There are many different licenses and credentials insurance professionals can obtain to gain certain skills and expand their knowledge and expertise. One of the commonly pursued licenses in both the insurance and financial industry is the Series 7 license.
Those new to the insurance industry and experienced finance professionals who recently shifted to insurance may be wondering why this FINRA-issued license is also afforded to insurance professionals.
Like the Series 6 license, the Series 7 is also more closely associated with financial planners and retirement planners.
So, what does this license have to do with insurance and insurance professionals? Some insurance agents or brokers pursue the Series 7 because it’s a legal and professional requirement when dealing with variable lines of insurance. Having this can not only increase their potential revenue, but also their credibility, expertise, and industry reputation.
In this guide, Insurance Business discusses the Series 7 license. We'll tackle important topics and questions like:
A Series 7 license is a certification that enables license holders to give advice on and sell securities products in the US. To obtain this, candidates must take and pass the Series 7 exam.
An individual that passes the Series 7 exam can be expected to possess advanced knowledge in these topics:
Basically, this license serves as authorization for an individual to sell virtually any type of securities apart from commodities and futures.
“The Series 7 license allows finance or insurance professionals to offer ‘packaged products’ such as mutual funds, variable annuities, variable life insurance, UIT’s (Unit Investment Trusts), plus individual securities like stocks, bonds, ETFs, options – with these four as probably the most known investments,” explains Nic Nielsen, CFP and CLTC at North Carolina-based financial planner Know My Plan.
In the case of insurance professionals, the Series 7 license allows them to sell insurance products with an investment component. The most common examples of this type of insurance product are:
These products have an element of risk, and their value can fluctuate based on the performance of underlying investments chosen by the policyholder. And because of this extra risk, these products must be registered with the Securities and Exchange Commission (SEC).
They must also be regulated by the Financial Industry Regulatory Authority (FINRA). It’s precisely due to the risk and the involvement of these two bodies that makes the Series 7 license mandatory for any professional – whether in finance or insurance, who wishes to deal in these products.
These are the minimum qualifications for this certification. Note that you don’t have to have a college degree to get the Series 7. You need:
There are a few key steps in obtaining this license. Here is the step-by-step process:
There are many course providers for the Securities Industry Essentials (SIE) and Series 7 exams. Keep in mind that these two exams are what FINRA regards as “co-requisites,” meaning you must pass both exams to get your license. You can take them in any order.
Choose preparatory courses that have a high passing rate for its students, plenty of course materials, competent instructors (experienced industry practitioners whenever possible) and instructor support. Also, don’t be afraid to ask licensed senior professionals for advice on which courses to take.
As with getting the Series 6 license, candidates must take and pass the SIE exam. This exam covers the basics of the US financial industry. Note that the SIE contains a total of 75 questions in four sections. The SIE will test you on these topics:
The passing score for the SIE exam is 70%. A candidate who passes the exam will have their scores considered valid for the next four years.
Once you pass the SIE exam, you need to be sponsored by your employer to apply for the Series 7 license. They must be either a FINRA-member firm or a Self-Regulating Organization (SRO), such as an insurance company. You cannot independently apply for the Series 7 license.
When you get sponsored, you may then submit the Form-U4 via FINRA’s Web Central Registration Depository (CRD). To ensure that Series 7-licensed professionals meet ethical standards set by FINRA, Form-U4 collects the following information from candidates:
The disclosures on the Form-U4 detail any criminal convictions, actions by regulatory agencies (SEC, state, or foreign), and other investment-related issues that the candidate may have.
After getting sponsored by your employer and registered with FINRA’s CRD, you must take the Series 7 exam. Officially called the General Securities Representative Examination (GSRE), candidates must take the exam within 120 days of registration, so it’s recommended to take the exam as soon as possible.
Once a candidate passes the exam, their sponsoring firm finalizes documentation with FINRA, and the licensee is required to complete continuing education.
They may take on additional licenses, such as the Series 63, Series 65, or Series 66. These additional licenses may be needed based on the functions performed, covering state regulations.
