We’ve received hundreds of questions concerning the DOL Rule, its impact on annuity advisors, and what it means to operate as a fiduciary under the rule since Americans for Annuity Protection launched its AskAAP program in August (offered as a free benefit to AAP members).
Do I need a Series 65 to sell a qualifying annuity IRA? is the most frequently asked question this week.
In a nutshell, the answer is no. We’ll explain why later, but first, let’s go over the several types of licenses available to annuity advisors and what they allow the licensee to accomplish. We’ve gathered data from the FINRA, SEC, and other sources.
Websites of Investopedia. State Insurance Departments, FINRA, and the NASAA are the three types of regulators who regulate licensure.
Naturally, all annuity consultants must be licensed as insurance agents in the state where they offer annuities. The license state is often chosen based on the annuity buyer’s address. If the annuity buyer lives in Arizona, you must have a current life insurance license granted by the state.
You can only sell fixed annuities, including fixed indexed annuities, as an advisor or agency with a valid state insurance license.
Representatives and supervisors need a variety of licenses, which are available from FINRA. Each license is associated with a particular sort of business or investment. While there are various licenses that focus on specific types of securities, the bulk of agents and advisors typically receive three general licenses:
Limited-investment securities license (Series 6): The Series 6 license is also known as the limited-investment securities license. It permits its owners to sell their shares “Mutual funds, variable annuities, and unit investment trusts are examples of “packaged” investment products (UITs). Principals who supervise representatives who hold a Series 6 license must get the Series 26 license in addition to the Series 6 license.
The general securities representative (GS) license is known as the Series 7 license. It gives licensees the ability to sell almost any sort of individual securities. This encompasses all types of bundled goods, as well as common and preferred stocks, call and put options, bonds and other individual fixed income instruments (except for those that also require a life insurance license to sell).
Commodities futures, real estate, and life insurance are the only major categories of securities or assets that Series 7 licensees are not permitted to sell.
Those who have this license are listed on the government’s website as “FINRA refers to them as “registered representatives,” but they are more commonly referred to as stockbrokers. Many insurance agents and other sorts of financial planners and consultants also have the Series 7 license, which allows them to assist certain types of transactions. General representatives who hold a Series 7 license must additionally obtain a Series 24 license.
The Series 3 license allows representatives to sell commodities futures contracts, which are widely regarded as the riskiest publicly traded investments.
Representatives that hold a Series 3 license tend to concentrate in commodities and rarely handle any other form of business.
Licensing by NASAA (North American Securities Administrators Association)
FINRA does not administer all securities licenses. The North American Securities Administrators Association (NASAA) is in charge of three important licenses:
Each state requires the Series 63 license, also known as the Uniform Securities Agent license, which allows licensees to conduct business inside the state. This license is required for all Series 6 and Series 7 licensees.
Anyone planning to provide non-commission financial advice or services must have a Series 65 license. Stockbrokers or other registered representatives who deal with managed-money accounts, as well as financial planners and advisors that give investment advice for an hourly fee or a flat charge % of assets, come into this category.
Series 66: The Series 66 is NASAA’s most recent exam. The Series 63 and 65 tests are combined into a single 150-minute exam.
Licensees must register their securities licenses with a broker-dealer that has been approved. If the assets under management are less than $25 million, those who want to hold themselves out to the public as Registered Investment Advisors (RIAs) must register with the state in which they conduct business, or with the SEC if the assets are more than $25 million. RIAs are not required to be affiliated with a broker-dealer.
So, in order to sell compliantly under the DOL’s Fiduciary Rule, what license do you need? That is dependent on the goods and services you provide.
You’ll need a 65 if you provide continuous financial advice and charge a flat price for your services. You’ll need a Series 6 and 63 if you wish to sell variable annuities or mutual funds.
If all you want to do is sell fixed annuities and life insurance for guaranteed income and asset protection, you’ll only need a life insurance license in the states where you’ll be doing business.
If you want to provide detailed, specialized, and customised advise about the securities, mutual funds, or variable annuities that your customer owns, you’ll need an additional license.
If you limit your recommendations to basic information about diversification, various investment markets, market risk, and recent or previous economic activity, however, your state insurance license authorizes you to have those general conversations and you do not require extra FINRA or NASAA licenses.
Of course, as required by suitability and, if appropriate, fiduciary compliance, the insurance-only advisor must and should discuss the client’s objectives, needs, risk tolerance, liquidity, and time horizon.
You might wonder why AAP is so certain that in a DOL fiduciary world, you don’t need a Series 65 to continue selling annuities. Because the DOL explicitly specifies this in the rule:
The Department proposed new and amended exemptions from ERISA and the Code’s prohibited transaction rules, allowing certain broker-dealers, insurance agents, and others who act as investment advice fiduciaries to receive common forms of compensation that would otherwise be prohibited, subject to appropriate safeguards.
While the fiduciary obligation is triggered by a recommendation to move (or not move) eligible money to an annuity, this does not mean you must suddenly be Series 65 licensed. Don’t be fooled by deceptive marketing or shady recruiters.
