Series 65 Uniform Investment Adviser Law Examination | Exam | What is a Financial Planner?

Examinee Qualification: Investment adviser representative (IAR) and independent IA firm proprietor
Time Allowed for Exam: 3 hours (180 minutes)
Number of Questions: 140, 130 of which count toward the final score
Exam Format: Multiple choice
Score Required to Pass: 72%
Exam preparation time: Approximately 20-40 hours (four weeks with between one and two hours of prep time daily)
Existing License Required: No
Testing Locations: Prometric Testing Centers throughout the U.S., Canada, Mexico, and U.S. Territories

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Series 65 Exam Overview

The Series 65 Exam qualifies examinees as investment adviser representatives (IARs) or independent IA firm proprietors who may be referred to individually as investment advisers.

Having a Series 65 license allows an adviser to offer fee-based investment advice, but, by itself, does not permit the sale of securities.

The exam was developed by the North American Securities Administrators Association (NASAA) and is administered by the Financial Industry Regulatory Authority (FINRA).

Each 140-question exam is assembled “on the fly” drawing from a pool of questions. The exams are always uniform in terms of difficulty and content because a difficulty and content rating has been assigned to each question. This process makes sure each exam meets certain content specifications and that every Series 65 Exam has the same difficulty level, while at the same time ensuring each exam is unique so as to eliminate the possibility of examinees gaining prior knowledge of answers.

Ten of the questions are “in-trial” questions that don’t count in calculating the final score.

Examinees receive their score immediately after the exam, both an overall score and a score for each of the four content areas. Examinees who fail the exam have to wait 30 days before taking it again. Candidates who fail the exam three times have to wait 180 days to take the exam again.

Series 65 Exam Content

Fourteen percent (19 questions) of the exam covers Economic Factors and Business Information:

Basic economic concepts (6 questions)
- Business cycles
- Economic indicators
  - GDP (Gross Domestic Product)
  - Employment indicators
  - Trade deficit
  - Balance of payments
  - CPI (Consumer Price Index)
- Fiscal and monetary policy
- Inflation and deflation
- Interest rates
- US dollar valuation

Financial reporting (5 questions)
- Annual reports and prospectuses
- Corporate SEC filings
- Financial ratios
  - Current ratio
  - Quick ratio
  - Debt-to-equity ratio
- Financial statements
  - Income statement
  - Balance sheet
  - Statement of cash flow
Quantitative methods (3 questions)
- Statistics
  - Measures of central tendency (mean, median, mode)
  - Range
  - Standard deviation
  - Beta and its derivatives
- Time value of money
  - Internal rate of return (IRR)
  - Net present value (NPV)
- Valuation ratios
  - Price/earnings
  - Price-to-book

Types of risk (5 questions)
- Systematic risk
  - Market
  - Interest rate
  - Inflation
- Unsystematic risk
  - Business
  - Regulatory
  - Liquidity
  - Political
- Opportunity Cost
- Capital structure and priority of liquidation

FIND SCHOOLS

Twenty-four percent (31 questions) of the exam covers Investment Vehicle Characteristics:

Types and characteristics of cash and cash equivalents (3 questions)
- Insured Deposits
  - Demand deposits
  - Certificates of Deposit (CDs)
- Money Market
  - Commercial paper
  - Treasury bills

Types and characteristics of fixed income securities (5 questions)
- Corporate bonds
  - Bond rating
  - Coupon bonds
  - Convertible bonds
  - Tax implications
- Municipal bonds
  - General obligation
  - Revenue
  - Tax implications
- Foreign bonds
  - Risks and advantages
  - Government debt
  - Corporate debt
  - Brady bonds
- U.S. government and agency securities
  - Treasury securities
  - FNMA (Federal National Mortgage Association)
  - TIPS (Treasury Inflation-Protected Securities)
Methods for valuing fixed income securities (3 questions)
- Fixed income valuation factors
  - Bond ratings
  - Conversion valuation
  - Coupon
  - Discount
  - Duration
  - Maturity
  - Premium
  - Yield to call
  - Yield to maturity
- Discounted cash flow
Types and characteristics of equity securities (5 questions)
- Equity interests
  - Common stock
  - Preferred stock
  - Convertible preferred stocks
  - Warrants (corporations issue warrants that give buyers the right but not the obligation to buy a specified amount of underlying stock at a specified price for a specified duration)
  - ADRs (American depositary receipts – stocks that trade in the U.S. but represent shares in a foreign corporation)
- Foreign stock
- Restricted stock
- Employee stock options
  - Incentive
  - Non-qualified
- Shareholder rights
  - Voting rights
  - Dividends
  - Liquidity preferences
  - Antidilution
Methods for valuing equity securities (2 questions)
- Fundamental analysis
Types and characteristics of pooled investments (4 questions)
- Mutual funds
- Closed-end investment companies
- Exchange traded funds
- Real estate investment trusts
- Unit investment trusts

Methods for valuing pooled investments (2 questions)
- Net asset value
- Discount/premium
Types and characteristics of derivative securities (1 question)
- Futures
- Options
- Forward contracts

Alternative Investments (2 questions)
- Hedge funds
- Limited partnerships
Insurance-based products (4 questions)
- Annuities (fixed, variable, and equity-indexed)
- Life insurance

Thirty-one percent (40 questions) of the exam covers Client Investment Recommendations and Strategies:

