Series 7 Exam

Overview of the Series 7 Exam

Ben Affleck wants to know if anyone here has passed the Series 7 exam?

The Series 7 exam, also called the General Securities Representative Exam, is a regulatory licensing exam administered by FINRA to assess the competency of entry-level finance professionals involved in the selling, trading or dealing of securities. The Series 7 is the most widely administered of FINRA’s regulatory exams, with more than 43,000 Series 7 exams administered annually.

The Series 7 is not just for stockbrokers

The Series 7 has been traditionally thought of by finance newbies as a stockbroker exam. In practice, the Series 7 is taken by a far broader group of finance professionals: Anyone tangentially involved in the buying, selling, recommending or dealing of securities may be required to take the Series 7.

That’s because many financial institutions have a better-safe-than-sorry policy around regulatory exams. FINRA member firms (i.e. investment banks and other financial institutions) want to be in good standing with FINRA. As a result, they mandate the Series 7 even to professionals not directly involved in the selling or trading of securities.  This means that finance professionals involved in sales and trading and equity research, asset management, investment banking advisory services and even operations are often required to take the Series 7.

Changes to the Series 7 Exam (Updates)

The Series 7 is undergoing a significant change starting in October 1, 2018.

Registration before October 1, 2018, the Series 7 was a beast of an exam: 6 hours long, with 250 multiple choice questions, covering general financial knowledge as well as product-specific knowledge.

Registering on or after October 1, 2018, the exam will be significantly shorter: 3 hours and 45 minutes with 125 multiple choice questions. The revamped exam will place greater focus on product-specific knowledge. Meanwhile, a corequisite exam called the Securities Industry Essentials (SIE) will test for the general knowledge that’s been removed from the Series 7 content outline.

Series 7 Exam registration prior to Oct. 1, 2018

Series 7 Exam registration on or after Oct. 1, 2018

Employee Sponsorship

One unchanged aspect of the Series 7 is employee sponsorship: You must still be sponsored by an employer that is a FINRA member (any firm involved in the selling of securities must be a FINRA member). You do not, however, have to be sponsored to take FINRA’s new SIE exam.

Series 7 Exam Topics

The Series 7 topics to study include:

• Equities (stocks)
• Debt securities (bonds)
• Municipal bonds
• Options
• Mutual funds and ETFs
• Life insurance and annuities
• Retirement plans, 529 plan
• Taxation
• Regulation
• Client and margin accounts
• A variety of other rules, products and finance concepts

Series 7 Topic Changes

After October 1, 2018, the nominal list of topics covered will remain the same, but the weighting will shift significantly. Broadly speaking, the new and improved Series 7 exam will shift away from arcane rules surrounding communication and advertisement to customers, knowledge of the various types of customer accounts and procedures around the execution of orders.

The newly formatted exam will focus on the nature of various securities and financial instruments such as equities, bonds, options and municipal securities.

Instead, the newly formatted exam will focus on the nature of various securities and financial instruments such as equities, bonds, options and municipal securities. This is a step forward in increasing the Series 7 exam’s relevance to the day-to-day work of finance professionals. As we’ll explain below, the current version of the Series 7 is widely considered lacking in this regard.

The Series 7 content outline goes into more detail on each topic and compares the old Series 7 with the new Series 7. (We find the layout of FINRA’s content outline somewhat non-accessible, but study materials from Series 7 exam prep providers (which we list below) reorganize the topic outlines in a far more straightforward and digestible way.)

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Studying for the Series 7: How to Prepare

The pre-Oct. 1, 2018 Series 7 exam is 250 questions and 6 hours long. It’s a grind that requires test takers to internalize arcane and generally useless (see below) finance knowledge. Most financial institutions will provide new hires with Series 7 study materials and will encourage them to allocate about 1 week of dedicated study time. In reality, test takers should spend close to 100 hours, of which at least 20-30 hours should be dedicated to practice exams and questions. All the test prep providers below provide these).

Unlike the CFA or other challenging finance exams, the Series 7 exam does not require test takers to demonstrate deep analytical problem-solving skills. It’s more skewed toward the regurgitation of information, which generally means there are no shortcuts with regards to studying for the Series 7. If you put in the time, you’ll pass. If you don’t, you wont.

Do yourself a favor: Pass the Series 7 on the first try.

Many investment banks will plop Series 7 study materials on each new hire’s cubicle and carve out a week for them to hunker down and study. The minimum passing score is 72%, and the pass rate is around 65%.

Do yourself a favor: Pass the Series 7 on the first try. If you fail, your employer and colleagues will know you couldn’t hack it and while your fellow new hires begin their jobs in earnest, you’ll have to retake the exam alone. But hey, no pressure.

When I was studying for my Series 7, my boss told me if I get above a 90%, it means I studied too long and wasted time that should’ve been spent on productive work. This is a pretty common sentiment on Wall Street. So again, no pressure.

Going forward (after October 1, 2018), the Series 7 will be shorter, but will need to be taken along with the SIE (unless you take the SIE on your own before you’re hired). We expect that the combined study time required to pass both exams will be comparable to the current study regimen.

How Useful is the Series 7?

As I’ve alluded to, you should know that the Series 7 is widely perceived by employers as irrelevant for the actual day-to-day work of their finance professionals. Ben Affleck captured this sentiment in a his famous and totally NSFW speech to his fresh crop of finance bros in the movie “Boiler Room”:

Remember, this is NSFW. Many many f-bombs.

Series 7 Exam Prep Training Providers

Trying to pass the Series 7 without third-party materials is impossible. You will either be provided with specific study materials by your employer, or you’ll have to seek out your own Series 7 exam prep materials.

Here we list the largest Series 7 training providers. All of them offer a self study Series 7 program with some combination of videos, printed materials, practice exams and question banks and all fall roughly in the $300-$500 ballpark depending on how many bells and whistles you want. Note that most of the exam prep providers also offer a live in-person training option, which we did not include in the cost comparison below.

We will be updating this list with prices and more details once these providers make their new shortened Series 7 study materials available ahead of the October 1 2018 switch.