What led you here? You’re most likely considering a career in a finance-related field or some investing here and there. If you’re planning on becoming an investor or having a career in financial planning in the United States, you most definitely heard about the Series 7 exam.
If you’ve watched the movie The Boiler, you know Ben Affleck’s famous speech about the Series 7 license and how he kicked out a broker from the meeting room. Things are not as intense in real life, and you’ll actually benefit from obtaining this license to be a valid broker, investor, or financer in the US.
Well, why do people boost about passing the exam? Is it actually that hard? This extensive guide will discuss all the minor and essential details you should know before sitting for the exam. Moreover, we’ll discuss how difficult it is and how much preparation you will need before the test.
What is the Purpose of the Series 7 Exam?
The examination is more commonly known as the Series 7 exam, but it also has a more technical name; the General Securities Representative Qualification Examination (GS).
The whole purpose of the examination is to assess your competence as an entry-level representative. It is a means of determining the skills of a registered general securities representative in the field, and it is meant to prepare employees for the working area.
In the United States, FIRNA administers this examination and issues the license once you successfully pass it. People use an available tool to figure out their knowledge and skills and whether they qualify to work as general securities representatives.
So, what does the Series 7 exam allow you to do? Here is a general list of occupations, more specifically, a list of items you’ll be able to sell:
- Stocks and bonds
- Variable contracts
- Rights and warrants
- Hedge funds
- Real estate investment trusts
- Money market funds
- Municipal securities
- Mutual funds
- Exchange-traded funds
The list above is not limited to the items above, as many other benefits come with passing the Series 7. However, if you’re entering the world of finance, it’s almost absolutely vital for you to obtain this license.
Remember that you will also have to sit for the SIE exam, a more straightforward exam than Series 7. It’s even shorter, costs less, and has and has fewer questions. On the other hand, Series 7 includes much more detailed questions and has almost double the number of questions on the exam.
But the exam should not be taken by everyone. Hence, should you take the Series 7 exam? Here is how to find out:
- It is meant only for people affiliated with dealers or brokers.
- You must be sponsored by an organization of dealers or brokers to be able to sit for the examination.
- You have to apply through a firm that will sponsor you, so they will pay for the exam.
- In 2018, FIRNA introduced the SIE exam, a prerequisite for sitting for the Series 7 test (you won’t have to apply through a firm for the SIE exam).
What Topics are Covered in the Series 7 Exam?
One vital piece of information to remember about the exam is that it is quite lengthy and extensive. That’s mainly the reason many candidates find it challenging at first glance. However, it is a simple entry-level examination, and the Series 7 exam questions are divided according to these topics:
- Debt Securities (aka bonds)
- Equities (aka stocks)
- Mutual Funds
- Municipal Bonds
- Life Insurance
- Retirement Plans
- Client and Margin Accounts
- Products and Finance Concepts
However, after 2018, there have been some minor changes. While the above topics are still covered, the weighted average for each subject is slightly different. Here is how many questions you should expect from each issue:
- Providing customers with information about investments, recommendations, transfer assets, and the ability to maintain records (91 questions)
- Obtaining and verifying customers’ purchases and sales instructions and agreements (14 questions)
- Opening accounts after validating customers’ financial profiles and investment objectives (11 questions)
- Seeking business for the broker-dealer from customers and potential clients (9 questions)
As you can see, there are 125 questions in the exam. However, these are only the ones that have a weight on your overall score. The exam consists of 135 questions, 10 of which are not graded, and they’re scattered through the exam.
Moreover, the total amount you have during the exam is 3 hours and 45 minutes. That might seem like ample time, as all the questions are multiple-choice, with 4 options for each question. The total amount of money you’ll have to pay every time you sit for the examination is $245.
For more detailed information about the outline of the exam and things to expect, refer to the content outline of the test supplied by FIRNA.
What is the Minimum Score Required to Pass Series 7?
First, you should understand how the Series 7 exam is graded. It’s based on an equating system. The scale is subjected to slight shifts depending on how difficult that particular exam is.
Overall, the passing grade for the Series 7 exam is 72%, so it might seem more straightforward than one would expect, right? However, the passing rate for series 7 is not entirely clear. Some test providers state that their students’ passing rate is around 90%, while other financial websites state it is about 75%. At the same time, FIRNA once said it’s closer to 65%.
As they aren’t entirely accurate, these numbers do not accurately represent how many people pass the exam. It obviously ranges in how prepared you are and whether you reach out for help through organizations and courses.
How Hard is the Series 7 Exam?
All things considered, is the series 7 hard? We found out that the answer to this question largely depends on how well you prepared for the exam. Let’s further discuss why Series 7 is more challenging than other securities exams and why preparation is absolutely vital.
