What Does the Series 65 Allow You to Do?
Understand the professional capabilities and responsibilities granted by the Series 65 exam for advising clients on investments.
The Series 65 exam qualifies individuals to provide investment advice to the public for compensation. Administered by FINRA and NASAA, it assesses a candidate’s understanding of investment concepts, laws, ethics, and strategies. Passing the Series 65 is a foundational step for those seeking to become Investment Adviser Representatives (IARs).
Core Activities of an Investment Adviser Representative
Once properly registered, an Investment Adviser Representative (IAR) can engage in specific activities. These primarily involve providing investment advice regarding securities, offering comprehensive financial planning services, and managing client portfolios for compensation. This advice is personalized and tailored to a client’s unique financial situation and goals.
IARs can offer recommendations on various types of securities, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). They assist clients with asset allocation strategies, helping to determine the appropriate mix of investments to achieve long-term objectives. This often extends to specific financial planning areas such as retirement planning, college savings strategies, and estate planning, where investment advice is integrated into a broader financial picture.
IARs may oversee the day-to-day management of client investment accounts, which can include making discretionary investment decisions on behalf of clients. Compensation for these services is typically fee-based, such as a percentage of assets under management (AUM), an hourly rate, or a flat fee for specific planning engagements. This fee-based model distinguishes IARs from professionals who primarily earn commissions from selling financial products.
Fiduciary Duty and Client Relationships
An Investment Adviser Representative operates under a stringent standard known as fiduciary duty. This legal and ethical obligation requires the IAR to act solely in the client’s best interest at all times, placing the client’s financial well-being above their own or their firm’s interests. This duty influences every aspect of the client relationship, from the advice provided to the handling of potential conflicts of interest.
The fiduciary standard demands full and fair disclosure of all material facts related to the advice given, including fees, potential conflicts, and any compensation arrangements. This transparency is often formalized through documents like Form ADV Part 2A (the firm brochure) and Part 2B (the brochure supplement), which provide detailed information about the advisory firm and the individual IAR.
Adhering to fiduciary duty means that an IAR must seek the best possible prices for client transactions and avoid practices that could benefit the advisor at the client’s expense. For example, an IAR cannot engage in “front-running,” which involves buying securities for their own account before buying them for a client.
Regulatory Framework and Registration Requirements
Passing the Series 65 exam is a prerequisite for individuals seeking to become registered Investment Adviser Representatives, but it does not, by itself, grant the authority to provide investment advice. Legal authorization to practice requires formal registration with either state securities authorities or the Securities and Exchange Commission (SEC). This dual regulatory structure depends largely on the amount of assets an advisory firm manages.
Firms with $100 million or more in assets under management (AUM) typically register with the SEC, operating under the provisions of the Investment Advisers Act of 1940. Investment advisory firms managing less than $100 million in AUM generally register with the securities regulator in the state where their principal office is located.
Individual Investment Adviser Representatives register through the Central Registration Depository (CRD) system, a national database maintained by FINRA. This process typically involves submitting a Form U4, which provides detailed personal and professional information, including educational background and any disciplinary history. Annual renewal of registration is also required.
Activities Not Covered by the Series 65
While the Series 65 qualification permits an individual to provide investment advice for compensation, it does not authorize all financial activities. Individuals holding only the Series 65 license are not permitted to execute securities trades, such as buying or selling stocks and bonds on behalf of clients, as this activity falls under the purview of brokerage services. Brokerage activities typically require additional licenses, such as the Series 7 General Securities Representative exam.
The Series 65 does not authorize the sale of specific financial products like insurance policies or annuities. These products often require separate state-specific insurance licenses. Similarly, engaging in activities such as underwriting securities, which involves facilitating the issuance of new stocks or bonds, requires specialized registrations beyond the scope of the Series 65.
Many financial professionals choose to obtain multiple licenses to broaden the range of services they can offer clients. For example, a “dually registered” advisor might hold both the Series 7 and Series 65, allowing them to both provide investment advice and execute trades or sell commission-based products.