The Series 7 examination and why you need to pass it

Everything you need to know about the Series 7 exam and how to pass it in this useful insider guide

What is the Series 7 exam?

Series 7 is not, sadly, anything to do with your favourite show on Netflix. Instead it’s a test, set by the Securities and Exchange Commission, that is designed to uphold the principles and fairness of the U.S. stockmarket. It’s a way of ensuring that brokers and dealers truly understand the market, and are qualified to guide their clients with proficiency and integrity. Think of it as a really hard, really long driving test that’s there to stop people in investment banking from crashing the market.

Who is the Series 7 for?

Series 7 is for entry-level, registered representatives. That means if you want to be any kind of general securities representative, broker or dealer and want to buy or sell pretty much any kind of financial securities, options or contracts,  you’ll need to pass the Series 7. And you’ll also need to be sponsored by a financial company who is a member of FINRA or a SRO.

What is the Series 7 exam about?

There are four main subjects covered by the Series 7 exam:

• Finding and acquiring business from customers and potential customers (9 questions- 7%)
• Evaluating customers' financial profile and investment objectives, opening accounts (11 questions- 9%)
• Providing accurate information about investments, making recommendations, transferring assets and maintaining good records (91 questions- 73%)
• Obtaining and verifying customers' purchase and sales instructions and agreements; processing, completing, and confirming transactions (14 questions-11%)

How long is the Series 7 exam and how many questions are there?

It’s a brute, at three hours and 45 minutes and 135 questions.

How difficult is the Series 7 exam?

Like all exams, the test becomes easier the more you do to prepare for it. The general consensus is that the Series 7 is less comprehensive, and therefore slightly easier to pass, than the CFA exams, but only 65% successfully make it through the Series 7 on their first time, so the pressure is on.

Tips to help you pass the Series 7

Brian Marks, managing director of New York-based FINRA Licensing Exam preparation firm, Knopman Marks Financial Training, offers his advice for acing the Series 7 first-time around:

1. Put the time in

My recommended prep time for the Series 7 exam is 80-100 hours. Study the right material and do at least 1,000 practice questions before the big day. Then it won’t be such a big deal.

2. Think concepts, not questions

Passing this test is less about memorizing answers and more about understanding the material.  Learning answers by rote is a formula for failure. People try brute force to memorize formulas rather than understanding the concepts. If your memory fails on the exam, there is no backup.

3. Don’t waste time on the technical subjects

Don’t spend too much time on the options and corporate bonds sectors when these two topics only account for about 20% of the exam. The new Series 7 exams place more emphasis on clients and constructing portfolios for them. There’s a trend towards testing practical knowledge to ensure that people are well equipped to meet clients’ investment needs.

4. Know the bell curve rule

The first and last 25 questions are usually the easiest, so don’t panic if it suddenly gets more difficult in the middle.

5. Train for what you’re getting yourself into

The Series 7 exam is three-hours and 45 minutes. The more you can practice this sort of exam, rather than  bite-sized study chunks, the better prepared you’ll be. Think  like an athlete and get your mind and body used to this marathon exam.

6. Make sure your study material is up-to-date

As regulators change the rules ever more swiftly, the study material you use needs to be less than a year old. Keep an eye out for crowd-funding questions and topics around making suitable investment recommendations. There’s a major trend toward the suitability of investments on the examination. They want to see that you know how particular clients would want to construct a portfolio and what types of products would be appropriate for them.

7. Go above and beyond

You need 72% to pass the Series 7 exam. Hit 80% in your practice exams and you go into the day knowing you can pass. Confidence is key and the bigger your margin for error, the better.

Photo by Joshua Earle on Unsplash

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