The Series 7 exam is designed to assess the competency and skill of an entry-level registered representative to perform their job as a general securities representative.
To have a clearer picture of what you’ll need to prepare for, the content outline below shows the four major job functions of a general securities representative. The table below shows the allocation of exam items for each of the major job functions:
|
Major job functions |
Number of items in the Series 7 exams |
|---|---|
|
(F1) Seeks Business for the Broker-Dealer from Customers and Potential Customers |
9 |
|
(F2) Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives |
11 |
|
(F3) Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records |
91 |
|
(F4) Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions |
14 |
|
Total |
125 |
Source: finra.org
Historically, the Series 7 license exam is still one of the toughest FINRA exams. It has one of the lowest passing rates compared to other securities licenses.
A significant amount of study and preparation is required to pass because of its comprehensive coverage of various financial instruments and regulations. However, depending on the skill, dedication to studying, ability and experience of the individual candidate, the Series 7 may not be as tough for them.
“On a scale of one to 10, it is probably a five," Nielsen says. "Many people can pass the exam with little industry background and cramming for two weeks. However, industry experience certainly helps.”
There are many course providers to choose from when it comes to preparing for these exams.
Here are a few of the most popular you may want to consider:
As for the SIE, there are several excellent course providers as well. Here’s a selection of course providers whose study packages can potentially help you get good marks:
If you’re looking for insurance sales training instead, these are the top websites to choose from.
For insurance professionals who want to expand their knowledge as well as their product portfolio, what is a sound strategy to prepare for the Series 7 exams and get their license? Here are a few tips:
That said, don’t forget to look for a mentor or teacher who’s active in the industry. Your own professional experience can also help you prepare if you are or have been employed in a finance-related role.
“Real industry experience is certainly a plus," Neilsen says. "However, there are Series 7 review courses and teachers that are terrific (Dalton Education, Ken Zahn, Joe Nissim). These are professionals that can help you focus on the areas that are really needed to pass the exam.”
“If any insurance professional wants to offer variable products (VUL or VA), they really need the Series 6 or the Series 7 license," Nielsen says. "There isn’t really an advantage of one over the other. However, if they want to go more in depth in financial planning and offer more solutions outside of insurance, then the Series 7 license would be beneficial.”
Apart from having the knowledge and legal authorization to sell variable universal life insurance and similar products, these are other benefits of having the Series 7:
When you work to get your insurance license and become an insurance agent, you are limited only to insurance products. If you obtain a Series 7 license, you get the necessary skills, knowledge, and legal authorization to sell insurance products with investment components.
A Series 7 license can also allow you to sell lucrative investments despite being in the insurance industry. You can take advantage of the US insurance industry’s recent venture into exchange-traded funds (ETFs).
Even with all the novel ways of getting variable lines of insurance or financial products from mobile apps, faceless brokers, or websites, consumers want a real person with whom they can interact. And keep in mind, there’s a new generation of customers who will want more value from their insurers. This factor alone makes the market more competitive as it is.
If you only hold an insurance license, you will face stiff competition from other agents with more certifications. When you have both an insurance license and a securities license, you’re in a better position to help clients piece together a blend of insurance and investment products for their current life goals and future financial objectives.
With both an insurance license and the Series 7, your existing clients will see your practice as a one-stop shop where they can entrust both their life insurance needs and investment goals. If you already have a long-standing relationship, a Series 7 license can make your clients trust and rely on you even more to help them with making informed decisions.
As with many other beneficial licenses or certifications, the Series 7 license takes time, effort, and funds to obtain. Whether the time and resources you invest to get the license is worth it depends on how well you leverage its benefits and provide clients with insurance and financial products.
For instance, adding this license can get you hired at one of the biggest life insurance companies or financial institutions, if you choose. But remember, you should pursue this certification only if it matches your career needs and goals.
Do you think the Series 7 license will do good for your practice? Share your thoughts in the comments
