed access to any type of reference material. Test administrators will provide you with a four-function calculator, two dry-erase boards and a dry-erase pen. Answering some questions may require the use of charts, graphs and other graphics.

The exam is administered via computer, so you’ll get your results shortly after submitting your exam. If you fail, FINRA provides you with a detailed report of your exam, which shows you how you performed in each section. You should use this to develop a more effective studying strategy before retaking the exam. Typically, you can do so after 30 days. After the third try, you’ll have to wait 180 calendar days.

Usually, your employer registers you to take Series 7. Every firm that deals with securities in the U.S. must be a member of FINRA.

The Bottom Line

The Series 7 exam is among the most rigorous tests in the financial services industry. But with preparation, you can ace it and become licensed to sell nearly any security. Once you’ve passed the exam, you can move on to more complex industry-regulated assessments. These licenses can help you rise in your financial services career.

Tips for Finding a Financial Advisor

Financial advisors can provide great financial support to help you make a long-term plan and even manage your assets. Finding a financial advisor 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.
Brokers sell securities and other financial products – and some sell advice. But not all financial advisors are brokers. Those who are both follow different standards, depending on the role. To minimize the confusion, ask prospective advisors if they always follow the fiduciary standard of working in their clients’ best interests. (Brokers only have to provide suitable recommendations.)