Offering financial advice, whether free or paid, can have a serious repercussion. The advisee may incur great financial or property gains or losses, thanks to the advice offered.
For this reason, many countries require financial advisers to have a license. Therefore, it’s illegal to render financial advice without a license in these countries. An individual may land in jail for this reason.
Here’s all you need to know about offering financial advice in the United States. Do you need a license? Can someone sue you for bad financial advice? You’ll find the answers to these questions and more here.
Can I Give Financial Advice Without A License?
Yes, you can give financial advice in the United States without a license, though it depends on the kind of advice you’re rendering.
You don’t need a license to offer personal finance coaching and products. For instance, you can talk about what an investment is, including the different types of investments available.
You cannot recommend a specific investment to an individual when you don’t have a license. You may land in trouble for doing so.
Only someone with a license can give advice on how to invest, including where to invest one’s money. You don’t need a registered business to render financial advice if you have a license. You can use your license to render paid investment advice.
A Handy Tip: Financial advice is too sensitive to hire just any individual. Instead, seek your advice from a licensed professional whether he or she is an expert or just has a license.
Getting a license to render financial advice means the individual in question has the knowledge and skills required to render the needed advice.
Just ensure your financial advice comes from someone with a license. You can get paid advice from someone with a CFP (Certified Financial Planner).
Note that an investment license is needed to render investment advice.
Is There A Specific License One Must Possess To Offer Financial Advice?
No special licenses for financial advisors who wish to offer paid financial advice exist. However, individuals that wish to sell investment products would require a license.
Various security licenses exist for financial advisors that wish to sell investment products. And the nature of the product being sold and the manner a financial advisor wishes to receive compensation will determine the security license to obtain.
Here is a breakdown of the various security licenses, including what they entail.
Series 6 License:
You can get a Series 6 license if you wish to sell packed securities such as variable annuities and mutual funds.
The FINRA (Financial Industry Regulatory Authority) administers the series 6 license.
What a financial advisor cannot do with a Series 6 licenses: There are things you cannot do with series 6 licenses. You can’t sell individual stocks and bonds.
The next license, the series 7, is more complicated and difficult to obtain, compared to the series 6. However, if you want to quickly start selling investment products to make money while preparing for your series 7 exams, get the Series 6 licenses. It’s what many people do before clinching their next big license, the series 7.
With series 6 licenses, you can make good money while preparing for your next license.
The interesting thing about the Series 7 license is that it enables you to sell almost all the investment products. You can even sell packaged securities, even if you don’t have a Series 6 license. The Series 7 license can give you such privilege.
The Series 7 license allows you to sell bonds, stocks, futures and options. It’s the gold standard of financial advisory license, also administered by FINRA.
Here are the investment products you cannot sell with a Series 7 license.
This license enables you to sell a wide range of investment products, but not all of them. You cannot sell commodities, life insurance and real-estate with a Series 7 license. Instead, you’ll require a different license for both.
A Handy Tip: The broadness of the Series 7 license makes it one of the toughest licenses for financial advisors to acquire.
Series 63 License:
The Series 63 license is not as tough as the Series 7, but it’s important. Every financial advisor requires a Series 63 license to practice their trade within the borders of the United States of America.
In other words, it doesn’t matter the state you’re in; you still need a Series 63 license.
Do you need to obtain other licenses after clinching the Series 63? Yes, you do. You can either choose the Series 6 or Series 7 license.
Another thing you need to know about the Series 63 license exam is that it’s heavy on rules and regulations. It’s a 75 minute exam too.
Series 65 License:
The Series 65 license is another license that states require, but only for individuals that set a fee for their services. Those that receive commissions don’t require this license to operate.
Like the Series 63 exam, the Series 65 license exam is majorly on rules and regulations.
However, if you have professional certificates like the CFP and CFA, FINRA may waive the Series 65 license for you. In other words, you can operate without a license.
Most people may ask, “is the Series 65 license examination difficult? The answer is yes and no.
The Series 65 license exam is a repetition of the Series 7 exam. Thus, if you have cleared your Series 7 exam, the Series 65 license exam will be easier for you.
This explains why many people prefer to take the Series 7 examination before writing the Series 65 exam. If you can pass the former license exam, the latter would be much easier.
On the other hand, people who haven’t written the Series 7 exam may find the Series 65 exam a little bit difficult.
Can You Sue Someone For Bad Financial Advice?
Yes, you can sue your financial advisor for bad advice that causes you great losses. You can file an arbitration claim to seek financial compensation for the losses incurred.
However, suing your financial advisor isn’t as straightforward as it seems. It’s possible, but you need to prove that he or she was aware that the financial advice was bad before informing you about it.
On this ground, you may likely win your lawsuit against a financial advisor and get the compensation you deserve.
However, if your financial advisor doesn’t have the required qualification to give the said financial advice, suing him or her would be easier.
So it’s best to request for your financial advisor’s license or qualification before doing business with them. You can even ask about the individual’s experience and other information that can help you gauge their ability to deliver the right advice that will ensure financial security.
If your financial advisor isn’t qualified, please seek another. Don’t wait until you have suffered massive financial losses before going for someone more qualified.
Sometimes, these unqualified financial advisors may charge lower fees to attract clients, but don’t fall for it. Get the right professional that can ensure financial security.
Do Financial Advisors Require A Degree?
You don’t need to have a university degree to work as a financial advisor. Instead, you have to write an exam and obtain a license to practice it.
You can write the CFA, CFP or Series 6, 7, 63 or 65 license examinations, administered by FINRA (Financial Industry Regulatory Authority). This body ensures financial advisors are qualified to practice. And they govern the business between brokers and investors.
However, the fact that university degrees don’t matter for financial advisors doesn’t mean you shouldn’t get a degree if you have a chance. Having a degree can set you apart. You can even venture into other lines of business whenever you want.
Majority of financial advisors have a university degree in finance-related fields. Some have even acquired master’s degrees in business administration.
So, you can decide if you want to have a degree to practice as a financial advisor. But keep in mind that your degree isn’t enough to make you a financial advisor. You need to take an exam administered by FINRA.
Can I give financial advice without a license? It depends on the kind of advice you want to give. You can give advice as a financial coach. That is, explain to clients what investments are, why they should invest, including the type of investment opportunities available.
You don’t need a license or certificate to offer such paid coaching. However, if you plan to offer financial advice on investments to make, when to invest, how much to invest, etc, you’re going to need a license.
Without a license, you can land in trouble for offering this financial advice if FINRA finds out that you’re doing so. You could also be in great trouble if the financial advice causes the client great losses.