CFA and Series 7: Overview
In short, the Series 7 license is easier to obtain than the Chartered Financial Analyst (CFA) certification. Compared with the CFA exam, Series 7 only requires a small amount of time to prepare. The materials in Series 7 are hardly that difficult or extensive. Series 7 can be obtained after passing two relatively short tests, while CFA requires three longer tests.
The CFA and Series 7 titles usually make you embark on a different career path in the financial industry. In general, Series 7 is needed to buy and sell securities products, including stocks, bonds, mutual funds, options, direct participation plans and variable contracts. CFA is not subject to mandatory requirements for positions in the financial industry by any regulatory agency. CFA is primarily a certification, comparable to a master’s degree, which can increase the credibility of investment professionals and improve career development prospects.
- The Series 7 license and the Chartered Financial Analyst certification are two names in the financial industry that usually lead to different career paths.
- Series 7 is managed by FINRA and is necessary for individuals to buy and sell specific securities lists in their work.
- CFA is managed by the CFA Institute and is generally regarded as an advanced certification similar to a master’s degree.
- CFA franchisees usually work mainly in portfolio analysis, investment consulting, securities analysis, investment banking, economics, and academia.
Chartered Financial Analyst
The CFA Institute issues a CFA charter to those who can pass its strict requirements. People sometimes compare the CFA study program with obtaining a master’s degree in business administration (MBA), but it is more focused on the investment field.
To obtain a CFA, an individual must meet all the requirements set by the CFA Institute, including:
- Pass all three levels of the CFA exam
- Obtain a bachelor’s degree or show four years of acceptable professional work experience
- To become a member of the CFA Institute, this requires contacting the local chapter
The breakdown of CFA courses can be found on the CFA Institute website.
CFA holders believe that the most challenging aspect of the program is meeting educational requirements. Candidates must pass three exams of increasing difficulty. The CFA Institute recommends at least 250 hours of study time for each exam. It provides two Level 1 exams each year in June and December. It only provides Level II and Level III exams once a year in June. In fact, due to the exam date, candidates can only pass the exam once a year. There is no limit to the number of times a candidate can retake the exam. Level 1 candidates may be tested in June and December. Candidates for Level II and Level III must wait a full year to retake the exam, as they can only be taken in June. Fees include registration fees and exam fees, ranging from US$650 to US$1,380.
The low pass rate of the CFA program illustrates the difficulty of the exam. Ten-year average statistics show that 44% of registrants have completed the plan. As for the individual tests, 41% passed the first level, 44% passed the second level, and 52% passed the third level.
CFA is considered to be one of the most professional investment analysis certifications in the financial industry. CFA can greatly help individuals’ professional development, mainly in the following areas:
- Investment management
- Portfolio analysis
- Buyer transaction
- Seller research analysis
- investment bank
- Financial Advisory
The main difference between Series 7 and CFA is that one is license and the other is certification. For individuals whose work involves the solicitation, purchase or sale of securities (including stocks, bonds, mutual funds, options, direct participation plans, and variable contracts), the Series 7 license is necessary. As of October 2018, passing the Series 7 exam is not the only requirement for new FINRA license holders. Newly licensed candidates must also pass the Securities Industry Fundamentals (SIE) exam.
SIE is a 75-question multiple choice exam. Candidates have 1 hour and 45 minutes to take the exam. The required passing score is 70 points. The SIE exam is designed by FINRA to ensure that FINRA licensees have a thorough understanding of basic securities industry knowledge.
Series 7 exams are administered by FINRA. It has 125 questions covering the four main job functions of Series 7 authorized representatives. The test must be completed within 225 minutes.
The four main job functions include:
- Function 1: Find business for brokers through customers and potential customers
- Function 2: Open an account after obtaining and assessing the client’s financial status and investment goals
- Function 3: Provide customers with information about investment, make appropriate recommendations, transfer assets, and keep proper records
- Function 4: Obtain and verify customer purchase and sales instructions and agreements; process, complete and confirm transactions
Most series 7 exam preparation courses recommend 80 to 100 hours of study time, including on-site practice exams and at least 1,000 practice questions. Unlike the CFA exam, which covers case studies, financial and investment theory, and quantitative mathematics, the Series 7 exam involves memorizing SEC regulations and some basic mathematics. A score of 72% is required to pass the exam, and the pass rate is greater than 70%.
To fully obtain a Series 7 license, candidates must:
- Associated with and sponsored by FINRA member companies or other applicable self-regulatory organization (SRO) member companies
- Register with FINRA
- Pass the SIE exam
- Meet the qualifications required by FINRA Rule 1220(b)(2)
Series 7 licenses and CFA certifications are usually obtained for different professions in the financial industry. Series 7 Licensed Representatives tend to engage in financial market sales and usually act as stockbrokers or transaction-based financial advisors. Remember that in any financial situation, Series 7 is required to solicit, buy, and sell stocks, bonds, mutual funds, options, direct participation plans, and variable contracts. If the representative is not employed by a FINRA registered organization within two years, the Series 7 license may expire.
Although some investment consultants who have obtained a 7-series license also hold a CFA license, most occupations that require a CFA do not require a series 7 license. Unlike Series 7, CFA certification does not expire. Therefore, it is a certification that can be used to promote your personal skills throughout your career. With the CFA charter and membership of the CFA Institute, franchise holders have the opportunity to continue their studies through continuing education courses every year. Generally speaking, CFA can transition well to higher-paying jobs and have greater freedom in terms of responsibilities and management authority.
In terms of courses and difficulty, Series 7 and CFA are quite different. The Series 7 license covers the basic securities market terminology, products, and job functions in the SIE exam and Series 7 exam. CFA courses are more quantitative and theoretical, covering areas such as quantitative analysis, securities valuation, economics, financial reporting, and accounting.