First of all, the exam is entirely concept-based. Hence, if you aim to memorize everything and head into the exam, you’re already off on the wrong foot. However, if you’re well aware of the concepts and have gone over all of them a few times, you’re good to go!
Second, not all the material will be reflected equally through the exam. As noted above, there is more weight on customers and representation, so it is always safer to shift your focus towards the topics with more weight.
Hence, a general recommendation is to make sure that you’re much more robust and capable of answering the questions on topics that have more prominence throughout the exam. Even if you’re a little weak or shaky on the other issues, you’ll be fine if you practice enough.
So, once again, is the Series 7 hard to pass? Our answer is simply yes. While that is generally the opinion, it isn’t a reason for you to struggle or get extremely nervous about it. Numerous candidates go to the exam being overconfident about their skills and knowledge, which often blows up in their faces.
However, let’s just say you fail the Series 7 exam. Is that the worst thing in the world? Of course not! Numerous people fail on their first try but often save themselves on their second try. Here is a general guideline of what to expect if you fail:
- 1st attempt failed: you can take the exam after waiting for 30 days and paying the same fee of $245
- 2nd attempt failed:the same rules apply, where you have to wait for 30 days, pay the same fee, and then sit for the exam once again
- 3rd attempt failed:now, after falling three times, you’ll have to wait for 180 days before paying again and sitting for the exam
- >4 failed attempts:after the 3rd failed attempt, you’ll have to wait for 180 days before considering sitting for the exam
So, while this might seem gloomy and difficult to follow through, keep this general rule of thumb in mind: prepare for 100 hours. Hence, we advise you to stay away from pushing yourself into the exam. If you take 50 days to prepare, with 2 hours aside every day, you’re most likely to ace the exam.
How to Increase Your Chances of Passing the Series 7 Exam: 5 Tips
Below are our tips for passing series 7. Keep in mind that this is not a strict outline you should stick to, but we found out that this critical advice helps people pass on their first attempt:
Know the Questions
You’ll find numerous questions that focus on negative modifiers. Hence, instead of having a straightforward question asking, “what IS,” you’ll find many “what is NOT.” While that might be confusing, reading the question correctly a few times goes a long way. After all, you have more than 3 hours to go through the questions.
Moreover, keep an eye out for T+2 questions as they almost universally have a holiday during that period. You should keep an eye out for that because market holidays will not count towards settlement.
Focus on Specific Topics
Most people struggle with “options,” as numerous people get hung up on the questions’ variety and intensity. Hence, while studying for the exam, focus more on munis, options, variable annuities, debt securities, and suitability.
Know the Process
There are a few steps you need to follow. First of all, while you need someone to sponsor you when you sit for the exam, you don’t need a sponsor when preparing. Hence, you can start off your prep classes early on. The next step is to get fingerprinted in your government office or through a Prometric Testing Center.
Then, fill out the U-4 form before submitting it to your broker or dealer along with your fingerprint. Keep in mind that your firm has to fill out the form. Once everything is confirmed, you will receive a confirmation enrollment with a “testing window,” usually about 4 months. You can sit for the exam to obtain your license.
You can find multiple series 7 prep materials. They come in books, online classes, face-to-face classes, past exams, sample questions, and much more. Our top favorites are:
- The Securities Institute of America Exam Prep
- Securities Training Corporation Material
- Achievable Courses
You should also practice a minimum of 1000 questions before sitting for the exam. Hence, if you plan to follow our rule of studying for 100 hours during 50 days, you can simply solve 20 questions every day to familiarize yourself with the formats.
These tips can apply while you’re preparing for the exam. It includes getting into a consistent routine every day. Moreover, find your focus while studying during the day, and always take short breaks in between once you start losing focus.
You can always keep some sort of flashcards to keep your memory fresh on topics and concepts that you’re not really strong in. Another strategy you can follow is to record yourself reciting some of the ideas and concepts and listen to them before you sleep or when you’re walking around.
Wrapping Things Up: Is the Series 7 Hard to Pass?
All things considered, the Series 7 exam should be taken quite seriously. Being overconfident about the exam will backfire, but being too self-conscious about it will also ruin your experience. We advise you to find the balance in between, and the only way you can do that is to prepare meticulously for the exam.
The way to do that is to follow a specific schedule every day, stick to it, and be consistent with how you tackle the issues. Moreover, learned the format of the questions and familiarized yourself with the tricky ones. Having flashcards or some method to revise the problematic topics will come in handy, especially when you need to go over them a few hours before your actual exam.
Check out this article on how many times you can take the Series 7 exam, so you can plan your study and testing schedule accordingly.