What Licenses Do Financial Advisors Need to Have?

Reviewed by Lea D. UraduFact checked by Kirsten Rohrs SchmittReviewed by Lea D. UraduFact checked by Kirsten Rohrs Schmitt

While there is no specific licensing requirement for financial advisors, they are generally required to have various securities licenses to sell investment products. The specific products that an advisor plans to sell, as well as the method by which they receive compensation, determines which licenses are required to be obtained.

Here is an overview of several common licenses held by financial advisors in the United States. These include the Series 6, Series 7, Series 63, and Series 65 licenses.

Key Takeaways

• Most professional financial advisors will need to obtain regulatory licenses to sell investment products and offer financial advice.
• Licensing exams are overseen by the Financial Industry Regulatory Authority (FINRA).
• The types of licenses needed will depend on the specific products being sold.
• Some of the most popular licenses include the Series 6, Series 7, Series 63, and Series 65.
• The Series 7 is considered the gold standard which allows holders to sell almost every type of investment product, such as stocks, bonds, options, mutual funds, and more.

Series 6 License

Administered by the Financial Industry Regulatory Authority, or FINRA, Series 6 enables financial advisors to sell packaged securities, such as mutual funds and variable annuities. A financial advisor with only a Series 6 may not sell individual stocks or bonds.

Many advisors start by obtaining a Series 6 before moving on to the more comprehensive and difficult-to-obtain Series 7. By doing so, they can get hands-on experience and even sell a limited range of products while studying for the Series 7.

Series 7 License

The Series 7 is the gold standard of financial advisor licenses. Also administered by FINRA, this license enables an advisor to sell nearly every type of investment product. A Series 7 licensee may sell stocks, bonds, options, and more.

The license also authorizes the sale of packaged securities, even if you do not carry an active Series 6 license. The only securities the Series 7 does not cover are commodities, which require a Series 3 license, as well as real estate and life insurance, both of which have their own licenses.

Because the Series 7 confers such broad authority, it is by far the most difficult license for a financial advisor to obtain.

Beginning in October 2018, FINRA created a new Securities Industry Essentials (SIE) exam that became a co-requisite to the revised Series 7 exam. Candidates are required to pass both the Series 7 and the SIE exam to obtain their general securities registration.

Note

You need a score of 72 to pass the Series 7 exam.

Series 63 License

Every state requires a Series 63 license for financial advisors to conduct business within its borders. This is an exam you must pass in addition to the Series 7 or Series 6. It is shorter and easier, lasting only 75 minutes, but covers a lot of minutiae regarding laws and regulations, some of which have been known to trip up test-takers.

Series 65 License

States also require the Series 65 but only for financial advisors compensated with fees as opposed to commission. Like the Series 63, this exam is heavy on rules and regulations, as the rules differ greatly for advisors who do not get paid on commission. Notably, individuals who hold a professional designation like the CFA or CFP may be eligible to have their Series 65 requirement waived by FINRA.

That said, much of the material on the Series 65 is a rehash of what an advisor has already seen on the Series 7 and, therefore, the test is considered rather easy to pass when taken subsequently. Most advisors who take both exams take the Series 7 first. The Series 65 can be difficult for the small percentage of advisors who take it without having passed the Series 7.

What Licenses and Certifications Do Most Financial Advisors Obtain?

The types of licenses and certifications that financial advisors have depend on the types of products and services they are selling. Common licenses and certifications/designations include certified financial planner (CFP), chartered financial analyst (CFA), chartered financial accountant (ChFC), and the Series 7, 6, 3, 63, and 65 licenses,

Can You Give Financial Advice Without a License in the U.S.?

Depending on the type of financial advice you provide, you may or may not need a license in the U.S.; however, in a professional capacity, you will most likely need a license. To work as a financial advisor, you will need to obtain certain licenses depending on the type of services you are offering. The Financial Industry Regulatory Authority (FINRA) oversees these licensing exams. Common licenses include Series 3, Series 7, Series 63, and Series 65.

What Is the Difference Between a CFA and a CFP?

A chartered financial analyst (CFA) generally gives advice to financial institutions, such as banks, mutual funds, and insurance companies. A certified financial planner (CFP) usually gives advice to individuals and sometimes small businesses.

The Bottom Line

Financial advisors need specific licenses to provide their services. This ensures they understand the products they are selling and the type of advice they are disseminating to clients. It also ensures they know the laws and regulations of various financial securities. The overall goal is to protect investors.

Advisors are required by regulatory bodies to obtain licenses depending on the products and services they are selling. Not all need licenses; however, having them helps to be competitive, in that they can offer more products and bring comfort to clients.

Read the original article on Investopedia.