Series 66

The Series 66 (officially known as the 'Uniform Combined State Law Examination') is a licensing exam and qualification for financial professionals in the United States. Think of it as a two-for-one deal. It merges the content of two separate exams—the Series 63, which covers state securities regulations, and the Series 65, which covers the knowledge required to be an investment adviser—into a single, comprehensive test. Administered by the Financial Industry Regulatory Authority (FINRA) on behalf of the North American Securities Administrators Association (NASAA), the Series 66 is designed for individuals who want to be registered as both an investment adviser representative (IAR) and a broker-dealer agent. To be eligible to take the Series 66, a candidate must have already passed the rigorous Series 7 exam. Passing this test demonstrates a professional’s knowledge of investment advice, ethics, and securities law, allowing them to serve clients in a dual capacity.

The Series 66 isn't just about memorizing rules; it's designed to ensure a financial professional has a broad understanding of the investment landscape and their ethical obligations within it. The exam focuses on a professional's ability to provide competent advice and act lawfully. The main topics covered include:

• Economic Factors and Business Information: Understanding how the wider economy, like interest rates and inflation, affects different types of investments. This includes reading financial reports and analyzing business fundamentals.
• Investment Vehicle Characteristics: Knowing the ins and outs of various financial products. This means understanding the risks and rewards of stocks, bonds, mutual funds, annuities, and other securities.
• Client Investment Recommendations and Strategies: This is the practical side of financial planning. It covers how to analyze a client’s financial situation and goals to recommend a suitable portfolio, including concepts like asset allocation and diversification.
• Laws, Regulations, and Guidelines: This is the heart of the exam. It tests knowledge of securities laws (often called ‘blue sky laws’) and the strict rules prohibiting unethical practices. This section ensures the professional understands their legal duties to you, the client.

While you'll never have to take the Series 66, knowing what it means can dramatically change how you choose a financial professional. It’s all about the standard of care you receive.

This is the most important takeaway for any investor.

• Fiduciary Duty: An individual registered as an Investment Adviser Representative (which requires passing the Series 66 or 65) is typically held to a fiduciary duty. This is the highest ethical standard in the financial world. A fiduciary is legally and ethically bound to act in your best interest at all times. They must put your financial well-being ahead of their own or their firm's. This includes disclosing any potential conflict of interest.
• Suitability Standard: A broker-dealer agent, on the other hand, has historically been held to a lower suitability standard. This simply requires that an investment recommendation is suitable for a client's circumstances. It doesn't have to be the best or cheapest option. For example, a broker could recommend a mutual fund with a high fee that pays them a nice commission, as long as it’s generally appropriate for your risk tolerance. A fiduciary, in contrast, would be obligated to recommend a similar, lower-cost alternative if one exists.

Because a person with a Series 7 and 66 is “dual-registered,” they can act as a broker or an adviser, sometimes switching hats. It is crucial to ask them, “In what capacity are you serving me for this transaction?” and to get it in writing. A true value investor seeks an advisor whose interests are squarely aligned with their own, and the fiduciary standard is the bedrock of that alignment.

Don't just take their word for it. You can verify a professional's licenses and check their disciplinary history for free using tools provided by regulators.

• FINRA's BrokerCheck: This tool provides information on brokers and brokerage firms.
• SEC's Investment Adviser Public Disclosure (IAPD): This database provides information on investment advisers.

Using these tools is a simple but powerful due diligence step before entrusting anyone with your money.