If you are a financial professional, there are likely several exams you will be required to pass before you can obtain your license and begin giving financial advice to your clients. For many financial professionals, this includes the Series 65 Exam, also known as the Uniform Investment Adviser Law Exam, which is currently administered by the Financial Industry Regulatory Authority (FINRA).
The Series 65 Exam was first established in 1989 by the North American Securities Administrations Association (NASAA). With some exceptions, passing this exam is generally the easiest way to become an Investment Advisor Representative (IAR), which is an advisor who gives financial and investment advice to their clients and is generally paid a commission.
If you are interested in becoming an IAR, then it is quite possible you will end up taking the Series 65 exam at some point in time. In this guide, we will answer some of the most common questions about this particular exam, including what you can do with a Series 65 license and how you can set yourself up to pass the exam.
Who is Required to Get a Series 65 License?
Most people who want to become an individual advisor representative will need to pass the Series 65 Exam and thus secure a Series 65 License. This is true in every state, as well as all United States territories and Washington DC.
Keep in mind that even once you have obtained your Series 65 License, you will still usually need to obtain an additional license (and registration) to practice in the state(s) of your choosing.
There are some situations in which you can become a licensed IAR without having to obtain a Series 65 License. For example, if you have already obtained a Series 7 License and a Series 66 License, then you will not need to pass the Series 65 Exam.
The path that will make the most sense for you will depend on the kind of role you plan to have. Individuals who have obtained a Series 65 License are allowed to give financial advice to their clients—but they are not allowed to directly sell securities to their clients or manage their portfolios. If you want to be a securities broker or dealer, you will need to obtain a Series 7 License, which most people consider more difficult and time-consuming.
Topics Covered on the Series 65 Exam
The topics covered on the Series 65 Exam are clearly outlined on the NASAA website. Generally, all questions on the exam will fall into one of four standard categories.
One of the most important categories on the exam is the “Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices” category. This category is featured in 39 questions, which is 30% of the exam. Topics covered include basic regulations for investment adviser representatives, ethical obligations held by these representatives, and regulations regarding how these representatives are allowed to communicate with clients.
The other most major category is the “Client Investment Recommendations and Strategies” section, which also accounts for 39 questions. This covers different portfolio management strategies, the effects of taxes and retirement planning, different types of accounts, and general security basics.
With 32 questions (25% of the exam), the third largest category is “Investment Vehicle Characteristics.” This part of the exam focuses on how different investment vehicles actually work, as well as their corresponding risks and benefits. This section includes a wide range of investment options, ranging from cash equivalents to equities.
The remaining 20 questions (15% of the exam) cover “Economic Factors and Business Information.” This is perhaps the broadest section; it primarily covers big-picture topics such as economic policy, economic indicators, and industry-wide risk concepts.
Tips for Preparing for the Series 65 Exam
Though NASAA does not publish the pass rates for the exam, major test prep companies, such as Securities Training Corporation, estimate that only between 65% and 70% of test takers will pass. This makes the exam itself slightly harder than some comparable exams, such as the Series 63 Exam.
While the exact amount of time you will need to prepare for this exam will depend on several factors—such as your background, knowledge and preferred learning style—most people who pass will spend between 80 and 90 hours preparing.
There are several things you can do to prepare yourself to pass the Series 65 Exam and obtain your Series 63 License. For most, working with an experienced exam prep partner will help prepare for success. These courses are designed by people who are very familiar with the exam material and the types of questions that will typically be asked.
The best Series 65 prep courses will offer a wide variety of course-specific material, such as online practice exams, on-demand lectures, Series 65 flashcards, instructor support, and more. Depending on your learning style, it might also be helpful to enroll in the course with a friend or colleague who is also preparing for the upcoming exam.
Series 65 Exam Structure
Currently, the Series 65 Exam consists of 130 multiple-choice questions. Candidates will have 180 minutes (3 hours), to complete the exam, which means they will have about a minute and a half to answer each of the questions.
During the exam, candidates will be allowed to use a calculator to answer any of the exam’s math-based questions. However, they must use the calculator provided to them by the exam administrators, which only includes the four main mathematical functions. Test takers will also be allowed to use a (provided) dry-erase board.
Before taking the exam, an application form must be filled out. Those associated with a financial firm can use form U10, while those who are not affiliated will use form U4.
The fee for taking the Series 65 Exam—which is set by FINRA—is currently $175. In order to pass the exam, candidates must correctly answer at least 94 out of the 130 questions, which is a score of 72%.
Passing the Series 65 exam demonstrates that an individual has a thorough understanding of the principles of investment advice, portfolio management, and fiduciary responsibilities. It enables an individual to legally provide investment advice to clients for a fee. It is also a requirement for individuals who want to start their own investment advisory firm or work for a registered investment advisory (RIA) firm. Passing the exam shows you posses necessary knowledge and expertise to provide professional investment advice to clients and you are ready to take the next step in your career.
Obtaining your Series 65 License can have a major impact on your financial career. Enroll today to learn about all topics covered on the exam and set yourself up for future success.