CFA vs. Series 7: An Overview

In short, the Series 7 license is substantially easier to obtain than the Chartered Financial Analyst (CFA) certification. The Series 7 takes only a fraction of the time to prepare for compared to the CFA exams. The material in the Series 7 is not nearly as difficult or extensive. The Series 7 can be achieved after passing two relatively short tests while the CFA requires three long tests.

CFA and Series 7 designations will usually take you down different career paths in the financial industry. Overall, the Series 7 is needed for the purchase and sale of securities products, including stocks, bonds, mutual funds, options, direct participation programs, and variable contracts. The CFA is not mandated by any regulatory agency for a financial industry position. The CFA is primarily a certification, comparable to a master’s degree, that increases the credibility of investment professionals and also improves career advancement prospects.

CFA

The CFA Institute issues the CFA charter to people who can pass its rigorous requirements. People sometimes compare the CFA study program to obtaining a master's of business administration (MBA) except that it is much more specialized in the area of investments.

To obtain a CFA, an individual must meet all of the requirements set forth by the CFA Institute, including:

  • Pass all three levels of CFA exams
  • Obtain a bachelor’s degree or show four years of acceptable professional work experience
  • Become a member of the CFA Institute, which requires an affiliation with a local chapter

A breakdown of the CFA program curriculum can be found here.

CFA holders feel that the program's most challenging facet is fulfilling the educational requirement. Candidates must pass three exams of progressive difficulty. The CFA Institute suggests a minimum of 250 hours of study time for each test. It offers the Level I exam twice a year in June and December. It offers the Levels II and III exams only once each year in June. Effectively, candidates can only pass one test per year due to the exam dates. There are no limits to the number of times a candidate can retake the exams. Level I candidates could potentially test in June and December. Levels II and III candidates must wait an entire year to retake the tests since they are only available in June. Fees are charged including a registration fee and exam fees ranging from $650 to $1,380.

The CFA program's low passing rate indicates the difficulty of the exams. Ten-year average statistics show that 44% of registrants complete the program. As for the individual tests, 41% pass Level I, 44% pass Level II, and 52% pass Level III.

A CFA is considered to be one of the most specialized investment analysis certifications in the financial industry. A CFA can significantly help an individual’s career advancement, primarily in the areas of:

  • Investment management
  • Portfolio analysis
  • Buy-side trading
  • Sell-side research analysis
  • Investment banking
  • Academia
  • Economics
  • Financial advising

Series 7

The primary difference between the Series 7 and the CFA is that one is a license while the other is a certification. A Series 7 license is necessary for individuals whose job involves the solicitation, purchase, or sale of securities, including stocks, bonds, mutual funds, options, direct participation programs, and variable contracts. As of October 2018, passing the Series 7 exam is not the only requirement for new FINRA licensees. New licensing candidates must also pass the Securities Industry Essentials (SIE) exam.

The SIE is a 75 question, multiple choice exam. Candidates have one hour and 45 minutes to take the test. A passing score of 70 is required. The SIE exam was designed by FINRA to ensure that FINRA licensees demonstrate a thorough understanding of basic securities industry knowledge.

The Series 7 exam is managed by FINRA. It has 125 questions covering four main job functions of a Series 7 licensed representative. The test must be completed in 225 minutes.

The four main job functions include the following:

  • Function 1: Seeks business for the broker-dealer through customers and potential customers
  • Function 2: Opens accounts after obtaining and evaluating customers’ financial profile and investment objectives
  • Function 3: Provides customers with information about investments, makes suitable recommendations, transfers assets, and maintains appropriate records
  • Function 4: Obtains and verifies customers’ purchase and sales instructions and agreements; processes, completes, and confirms transactions

Most Series 7 exam preparation courses suggest 80 to 100 hours of study time, including live practice exams and at least 1,000 practice questions. Unlike the CFA exams, which cover case studies, financial and investment theories, and quantitative math, the Series 7 exam involves memorizing SEC regulations and some basic math. A 72% score is necessary to pass the exam, and its passing rate is greater than 70%.

To fully obtain the Series 7 license, candidates must:

  • Be associated with and sponsored by a FINRA member firm or other applicable self-regulatory organization (SRO) member firm
  • Register with FINRA
  • Pass the SIE Exam
  • Comply with eligibility under FINRA Rule 1220(b)(2)

Key Differences

The Series 7 license and CFA certification are generally acquired for different careers within the financial industry. Series 7 licensed representatives tend to work in financial market sales, often as a stockbroker or transaction-based financial advisor. Keep in mind that a Series 7 is required to solicit, purchase and sell stocks, bonds, mutual funds, options, direct participation programs, and variable contracts in any financial position. The Series 7 license can expire if a representative is not employed with a FINRA registered organization for two years.

Although some Series 7-licensed investment advisors also hold a CFA charter, most careers requiring a CFA don’t require a Series 7 license. Unlike, the Series 7, the CFA certification does not expire. As such, it is a certification that can be used in marketing your personal skills and CFA accomplishment throughout your career. With the CFA charter and membership with the CFA Institute, charterholders have the opportunity to further their education annually through continuing education courses. In general, the CFA can be a good segway to a higher paying job with greater latitude for responsibility and management authority.

In terms of curriculum and difficulty, there is a big difference between the Series 7 and the CFA. The Series 7 license covers basic securities market terminology, products, and job functions through both the SIE exam and the Series 7 exam. The CFA curriculum is much more quantitative and theoretical, covering the areas of quantitative analysis, securities valuation, economics, financial reporting, accounting, and more.

Key Takeaways

  • The Series 7 license and Chartered Financial Analyst certification are two designations in the financial industry that will typically lead to different career paths.
  • The Series 7 is managed by FINRA and is required for individuals buying and selling a specific list of securities in their job.
  • The CFA is managed by the CFA Institute and is usually viewed as a high level accreditation similar to a master’s degree.
  • CFA charterholders typically work primarily within the areas of investment portfolio analysis, investment advisory, securities analysis, investment banking, economics, and academia.