If you’re considering a profession in the financial industry, you’re going to need to pass several licensing exams. The series 63 is one of those exams. What is the Series 63? Also known as the Uniform Securities State Law Exam, it covers the ethical and fiduciary obligations that allow you to facilitate orders for any type of financial security.
An investment professional should only act in accordance with a client’s best interest, even if it means going against their own. This ensures clients aren’t taken advantage of when it comes to buying and selling securities. For this reason, many firms require their investment professionals to take and pass the series 63 license exam.
Are you considering taking the series 63 license exam? Perhaps you’re shopping around for financial advisors and you’re only considering those with the best qualifications. Either way, we’ll go over everything you need to know about the series 63 license exam and what it means for investment professionals and their clients.
Why Would You Take the Series 63 Exam?
In simple terms, the series 63 exam makes an investment professional a fiduciary. What is a fiduciary? It is someone who has been placed in a position of trust and therefore has the legal obligation to act in their client’s best interest, even if it conflicts with their own. Fiduciaries can be found across a wide range of industries and professional relationships, including realtors, lawyers, trustees, and more.
Despite popular belief, not all financial advisors are fiduciaries. This could cause potential conflicts of interest when it comes to a managed investment portfolio. In the cases where financial advisors are incentivized to sell investment products for a commission, there is obvious friction.
For this reason, it is recommended that people seeking out investment advice only engage with those that are fiduciaries. This ensures the relationship will be built on honesty, good faith, and loyalty. It also gives an added layer of protection for those that are entrusting someone else to manage their finances. High caliber investment firms recognize this and will require their advisors to become fiduciaries.
What Is On The Series 63 License?
The series 63 exam consists of 65 multiple-choice questions, with only 60 being counted towards your final score. The remaining 5 questions are experimental questions the North American Securities Administrators Association (NASAA) might consider using on future exams. You could expect to take your exam on a computer at a Prometric testing location.
You will need to answer 43 questions correctly out of the total 60 scored in order to pass the exam. But you will only have 75 minutes to complete the exam. This means that you cannot afford to spend more than a minute and 15 seconds on each question, or else risk falling behind. Although the Series 63 is known for being one of the shorter securities licensing exams, it is also notorious for harboring trick questions.
Securities Acts and Regulation
You can expect to face questions about securities acts and regulations. This section should take up about 75% of the total scored questions. You may be asked to identify what is true about an individual securities act, such as the National Securities Market Act or the Uniform Securities Act. You will also need to know how different rules and regulations apply and when they are relevant.
Ethical Practices And Fiduciary Obligations
The other portion of the series 63 exam requires you to identify how ethical practices and fiduciary obligations translate into real-life scenarios. This section will compromise about 25% of the total scored questions. For instance, many of the questions will contain examples of financial transactions and you will be asked how they relate to different rules and regulations. You may also be asked to identify the correct fiduciary response to a specific scenario.
How Should You Prepare?
In order to prepare for the series 63 exam, it is recommended to purchase a textbook or study guide to help you learn the material and relevant terminology. It’s important your book has sample questions and answers. The more sample questions and practice exams you complete, the more prepared you will be for the actual exam. Make sure to time yourself as you answer questions.
Definitions and terminology are one of the major hurdles for series 63 test-takers — aside from time constraints. Make sure you understand when registration or exemptions are required. You will also need to be familiar with terms like agent, broker-dealer, securities, administrators, as well as others. All in all, practice makes perfect. You’re going to want to spend about 30 to 40 hours studying for the series 63 exam.
Series 63 Requirements
The series 63 is required for selling securities in all states except for Florida, Colorado, Puerto Rico, Louisiana, Maryland, New Jersey, Ohio, the District of Columbia, and Vermont. It’s recommended to have passed the series 6 and series 7 licensing exam before you take the series 63 exam.
You don’t need a college degree to register for the series 63 exam. However, most examinees have at least a college degree in a finance or business-related field. Most examinees are also actively seeking employment as a financial advisor or an insurance agent that sells securities.
Unlike most securities exams, you don’t need to work for a FINRA-member firm in order to take the series 63 exam. If this is the case, you will need to complete a Form U10 (Uniform Examination Request for non-FINRA candidates) to register. If you are part of a FINRA-member firm for at least four months, your firm will have to file a Form U4 (Uniform Application for Securities Industry Registration) for you to register.
The exam costs $125 to take. You can enroll in the series 63 exam through FINRA’s website here.
What To Know About The Series 63 License Exam
Although the exam is not easy, putting in the time to practice will help you sit down with confidence when the time comes. About 86% of people that take the series 63 license exam are able to pass on the first try.
If you do not pass the exam on your first try, you will need to wait at least 30 days before taking it again. If you do not pass three times in a row, you will have to wait 180 days before you are able to re-enroll.
It’s important you dedicate at least 30 hours of studying to prepare for the exam. Take as many practice exams as you can. This way you can get a feel for the types of questions you will be asked. Whatever you do, don’t rush or try to cram your study hours the week before your exam. Doing so will only create stress and impede your ability to perform your best.
All in all, if you live in the majority of states where the series 63 license exam is a requirement, passing the exam brings you one step closer to beginning your career as an investment professional.