Type of clients (4 questions)
- Individuals and sole proprietorships
- Business entities
  - General and limited partnerships
  - C-corporation
  - S-corporation
  - Limited liability company
- Trusts and estates
Client profile (4 questions)
- Current financial status
  - Cash flow
  - Balance sheet
  - Existing investments
  - Tax situation
- Financial goals and strategies
  - Current income
  - Retirement
  - Death
  - Disability
  - Time horizon
- Risk tolerance
- Non-financial investment considerations
  - Attitudes
  - Values
  - Experience
  - Demographics
Capital Market Theory (3 questions)
- Capital Asset Pricing Model (CAPM)
- Efficient Market Hypothesis
  - Semi-strong
  - Strong
  - Weak
- Modern Portfolio Theory
Portfolio management styles and strategies (5 questions)
- Strategic asset allocation
  - Asset class
  - Buy/hold
  - Rebalancing
  - Style
- Tactical asset allocation (for example, market timing)
- Investing for income versus capital appreciation
- Passive versus active investing
- Value versus growth investing
Portfolio management techniques (3 questions)
- Averaging
  - Dollar-cost
  - Capital goal within specified time period
- Diversification
- Sector rotating
Retirement plans (3 questions)
- Individual Retirement Accounts
  - Traditional
  - Roth
- Qualified retirement plans
  - Pension and profit sharing
  - 401(k)
  - 403(b)
  - 457
- Nonqualified retirement plans
ERISA (Employee Retirement Income Security Act) concerns (3 questions)
- Fiduciary issues
  - Investment choices
  - 404(c)
- Investment policy statement
- Prohibited transactions
Special types of accounts (3 questions)
- Education-related
  - 529s
  - Coverdell
- UTMA/UGMA
- Account ownership options
  - Joint
  - Pay-on-death
  - Tenancy in common

Tax considerations (4 questions)
- Individual income tax fundamentals
  - Capital gains
  - Tax basis
- Alternative minimum tax
- Corporate, trust, and estate income tax fundamentals
- Estate and gift tax fundamentals
Trading securities (5 questions)
- Terminology
  - Bids
  - Offers
  - Quotes
  - Market, limit, or stop order
  - Short sale
  - Cash accounts, margin accounts
  - Principal or agency trades
- Costs of trading securities
  - Commissions
  - Markups
  - Spread
- Exchanges and markets
  - NYSE, AMEX, CBOE, regional, international
  - OTC, Nasdaq
- Role of broker-dealers, specialists, market-makers
Performance measures (3 questions)
- Returns
  - After tax
  - Annualized
  - Dollar-weighted
  - Expected
  - Holding period
  - Inflation-adjusted
  - Internal rate of return
  - Risk-adjusted
  - Time-weighted
  - Total
- Yield
  - Yield-to-maturity
  - Current yield
- Benchmark portfolios

FIND SCHOOLS

Thirty-one percent (40 questions) of the exam covers Laws, Regulations, and Guidelines from state and federal Securities Acts, along with related rules and regulations and ethical practices and fiduciary obligations.

Of the 40 questions, 24 are about State and Federal Securities Acts and related rules and regulations. Each of the following six areas contains four questions:

Regulation of state and federal Investment Advisers
Investment advisers are firms that charge a fee for advice about the purchase and sale of securities.
- Definitions
- Registration/notice-filing and post-registration requirements
Regulation of Investment Adviser Representatives (IARs)
IARs are individuals associated with investment adviser firms.
- Definition
- Registration
Regulation of broker-dealers
Brokers are in the business of making securities transactions for accounts belonging to other people, and dealers are in the business of buying and selling securities for their own account.
- Definition
- Registration and post-registration requirements
Regulation of agents of broker-dealers
- Definition
- Registration
Regulations of securities and issuers
Issuers are governments, corporations, or investment trusts that register and sell securities to pay for their own business operations.
- Definitions
- Registration and post-registration requirements
- Exemptions
- State authority concerning federally covered securities
Remedies and administrative provisions
- Administrative actions
- Administrator authority
- Other penalties and liabilities

The other 16 questions are about ethical practices and fiduciary obligations. There are four questions in each of the following four areas:

Communications with clients and prospects
- Contracts with clients
- Disclosures
- Guarantees of performance
- Unlawfully representing registrations
Compensation of securities agents and firms
- Disclosing of compensation
- Fees and commissions, including fees based on performance
- Soft dollars (payments made by mutual funds or other money managers to their service providers)

Client funds and securities
- Authorization to trade
- Custody of client financial assets
- Discretion over client accounts
- Sensible investing standards
- Suitability of investment recommendations
Conflicts of interest and other issues concerning fiduciary responsibility
- Client confidentiality
- Excessive trading
- Insider trading
- Loans to and from clients
- Market manipulation
- Selling away (offering of securities that are not available from the representative’s firm)
- Sharing in the profits and losses of a customer account

Applying for the Series 65 Exam

Employing FINRA-member IA firms will submit Form U4 and pay the examination fee on behalf of would-be investment adviser representatives (IARs) applying to take the Series 65 Exam. Proprietors establishing a new independent FINRA-member IA firm will submit Form U4 and exam fees themselves after establishing an Investment Adviser Registration Depository (IARD) User Account. In both instances, Form U4 and exam fees will be submitted through FINRA’s Investment Adviser Registration Depository (IARD).

To enroll for FINRA exams, candidates must be sponsored by a FINRA-approved state regulator or regulatory authority. If your sponsor is not a FINRA member, enroll for your FINRA exams on the FINRA website.