What’s the Difference Between Series 7 and the CFA^® Charter?

Working in a brokerage or an investment firm is a popular choice for those who want a career in finance. Having a FINRA Series 7 license or a CFA® charter can be beneficial to anyone interested in working in that area of finance. So, you might be wondering what’s the difference between the Series 7 license and the CFA charter? This article breaks down both, including what they are, how to get them, what’s on the exams, and more to help you determine which you should earn.

The FINRA Series 7 license

The FINRA Series 7 license, also known as the General Securities Registered Representative license, allows you to sell corporate stocks and bonds, municipal bonds, mutual funds, variable annuities, options, direct participation program partnerships, collateralized mortgage obligations, and more in the United States. It’s administered by the Financial Industry Regulatory Authority (FINRA), which regulates member brokerage firms and exchange markets.

To earn the Series 7 license, you must pass two exams: the Series 7 exam and its corequisite, the Securities Industry Essentials (SIE). The SIE focuses on the basic information anyone in securities should know, but the Series 7 license requires specific knowledge. Therefore, you may hear it referred to as a “top-off exam.”

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How to get your Series 7 license

These are the steps for getting your Series 7 license:

1. Pass the SIE exam. No degree or work experience is required to take this exam. The majority of candidates have a college degree or are in the process of earning one, however.

2. Secure a sponsorship with a FINRA-member firm. After you work for a FINRA-member firm, they indicate that they are sponsoring you by filing a special application called a Form U4 which registers you for the exam.

3. Take and pass the FINRA Series 7 license exam. Like the SIE, there are no degree or work requirements, but most candidates have a college degree in a finance-related field.

How to prepare for the FINRA Series 7 license exam

The recommended number of hours of study ranges from 80-100 to prepare for the FINRA Series 7 exam if you have a finance background and about 150 hours if you don’t. You should expect the exam to be challenging. Series 7 exam preparation classes are recommended as part of the preparation process, along with making a study plan, focusing on learning concepts, using practice questions, and taking practice exams.

About the FINRA Series 7 license exam

Series 7 exams are administered by Prometric throughout the year, and the fee for the exam is $245 USD. After your sponsor submits the Form U4 application, FINRA opens up a 120-day window, and you can take the computer-based, multiple-choice exam at a Prometric testing center on one of the days in that window. The format of the exam changed in October 2018, so pass rates for the new version are not available yet, but the general report is that it is around 72 percent.

Those who sit for the FINRA Series 7 exam can expect to be tested on investment risk, taxation, equity and debt Instruments, packaged securities, options, retirement plans, and interactions with clients.

The CFA® Charter

The CFA Charter is a professional credential offered internationally by CFA Institute to investment and financial professionals; it is an abbreviation for Chartered Financial Analyst®. The program covers a broad range of investment and portfolio management, financial analysis, stocks, bonds, and derivative topics, and it provides a generalist knowledge of other areas of finance. To earn the charter, you must take and pass all three levels of the CFA Program exam.

How to get the CFA® Charter

These are the steps for getting the CFA designation:

1. Earn a bachelor’s degree (or equivalent) or be in the final year of your bachelor’s degree program. If you have 4 years of relevant work experience or a combination of professional work and university experience that totals 4 years, you are also eligible to start the CFA Program.

2. Take and pass the Level I, Level II, and Level III CFA Program exams.

3. Become a member of CFA Institute.

4. Provide CFA Institute with proof that you’ve been working full-time for 2 years in a role that either involves investment decision-making or with a product that contributes to that process. This can include any work experience you had before passing the exam, as well as after.

How to prepare for the CFA® Program exam

CFA Institute advises spending a minimum of 300 hours of studying to prepare for each level of the CFA Program exam. CFA Institute offers Learning Outcome Statements (LOS) that detail exactly what you are expected to do on exam day, so they should be your main area of focus. It helps to take CFA Program exam preparation classes and answer as many practice questions as you can, like the CFA question of the day. To familiarize yourself with the exam process, take several mock exams as well.

About the CFA® Program exam

All three levels of the CFA Program exam are offered in June, and you can also sit for Level I in December. This is quite a difference from the FINRA Series 7 exam. The main format is multiple-choice, although Level III has a written portion called constructed response, too.

For all levels of the CFA Program exam, you will be tested on ethical and professional standards, quantitative methods, economics, financial statement and analysis, corporate finance, equity valuation, alternative investments, fixed income, derivatives, and portfolio management.

Now that you know about each, let’s look at how to decide which is right for you.

Which is right for you—the FINRA Series 7 license or the CFA® Charter?

Another difference between the two credentials is that the Series 7 license is mandatory for anyone who wants to sell securities in the U.S., but the CFA Charter is an optional designation that demonstrates mastery of finance topics. So, which designation to pursue really depends on what you want to do in your career.

If you want a career selling stocks in a brokerage, investment firm, or bank, then not only is the FINRA Series 7 right for you, but it is also required. With a CFA charter, you can pursue a number of career opportunities such as portfolio manager, research analyst, consultant, risk manager, corporate financial analyst, financial adviser, and the C-suite.

Of course, you don’t have to choose at all. Having both designations opens more doors in your career, especially if stocks and other securities investment products are your passion. Many Series 7 license holders who become investment advisor representatives or set up registered investment advisor firms have found that holding the CFA charter is beneficial to their business and clients. And, quite a few CFA charterholders who take staff positions in the research departments of brokerages will go on to earn their Series 7 licenses.