RIA Compliance and Practice Management Blog

Starting Your Own RIA Firm: What to Consider When Taking the Series 65 Exam

Posted by RIA in a Box

Mar 3, 2014 9:00:00 AM

*Updated on Jan 16, 2019

An individual who wants to legally drive an automobile must first meet the written exam requirements as well as pass the required road test. Anyone that wants to practice law must pass the bar or one looking to practice medicine must satisfy the requirements set forth in the medical licensing exam. Similarly, a professional who wishes to enter the Registered Investment Advisor (RIA) industry must adhere to the qualifying requirements to legally conduct business as an Investment Adviser Representative (IAR).

Who needs to register as investment adviser representative?

In general, any individual associated with an RIA firm who is rendering or providing investment advisory services including but not limited to asset management, wealth management, investment analyses, research, financial planning, and often those acting in a solicitor capacity will need to register as an IAR of an investment advisory firm. In addition, often an individual deemed to be a director, officer, controlling partner, or managing member of an RIA firm will be required to register as an IAR.

What are the exam requirements to become an IAR?

The Series 65 is the qualifying Uniform Investment Adviser Examination that an individual must pass to act as an IAR. There are exemptions available for one to meet the minimum competency requirements in most jurisdictions. One such exemption is the combination of holding both the Series 7 and Series 66 licenses, and in almost all instances the Series 7 and Series 66 licenses should have been registered with a broker dealer within 24 months of the time of the IAR’s initial application.

There are a number of professional designations that will often be accepted in lieu of an examination. They include the Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA), Certified Insurance Counselor (CIC) Certified Insurance Counselor (CIC), Chartered Financial Consultant (ChFC®), or Personal Financial Specialist (PFS). In general, it is much easier to study and successfully pass the Series 65 exam compared to attempting to achieve one of these professional designations which generally require additional education and a significant time investment.

Certain states do have unique qualifications to become an IAR. As an example, the state of Ohio will accept a passing score on any of the following series examination(s): 6, 7, 22, 24, 26, 39, 62, 63, 65 or 66. As another example, the state of New York has its own process of registering an IAR via the New York Investment Adviser Qualification form or Form NY-IAQ.

In addition to successfully passing the Series 65 exam, there are often additional steps necessary to properly register as an individual investment adviser representative such as the completing the proper filing paperwork and submitting a background and/or fingerprint verification required by certain filing jurisdictions.

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How can an individual take the Series 65 Exam?

The Series 65 is an "unsponsored" exam in which there is a $155.00 examination fee paid directly to FINRA for administering the examination. Once registered for the Series 65, an initial 120-day window is opened during which the individual must successfully pass the regulatory examination.

The exam is comprised of 130 multiple choice questions in which a passing score of 72 must be achieved. The exam covers a wide range of topics such as macroeconomics, financial reports and statements, market risk, investment and security instruments, client profile and suitability characteristics, and federal and state laws and regulations.

Since the Series 65 is such an important element of starting an investment advisory firm and becoming an IAR, it is essential to prepare properly and set aside the time and plan to study accordingly. There are many options for one to choose from in obtaining the appropriate study guide and examination prep materials to assist with passing the examination. Some well-known financial education providers listed in no particular order are Kaplan Financial, Securities Training Corporation (STC) and Solomon Exam Prep. There are many other education providers and when purchasing the materials it probably makes sense to research the passing rate statistics, user reviews, and sample materials.

Some common mistakes and misconceptions that one may encounter in achieving a passing score for the Series 65 is relying on previous financial industry experience and familiarity with basic topics without studying and grasping the core subject matter. The majority of the examination’s compliance topics revolves around federal and state laws, business ethics and fiduciary guidelines that are not typically understood in layman’s terms. Also, be sure to obtain up to date examination prep materials due to evolving codes, laws, and regulations that may not be reflected in outdated exam guides.

Hopefully after one has put in the required study time and gauged their readiness via a few practice examinations they will pass the exam, however; there is always a possibility that for one reason or another that the initial attempt to pass the Series 65 exam does not go according to plan. After an initial failed attempt, a new exam window must be opened and the exam can be taken a second time after waiting at least 30 days. After a second failed attempt, another 30 days from the date of the second exam must elapse before the third attempt to pass. After the third failed attempt, at least 180 days must elapse before taking the exam a fourth time.

It is advisable to implement a sound study format. Several strategies to utilize are reading the text books first and completing the questions at the end of each section before moving to the next. Common habits are taking online modular and final exams to identify the more complex subjects to focus on, using index cards or even attending a live instructional class.

Good Luck!

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Topics: RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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