As RIA compliance consultants, we regularly receive a number of questions related to the exam requirements of becoming an individual investment adviser representative (IAR) of a new registered investment advisory (RIA) firm. It is important to remember that the RIA firm and individual IAR registration processes are separate.
In addition, many similar individual investment adviser registration questions arise when the Chief Compliance Officer (CCO) of a growing RIA firm is reviewing the potential hire of a new individual IAR. It is important for the CCO to understand if the prospective IAR will need to take an examination as part of the individual investment adviser registration process. This is important to know, because if the new potential hire needs to take an examination, additional time should be budgeted from a business perspective before the new IAR will be able to join the RIA firm and begin conducting investment advisory business.
Some of the common RIA compliance questions related to individual invesment adviser registration process include:
- Is the Series 65 a license?
No. The Series 65 is solely an examination that is a pre-requisite for becoming a representative of a registered investment advisor (RIA) firm. Unfortunately, you can not “hang” any previous licenses as part of your registered investment advisory firm (e.g. Series 7, etc.). The Series 65 by itself does not give you the right to give advice or charge fees, etc. You are still required to file your individual registration documents with your state jurisdiction, in most states a Form U4, and be approved by that jurisdiction before you can provide any advice for a fee. (Note: New York uses a registration document called an NY-IAQ and Wyoming does not register investment advisor representatives.)
- If I currently hold the Series 7 and 66 licenses, do I need to take the Series 65 exam to become an investment advisor representative?
If you have successfully passed both the Series 7 and 66 examinations and have been affiliated with a broker/dealer in the past 24 months, than a prospective investment advisor representative will generally not be required to take the Series 65 examination as the active Series 7 and 66 combination will suffice. If you just hold an active Series 7 license, the Series 66 examination may be taken as alternative to the Series 65 examination. If you are unsure of your personal or prospective hire's license status, you can find an individual's exam and license history on the Investment Adviser Public Disclosure (IAPD) individual investment adviser search website.
- How hard is the Series 65 Exam and what does it cost to take the exam?
If you spend a solid 10-12 hours studying, you generally should have a good chance to pass. A member of our staff helps NASAA (the North American Securities Administrators Association. – they are responsible for the creation of the Series 63, Series 65, and Series 66 exams) write and review the bank of potential exam questions. He assures us that while the questions are written to be “entry level” in nature, they are not easy. If you don’t study you will likely find yourself unable to pass and have to wait 30 days and pay another $165 (current fee as of December 29, 2013) to retest. There are a number of companies that provide Series 65 exam prep materials. Clients of RIA in a Box receive a discount on the Kaplan Series 65 exam preparation materials. NASAA has also provided a Series 65 outline which highlights the types of questions found on the exam: Series 65 Exam Outline.
- Are there any professional designations which exempt someone from needing to take the Series 65 Exam?
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), 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.
- Is there a continuing education requirement for an investment advisor representative?
There is presently no continuing education requirement. As of today, neither the firm nor any representatives of the firm need continuing education. This includes the CCO (Chief Compliance Officer). However, remember that if you have an investment adviser representative that is also a registered representative of a broker/dealer firm firm, the registered representative will typically have both firm element and “outside provider” continuing education requirements as part of their broker/dealer affiliation.
- Can an investment advisor representative be a dual registrant of multiple firms?
A dual registrant is an individual investment advisor who is registered to multiple investment firms. Most states allow individuals to be dually registered to multiple firms, but there are some states which do not allow this practice including Alaska, Mississippi, Nebraska, Oregon, South Carolina, Utah, and Virginia. Other states only allow dual registration to affiliated firms. Affiliated firms are generally firms under common control or ownership.
- Does an investment adviser representative need to be registered to an RIA firm?
Yes, in order to conduct investment advisory business, an investment adviser representative must be registered to an RIA firm. Similarly, every investment advisory firm needs at least one investment advisor representative registered to the firm. Thus, a prospective investment advisor looking to start his or her own advisory business would need to register a new RIA firm, either with the SEC or relevant state(s), and then have his or her own individual registration registered to the new RIA firm at the state level. All individual registrations are administered at the state level regardless if the RIA firm is registered at the SEC or state level.