No doubt if you are reading this, you are trying to find out more about FINRA’s licensing exam known as Series 7.
And perhaps, in particular, the Series 7 exam difficulty and overall pass rate.
And that’s what we will cover here today.
This article looks at an exam taken by candidates that receive sponsorship from a FINRA member firm as a follow-on from the Securities Industry Essential (SIE) exam.
We will focus on the following:
So yes, you are in the right place if you need to know more about this FINRA exam, so let’s jump straight in then.
Series 7 Exam Overview
To begin our detailed look into things like the Series 7 license pass rate and whether this is a hard exam or not, we must start with a general overview.
And that should always begin with the fact that this FINRA series exam is a natural following from the SIE exam.
In fact, the entry-level SIE exam is a corequisite of Series 7 as detailed by FINRA.
So, to take the actual exam for Series 7, you’ve got to complete and pass the SIE exam first up.
As mentioned earlier, all candidates will need to be sponsored as a prerequisite too.
Those candidates that become registered representatives after passing their Series 7 general securities representative exam can sell the following products.
- Corporate and municipal securities
- Investment company products
- Government securities products
- Variable annuities
- Direct participation programs
- Variable contracts
- Money market funds
- Mutual funds
- Stocks and bonds
- Hedge funds
These are the types of products sold by stockbrokers and to become one, you will need to obtain a Series 7 license.
They cannot sell:
- Life insurance products
- Commodities futures
- Real estate
The exam itself will cover the following four functions as part of the coursework.
- Function 1 description: Seeks Business for the Broker-Dealer from Customers and Potential Customers (9 questions or just 5% of the exam in total)
- Function 2 description: Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives (11 questions or just 8% of the exam in total)
- Function 3 description: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records (91 questions or just 67% of the exam in total)
- Function 4 description: Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions (14 questions or just 10% of the exam in total)
Other quick facts you need to know about the Series 7 exam
Series 7 is the longest of the FINRA representative-level exams.
If you compare it to Series 6 for example, it has more than double the amount of questions.
Just like all the FINRA exams, candidates will face multiple-choice questions.
There are 135 to answer of which 125 will count towards your final mark.
The 10 extra questions are inserted randomly in the exam, so candidates won’t be able to tell which is a scoring question or not.
Therefore, you should treat every question as a scoring one.
Test takers should also note that because the exam consists of 135 questions, you will be given three hours and 45 minutes to complete it.
That gives you around a minute and a half to spend on each question.
And that’s more than enough for candidates that have taken their test prep seriously.
Lastly, let’s just look at the overall exam cost and whether candidates can rewrite the exam should they fail on their first attempt.
First up, the exam costs $245 and is one of the more expensive offerings from FINRA.
Secondly, should a candidate fail, they do have the option of rewriting the exam, but there are some rules that you have to follow.
Your first rewrite can take place 30 days following your first exam attempt.
Should you fail again, you can make another attempt after another 30 days.
If you fail a third time, however, the period increases to six months (180 days).
Now that’s like a lifetime for someone who is trying to make their start in the securities industry, right?
So make sure you use extra study materials, practice exams, and study guides to ensure your study time helps you prepare efficiently.
Series 7 Pass Fail Rate
How hard is the Series 7 exam?
Well, there is no doubt that it pushes candidates.
First up, you’ve got to prepare for almost four hours of exam time to complete the 135 questions.
From those figures alone, you can easily see that a poorly prepared candidate is going to struggle to achieve a passing mark.
But what score do you need to pass the exam?
Candidates must score 72% or more on the exam to pass.
And the passing rate for the Series 7?
Well, the average Series 7 score is 65% although Kaplan Financial claims it to be around 72% although that might be with using their Series 7 exam prep.
Again, however, it’s important to stress that proper exam preparation is key for most candidates to get through this exam first try.
One of the best study tips we can give you is to understand aspects of the overall exam structure of Series 7.
Of the 135 questions you will have to answer, around 50 of them are options trading related.
And around 35 of those options trading-related questions deal specifically with option strategies.
According to Investopedia, they will cover the following areas:
- Covered contracts
Questions will also focus on the following critical aspects of each of those mentioned above:
- Maximum gains and loss
- Stock movement related to profits
Candidates should also understand how questions are presented.
Like other FINRA exams, Series 6 for example, a bell curve technique is applied.
So the test starts with easier questions but they will gradually get more challenging.
This happens as you start to reach the midpoint of the exam.
Following that, the questions will again get easier as candidates move towards the end of the exam, hence the reference to a bell curve.
Yes, all questions are critical, but remember, you need 72% to pass.
That means getting 95 questions right.
And that should include the easier ones in the question bank, that’s for sure.
Series 7 Preparation
Is it hard to pass Series 7?
Without a doubt.
