Licensing
Licensing can be an important indicator for the type of advisor you are interviewing. That's because licenses determine the type of compensation the advisor can receive from you which in turn impacts what the advisor will try to sell you.
There are four types of advisors in regard to licensing:
- Advisors who don't hold securities licenses
- Advisors who hold securities licenses
- Advisors who hold various types of insurance licenses
- Advisors who hold a license that permits the sale of fee-based services
Don't Hold Securities Licenses
Professionals who are Registered Investment Advisors (RIAs) or Investment Advisor Representatives (IARs) may not hold securities licenses. This means they are fee-only professionals who cannot accept commissions.
Hold Securities Licenses
A very high percentage of advisors hold one or more securities licenses that permit them to receive commissions from the sale of investment products or transactions.
Hold Insurance Licenses
A high percentage of advisors hold one or more insurance licenses that permit them to receive commissions from the sale of insurance products.
Fee for Service License
Some states require RIAs and IARs to hold a license (Series 65) that permits them to receive fees.
Active Versus Expired LIcenses
Some RIAs and IARs have allowed their licenses (investment and/or insurance) to expire. In that case, they are fee only professionals.
Registered Investment Advisors (RIA)
Some advisors own their own Registered Investment Advisory firms.
Investment Advisor Representative (IAR)
Some advisors are Investment Advisor Representatives who work for RIAs.
Securities Licenses
Following is a listing of the most frequent securities licenses that are held by advisors.
- Series 7 - A general purpose securities license that enables advisors to be compensated for trading securities and selling financial products for commissions.
- Series 24 - A general securities principal's license for supervising licensed professionals.
- Series 63 - A uniform securities agent state law license that enables advisors to market services and products in their home state and other states where they are licensed.
- Series 65 - A license for fee-based advisors.
- Series 6 - A securities license that limits advisors to the sale of mutual funds and variable insurance products such as annuities and universal life. Sales of insurance products also require insurance licenses.
- Series 66 - A uniform state license that combines the Series 63 and Series 65.
- Series 3 - Permits the sale of commodities.
- Series 42 - Permits the sale of options contracts.
- Series 4 - Permits the supervision of option licensed professionals.
- Series 22 - Permits the sale of direct participation programs.
- Series 52 - Permits the sale of municipal securities.
- Series 53 - Permits the supervision of municipal licensed professionals.
- Series 62 - Permits the sale of corporate securities.
- Series 72 - Permits the sale of government securities
Insurance Licenses
Following is a listing of the most frequent insurance licenses that are held by advisors.
- Fixed Annuity - An insurance license that permits advisors to sell fixed annuity products. This license also covers other fixed insurance products.
- Variable Annuity - An insurance license that enables advisors to market variable annuity products. This type of product sale also requires a securities license (Series 6 or 7) because its an investment product inside an insurance contract.
- Life Insurance - A license that permits advisors to market life insurance products and fixed annuities.
- Variable Life Insurance - A license that permits advisors to market variable life products. This product also requires a Series 6 or 7 license.
- Other Insurance Licenses - Advisors may also hold long-term care, health, disability, and casualty insurance licenses.
