A Journey Through the Series 7 Exam

Key Takeaways

• The purpose of the rigorous exam is chiefly to set competency levels for a stockbroker or registered representative to work in the securities industry.

• The examination covers a wide range of financial terms and topics in addition to securities regulations.

• There are several advantages to passing the Series 7 exam, including career opportunities in finance. Such careers run the gamut, from accountant and financial analyst to investment banking and financial adviser.

Anyone seeking to become a registered representative in the U.S. securities industry will at some point come across the term “Series 7 Exam,” as it is the entryway to licensure for a range of financial services activities. To help with preparation and understand what the test means, here is, from novice to licensed professional: a journey through the Series 7 Exam.

What is the Series 7 Exam?

Anyone aiming to work in financial services, whether as a general securities representative, stockbroker, financial planner or adviser, or insurance agent, or the like, is required to take the Series 7 exam.

Formally known as the General Securities Representative Qualification examination, the Series 7 test, as well as its licensing, is administered by the Financial Industry Regulatory Authority (FINRA). More than 43,000 Series 7 exams are taken each year. Of all FINRA’s regulatory exams, the Series 7 is the most widely administered.  

Among other things, a person who passes the exam is qualified to solicit, buy, and sell securities, including municipal fund securities, corporate securities, options, investment company products, direct participation programs, and variable contracts. Basically, passage of the exam licenses the person to sell all manner of securities except futures and commodities.

Covered activities and products for those who pass the examination include, but are not exclusive to:

• Mutual funds
• Money market funds
• Public offerings and/or private placements of stocks and bonds
• Options on mortgage-backed securities
• Unit investment trusts
• Exchange-traded funds
• Real estate investment trusts
• Government securities
• Options on mortgage-backed securities
• Sale of municipal securities and hedge funds
• Venture capital
• Retirement plans

Note that those who garnered a Series 7 registration on or after Nov. 7, 2011, will only be qualified to participate in municipal securities sales and purchases.

What is the Importance of the Series 7 Exam?

The Series 7 exam is a big deal in the industry, and here are two main reasons why:

1. Need for registered financial representatives. One reason the exam is important is that it permits the licensing of financial advisors, of which there is a shortage. The general concern is that, at current levels, firms will not be able to meet future demand.
2. Credibility and trust to those that pass the exam. The purpose of the rigorous test is chiefly to set competency levels for a stockbroker or registered representative to work in the securities industry. To that end, it requires candidates to demonstrate extensive knowledge in the financial services space.  

What is the Format of the Series 7 Exam?

The Series 7 examination covers a wide range of financial terms and topics in addition to securities regulations.

The test comprises 125 multiple-choice questions that must be answered in three hours and 45 minutes. To pass, candidates must score at least 72 percent. 

What are Some of the Key Topics in the Series 7 Exam?

The test touches on nearly every aspect of the financial industry. In preparation, some of the main topics to study include:

• Debt securities
• Equities
• Options
• Securities markets
• Regulations
• Municipal bonds
• Mutual funds and ETFs
• Retirement plans
• Annuities and life insurance
• Taxation
• Margin and client accounts
• A range of other products, rules, and finance concepts

What are the Benefits of Passing the Series 7 Exam

There are several advantages to passing the Series 7 exam, including career opportunities in finance. Such careers, which usually offer opportunities for further growth, run the gamut, from accountant and financial analyst to investment banking and financial adviser.

Other titles and careers can include chief financial officer, risk manager, auditor, credit analyst, commercial banker, financial planner, corporate finance, budget analyst, investment manager, and portfolio manager. Still other possibilities include investment analyst, insurance agent, finance manager, controller, compliance expert, banker, actuary, and property manager.

Someone who passes the Series 7 exam is automatically conferred a great deal of credibility and trust. As has been covered, the test requires rigor and a thorough general knowledge of financial terms and topics.

Depending on their field, those who pass the test and are licensed commonly experience an expanded client base.

Further, the knowledge gained from the exam can help drive the newly licensed to six-figure salaries and/or commissions in their field.

Learn More

Those interested in learning more about finance and investing should take advantage of resources such as those offered by the popular alternative investment platform Yieldstreet. Its Insight and Education blogs cover the latest industry updates and break down all the terms necessary to know.

Blog titles, for example, include those about diversification – crafting a portfolio with varied investments that have different expectations. Diversifying one’s holdings can reduce overall volatility and risk and is essential to successful long-term investing.  

Alternative investments can be a good way to help accomplish this. Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings. 

Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk. 

In some cases, this risk can be greater than that of traditional investments.

This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million.  These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.

However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments. 

Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10,000.

Learn more about the ways Yieldstreet can help diversify and grow portfolios.

Summary

The Series 7 exam stands out industry-wise because it is extensive and rigorous. Those who pass it will have demonstrated – and gained — vast knowledge of terms and activities in the financial services arena. They also will have likely significantly helped their careers and opportunities.