The Series 7 exam is one of the basic licensing tests required to begin work in the securities industry. Passing the exam allows a registered representative to sell financial securities other than commodities and futures (which requires a separate exam). The Series 7 exam is administered by FINRA, the Financial Industry Regulatory Authority.
Formally called the General Securities Representative Qualification Examination, the Series 7 exam is typically the first exam you’ll take if hired to work for a bank or brokerage that sells financial products to customers. As such, it covers basic knowledge core to providing financial services, and it’s important to pass the test within a few months of being hired for an entry-level position.
What is the Series 7 exam?
What is the Series 7 exam?
Before you take the Series 7 exam, you’ll need to be sponsored by a FINRA member firm (usually a bank or broker-dealer) that’s hired you or is intent on hiring you. In most cases, passing the exam is a condition of employment; if you don’t obtain the required securities licenses before a specified time, you may be unable to work for your intended employer. Thus, passing the exam according to the firm’s deadline is critical.
The Series 7 exam is fairly comprehensive, lasting almost four hours and comprising 125 multiple-choice questions. You’ll need to score at least 72% to earn passing marks. On the test, you’ll be quizzed on the following job functions (Source - FINRA):
- Seeks Business for the Broker-Dealer from Customers and Potential Customers
- Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives
- Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets, and Maintains Appropriate Records
- Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions
As a new hire, you’re expected to demonstrate competency in the basics of the financial industry. This includes not only a mastery of the nuts and bolts (e.g., how stocks and bonds work) but also the day-to-day activities (e.g., communicating with clients and understanding how to perform transactions).
Finally, the exam includes major non-financial elements, like soliciting business and keeping proper records. Interestingly, the exam covers much more than financial math, which signifies that working for a broker-dealer involves a great deal more than just working with numbers.
Why does it matter?
Why does the Series 7 exam matter?
FINRA administers the Series 7 exam to enforce a minimum competency for entry-level employees. This is especially key for new hires who may not have had exposure to financial subjects in their university studies. The Series 7 acts as a prerequisite for many of the other FINRA exams, like those for options trading and managerial positions.
In 2018, FINRA rolled out the SIE (Securities Industry Essentials) Exam, another test required for new employees. The SIE tends to be a bit more basic in nature than the Series 7, which focuses on applying that knowledge in real-world situations.
How to prepare
How does one prepare for the Series 7 exam?
If you’ve never taken a financial exam before, there’s not much to worry about -- so long as you study appropriately. Your firm will almost certainly run a formal training program that includes Series 7 exam preparation (usually supplemented by an outside provider).
To pass the exam and start your career in the financial industry, the key is to stay on the predetermined study schedule provided by your exam prep company. They’ve run the exam many hundreds of times with thousands of candidates, so if you follow their process diligently, your odds of passing the Series 7 are quite high.
It takes about four to six weeks, or about 150 hours, to adequately prepare for the exam. Although it may sound daunting, the study schedule is often considered manageable when spread over several weeks. With the right time, preparation, and deliberate practice, passing the exam is well within reach for most candidates for a career in finance.
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To learn more, visit the FINRA website to read about the exams in more detail. Plenty of material covering financial markets and financial education also can be found anywhere on the Fool.com website.