This is one tough exam.
Without proper exam prep which includes taking as many practice questions as you can, using flashcards, and possibly using a prep course, most candidates will fail.
In fact, most experts will agree that when it comes to studying time, candidates need to prepare for at least 80 to 100 hours.
As for practice questions, well, the more you do the better.
Many experts, however, believe that candidates need to complete anything from 800 to 1000 questions in practice exams.
I am sure you will agree, that’s a lot of work.
But it’s a necessity if you’d like to get your Series 7 license, it’s as simple as that.
There are other tips and tricks that you can use to your advantage too and that’s what we will look at next.
Increasing your chance of passing the first time
Before you head off to the FINRA testing center or take the exam online, make sure you follow some of these simple ideas during your preparations.
Don’t focus too much on the math but rather the concepts
Yes, the math is part of the exam, but only around 10% to 15% of all questions will contain it.
And that’s not that much at the end of the day.
We aren’t saying leave the math and formulas out completely but making it the sole focus of your studying is an option either.
If you understand the concepts behind the formula and the maths linked to them, you will have a far better grasp of what’s going on.
Ultimately, that’s what you need to aim for.
Draw up a study plan
Those taking the exam might think that the 120-day period they have to write it from the time they register is more than enough, but without a plan, those days can quickly whittle away.
And of course, if you have a proper plan in place and put in all the hard work that you have to do when it comes to exam prep, you don’t need to wait the full 120 days to write.
Now a study plan means different things to different people, so the onus lies on you to devise one that works best for you.
Be sure to include revision time as well.
It’s extremely useful to keep all the work you have to get through fresh in your mind.
A good way to do this is to review what you did the day before every time you sit down with the coursework.
That will help keep it fresh.
Break it down
There are plenty of difficult concepts and formulas to work through and understand.
Sometimes, breaking them down as best you can go a long way to helping you understand things better.
For example, if you are struggling with a particular math question, instead of working it through as you normally do, draw a diagram.
By changing the way you view a problem, you might just unlock the answer far easier.
And you’ll never know if you don’t try, right?
Take as many practice tests as you can
This is something that I cannot emphasize enough.
The best way to test your knowledge is not to regurgitate it from the course work but instead, to take practice tests to see if you understand it.
Ultimately, that’s what you want and it will give a clear indication if you are ready for the exam or not.
If you don’t understand the concepts covered by the Series 7 exam, you cannot hope to pass it.
Earlier, I said that candidates should cover at least 1000 practice questions, and yes, while that sounds unrealistic, this should be your goal.
Take note of your results on these tests as well.
If you are just passing them, the chances are that you won’t pass the Series 7 exam.
Should you be getting regular scores of around 80%, then you probably are exam-ready.
Don’t leave it all till the last moment
You might be the most intelligent person in the world, but leaving your preparation for a few weeks before the exam will probably lead to disaster.
There is no point in compromising your chances of passing the first time in doing so either.
There’s just so much work to cover here.
Remember, it’s recommended that candidates put in at least 80 hours of preparation for this exam.
Can you do that in a one or two-week period?
Well, some of us might be able to but surely they would be better off with less harried preparations?
Get outside help
There are so many resources available on the internet that you can use to help you pass this exam.
Perhaps you need to look into some exam prep courses or try out some flashcards.
And we’ve already talked about the need to take practice tests.
But you can find other excellent sources of information about the Series 7 exam on Youtube, for example.
So set some time aside, do some research and see what you can come up with to help supplement your studies.
Read carefully and take your time
You’ve probably heard this one before but it’s easy to get ahead of yourself when taking the exam.
That can happen when you think things are going badly as you desperately search for a question you know the answer to.
But it can also happen when you get overconfident and start flying through the questions and skim-reading them.
That way you might just miss out on something important, so rather take a measured approach.
Candidates are given more than enough time to complete the exam.
Here’s a good method to follow when approaching questions:
- Read the question in full before even looking at the answers
- Try to isolate exactly what the question is asking of you
- This is easier to do if you look for key phrases within the question
- Now look at the answers and eliminate those that don’t fit
- Don’t readily change your answer, usually your gut feel is right.
And that’s it for this article that gives you a little more insight into what the Series 7 exam is all about and how you can prepare for it.
Without a doubt, preparation is key.
You aren’t going to get through this exam on a wing and a prayer.
So once you’ve booked it, make sure you wisely use the 180 days you have to prepare.
And no, as I’ve already mentioned, going through the coursework is probably not going to be enough.
You are going to have to do more than that in your Series 7 exam prep, that’s for sure.
For me, the most critical part of that extra work would be taking practice tests.
They are the best way to gauge where your level of knowledge is at and how your preparations are going.
If you put the time in, you’ll be one of those candidates that pass the first time, that’s for sure.