What Licenses Are Required to Sell Variable Annuities?

Variable annuities are financial products offering investment growth potential alongside insurance features. These products differ from traditional annuities because their value can fluctuate based on the performance of underlying investment options, known as sub-accounts. Due to their dual nature as both insurance products and securities, strict licensing requirements are in place to ensure that individuals selling them possess the necessary knowledge and ethical understanding. This regulatory framework aims to protect consumers by ensuring that only qualified professionals provide guidance on these complex financial instruments.

Required Licenses

Selling variable annuities necessitates holding a combination of licenses. The foundational requirement is a state-issued life and health insurance license. This license permits an individual to sell various insurance products, including life insurance policies and annuities, within a specific state. Variable annuities fall under the purview of this license due to their underlying insurance contract.

Beyond the state insurance license, the securities component of variable annuities requires specific qualifications from the Financial Industry Regulatory Authority (FINRA). Individuals must obtain either a Series 6 or Series 7 license. The Series 6, known as the Investment Company and Variable Contracts Products Representative Qualification Examination, specifically authorizes the sale of packaged investment products like mutual funds and variable annuities, focusing on their characteristics, risks, and regulatory aspects.

Alternatively, the Series 7 is a more comprehensive license allowing the sale of a much broader range of securities. This includes individual stocks, bonds, options, and virtually all other types of securities, in addition to packaged products like variable annuities. While the Series 7 is broader, either the Series 6 or Series 7 license is sufficient for the federal securities licensing requirement to sell variable annuities. Many professionals opt for the Series 7 for its wider applicability in the financial industry.

In addition to FINRA licenses, most states require securities professionals to pass the Uniform Securities Agent State Law Examination, the Series 63. This exam focuses on state-level securities laws and regulations. The Series 63 ensures that agents understand the legal obligations and ethical practices specific to conducting securities business within a particular state, complementing the federal regulations covered by FINRA exams. This license is typically required in conjunction with a FINRA license to operate legally.

Other securities licenses, such as the Series 65 or Series 66, are primarily for individuals who provide investment advice for a fee rather than solely selling products. While these licenses can be beneficial for broader financial advisory roles, they are not directly mandated for the sole act of selling variable annuities. The combination of a state life and health insurance license, a FINRA Series 6 or 7, and the Series 63 ensures a professional is adequately qualified to sell variable annuities.

Steps to Obtain Licenses

Acquiring the necessary licenses to sell variable annuities involves a structured process. Success on the required exams relies on thorough preparation, often including self-study, exam preparation courses, and reviewing study materials. These resources cover the extensive content for both insurance and securities examinations, helping candidates understand complex topics and test-taking strategies.

The first practical step usually involves obtaining the state life and health insurance license. This typically requires submitting an application to the state’s Department of Insurance and fulfilling any pre-licensing education requirements, which can range from 20 to 60 hours depending on the state. After completing the coursework, candidates must schedule and pass the state insurance exam, which often has a typical passing score of 70%. Some states may also require fingerprinting and a background check as part of the application process.

For the FINRA securities licenses, sponsorship by a FINRA member firm is required. This means an individual must typically be hired by or affiliated with a licensed brokerage firm before they can register for and take the Series 6 or Series 7 exam. Once sponsored, the firm files a Form U4 on the candidate’s behalf. The Form U4 collects extensive personal, professional, and disciplinary background information, which is then used to register the individual with the appropriate regulatory bodies.

After the Form U4 is filed, the candidate can schedule and take the required FINRA exam, either the Series 6 or Series 7. The Series 6 is a 50-question exam with a 70% passing score, while the Series 7 is a more extensive exam requiring a 72% passing score. Both exams are proctored and have specific time limits. Many candidates also take the Securities Industry Essentials (SIE) exam prior to their sponsored exam, as it covers foundational knowledge and does not require sponsorship.

Lastly, the Series 63 exam is often required in addition to the FINRA license to transact business within a state. This exam covers state securities laws and regulations. It can often be scheduled concurrently with or after the FINRA exam. The entire licensing process, from pre-licensing education to passing all exams, can take several weeks to a few months depending on individual study pace and exam availability.

Maintaining Your Licenses

Once obtained, licenses for selling variable annuities require ongoing maintenance. A primary obligation is completing continuing education (CE) requirements for both insurance and securities licenses. For state insurance licenses, typical CE mandates involve a certain number of hours every two years, with some states requiring specific topics like ethics or annuity training. These hours must be completed before the license renewal date to avoid penalties or a lapse in licensure.

For securities licenses, FINRA mandates two components of continuing education: the Regulatory Element and the Firm Element. The Regulatory Element requires registered persons to complete training annually by December 31st for each registration held. This training focuses on significant rule changes and regulatory developments relevant to their registration category and is accessible online. Failure to complete the Regulatory Element by the deadline results in an inactive status.

The Firm Element requires broker-dealers to establish their own training programs to keep registered individuals updated. Firms assess their needs annually to develop a written training plan and must maintain records of content and completion. This component ensures that training is tailored to the firm’s business and regulatory concerns.

Beyond continuing education, regular license renewal is necessary. State insurance licenses typically have a biennial renewal cycle, and individuals must submit renewal applications and pay associated fees. Securities registrations are maintained through the sponsoring firm, which is responsible for keeping the Form U4 updated. Any changes to personal information, employment status, or disciplinary actions must be promptly reported to FINRA and relevant state regulators by amending the Form U4. Adherence to these ongoing obligations ensures professionals can continue to sell variable annuities legally and ethically.