The licensing requirements for working as a financial advisor vary widely. Generally, you should take either the Series 6 or Series 7 exams and either the Series 63, Series 65, or Series 66 exams, depending on your practice. If you have another professional certification, such as Certified Financial Planner (CFP) or Certified Financial Analyst (CFA), you may be exempt from the Series 65 exam. The exact license you need for this work depends on what you are doing and the laws of your particular state or jurisdiction.
Consider working with a financial planner when making an investment, retirement, or estate plan.
Definition of Financial Advisor
The term “financial advisor” applies to a very wide range of potential services and describes a professional who helps guide and direct the financial decisions of clients. A financial advisor may provide advice on managing investments, planning taxes, predicting retirement, and more.
Until relatively recently, the term “financial advisor” was used to describe various positions throughout the financial industry. However, a recent regulation by the U.S. Securities and Exchange Commission (SEC) called Regulation Best Interest (Reg BI) limits who can use the title. A financial advisor is generally a Registered Investment Advisor (RIA) or a company acting as an agent for an investment advisor.
Conversely, the use of these terms in names or titles in the context of a broker-dealer providing investment advice to individual clients generally violates the ability disclosure requirements under Reg BI. Disclosure requirements generally refer to rules that require advisors to properly notify the scope and terms of their relationships with clients and material facts related to conflicts of interest when making recommendations.
What is a trustee
Advisors registered with the SEC are legally required to comply with fiduciary duties. This means that the client’s interests must come before your own. According to the SEC, fiduciaries are expected to fulfill their duties of care and loyalty to their customers. As a result, “the highest standards of conduct are adhered to.”
By working with advisors who adhere to fiduciary duty, you can be confident that they have a legal obligation to put your best interests first. While fiduciaries may still have conflicts of interest (which they must disclose to their clients), they can take comfort in knowing that they have a duty of trust and loyalty to you, the consumer. , most experts recommend asking your advisor whether he or she is adhering to your fiduciary duties during your first meeting. Services such as SmartAdvisor can also be used to match prospective clients with fiduciary financial advisors.
Most Common Financial Advisor License
The exact requirements may vary by jurisdiction, but in most cases a license is required to do this work. As a general rule, to work as a financial advisor, you must pass an exam in your area of expertise. The Financial Industry Regulatory Authority (FINRA) oversees the licensing exams required in most states.
There are many financial advisor licenses and exams. The specific licenses required vary by practice and change over time for many financial professionals. For example, he would typically need one license to trade securities and another to supervise and manage stock traders. As you progress in your career, you may need to obtain different licenses to reflect your new skills and responsibilities.
If you are ready to be matched with a local advisor to help you reach your financial goals, get started now.
As a general rule, the six most common licenses are:
H3 Series 3 – National Commodity Futures Trial
The Series 3 exam gives you a license to sell real estate, life insurance, and merchandise. Note that Series 3 is not required to sell most other forms of insurance. For example, you are free to sell auto insurance without Series 3. Series 3 is also not a requirement for a dedicated realtor with its own licensing board. This is a requirement for financial advisors to sell these assets as part of their work.
H3 Series 6 – Investment Firms Product Representative
The Series 6 exam gives you a license to buy and sell investments. The general rule here is that you can sell packaged investments and third-party products as long as they are not specific individual securities such as stocks or bonds.
Specifically, you can sell the following products:
H3 Series 7 – General Securities Representative
The Series 7 exam gives you a license to buy and sell all securities. This includes all products licensed in the Series 6 exam, as well as other assets. The most common products sold by Series 7 Practitioners include equities, bonds, mutual funds, exchange traded funds (ETFs), real estate investment trusts (REITs), futures, options, derivatives and accredited investments.
This is a generalist license. It allows you to practice as a general broker of securities.
H3 Series 63 – Unified Securities Agent State Law Examination
Series 63s are usually acquired by advisors who work on a commission basis. To practice on this exam, you need a Series 63 plus either a Series 6 or Series 7. This license allows you to work as a broker-dealer agent for companies that issue financial instruments.
H3 Series 65 – Uniform Investment Advisory State Law Examination
If you want to be paid by flat rate or hourly rate instead of commission, you must take the Series 65 exam. It has 140 questions versus his 60 questions on the Series 63 exam, which is considerably longer and more detailed than the Series 63, but allows you to practice as an investment adviser representative. This means that with the Series 65 you can provide independent advice and financial services and operate in a fiduciary capacity.
Most investment advisors take the Series 65 exam and either or both the Series 6 and Series 7 exams, but they are not required. (Practitioners can take both Series 6 and Series 7 if they have already taken Series 6 and then decide to expand their practice by taking Series 7.) Another specialty, such as CFP or CFA If you are qualified, you may be able to waive your qualification. Series 65 exam. Check with your state for details.
H3 Series 66 – Uniform Federal Law Exam
The Series 66 exam is a combination of both the Series 63 and Series 65. It can be taken as an alternative to one or both of these exams. You can also practice as both a broker-dealer agent and an investment advisor agent. To practice on this exam, you need a Series 7 in addition to a Series 66.
As a general rule, financial advisors need a license to practice professionally. Exactly which license you need depends on your training and what you do.
financial advisor tips
The insight and guidance of a financial advisor can make a big difference in your ability to reach your financial goals. If you don’t have a financial advisor yet, finding one isn’t difficult. SmartAsset’s free tool matches you with up to 3 vetted financial advisors serving your area and allows you to interview advisor matches for free to determine which advisor is right for you. increase. If you’re ready to find an advisor who can help you reach your financial goals, get started now.
One consideration when choosing a financial advisor is whether that person uses a fee-based or fee-only approach. Here is a primer on the subject.
See our list of top financial advisors by state and city.
Photo credit: ©iStock.com/dragana991, ©iStock.com/PeopleImages, ©iStock.com/AndreyPopov
The post Do Financial Advisors Need a License? First appeared on the SmartAsset blog.