Obtain the licenses you’ll need to assist your chosen clients with the products and services you provide.
Yes, due of insurance company suitability requirements or licensing constraints, you may be leaving assets on the table as an insurance-only agent. Yes, you will need to be licensed if you wish to provide ongoing financial planning services.
However, if you wish to examine your client’s insurance needs and provide knowledgeable and professional analysis on which insurance solutions would best meet those needs, you should become an insurance-only advisor. In our exaggerated world of market risk and financial product worship, your talents and abilities are desperately needed.
Americans for Annuity Protection’s vice chairman and CEO is Kim O’Brien. She’s worked in the insurance industry for 35 years. O’Brien led the National Association for Fixed Annuities (NAFA) to battle the SEC’s Rule 151A over a period of approximately 12 years.
Which license or licenses are required to sell variable annuities?
The limited-investment securities license (Series 6) is a type of Series 6 license. Its holders can sell “bundled” investment products like mutual funds, variable annuities, and unit investment trusts (UITs).
What qualification must a person have in order to sell variable annuities?
Annuities are insurance contracts that are sold by a variety of organizations and people having life insurance licenses. Banks, life insurance agents, stockbrokers, licensed investment advisors, and brokers are all included.
If you’re thinking about buying an annuity, you should have a basic understanding of how they’re regulated. Use this information to learn more about the firm is issuing your annuity, as well as the individual who is selling or recommending it. Many regulatory authorities have tools that you can use to look up information on companies and brokers. If you have a terrible experience, you can also file a complaint.
At the state level, each state’s insurance commission regulates all types of annuities. Any insurance company that sells annuities needs to be licensed in each state where it operates. State insurance commissioners oversee insurance businesses’ finances and ensure that they adhere to regulations aimed to safeguard clients from unscrupulous tactics.
Variable annuities are regulated at the federal level by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), in addition to state monitoring (FINRA). A securities license is required for anyone selling variable annuities.
Do you have to register with FINRA to sell variable annuities?
Regulation. The Securities and Exchange Commission (SEC) regulates the selling of variable insurance products, while the SEC and FINRA regulate the sale of variable annuities.
Can I sell variable annuities with a Series 7?
FINRA governs securities firms in the United States, and every securities professional hired by a member is required to register with the organization. Agents who are licensed to offer annuities, such as life insurance agents, fall into this category. After passing the Series 6 exam, insurance producers are permitted to market variable annuities, mutual funds, and other similar products. The Series 7 license allows agents to sell annuities and mutual funds, as well as a variety of other assets.
How do I get a FINRA license?
Securities professionals must complete qualifying exams provided by FINRA to demonstrate their competence in the specific securities activities in which they will operate in order to become registered. Before working in various sections of the firm, a worker must pass the tests.
These tests cover a wide range of topics related to markets, securities, and the regulatory structure that governs them. This requires understanding both FINRA and other self-regulatory organizations’ rules (SROs). The tests are designed to guarantee that a person has attained a minimal level of knowledge and expertise.
What are the Series 7 and 63 licenses?
Financial agents and salespeople with a Series 7 license can sell securities. These professionals need a Series 63 license to sell securities in a certain state. The Series 7 exam is needed of all financial professionals who want to sell securities.
What license do you need to sell variable life insurance?
A state life insurance license, a series 6 license, and a series 63 license are all required to sell variable life insurance. These licenses are required in all states, and they allow holders to sell financial products that include or use mutual funds and other variable-return instruments. You must complete continuing education and testing every business quarter to keep your series 6 and 63 licenses current. To keep your life insurance license current, you must complete ongoing education and testing (every two years, typically). For these certifications, most states need 15 to 30 credit hours of combined continuing education.
Who needs a Series 6 license?
Financial planners, retirement plan specialists, investment advisors, and private bankers all require the Series 6 license. Candidates must pass the Investment Company/Variable Contracts Products Limited Representative (Series 6) exam to receive the Series 6 license.
Do variable annuities have to be registered?
Variable annuities are classified as either insurance or securities in some states, while they are classified as both insurance and securities in others. Variable annuities must be registered with both the state’s insurance and securities agencies in states where variable annuities are regulated by both.
Can an IRA be a variable annuity?
- A variable annuity provides a retirement income based on the performance of the underlying investments.
- A variable annuity is not the same as a fixed annuity, which guarantees a particular payout.
- Qualified variable annuities, or financial products purchased with pre-tax funds, can be transferred to a regular IRA.
- Non-qualified variable annuities, or those purchased with after-tax funds, cannot be transferred to a regular IRA.
- Non-qualified variable annuities, on the other hand, can be transferred to other non-qualified accounts.
Do variable annuities have cusips?
Click on the monthly or quarterly performance link to see details about a specific product’s performance history. The Northwestern Mutual Series Fund, Inc., the Fidelity VIP Portfolios, Neuberger Berman AMT, Credit Suisse Trust, and the Russell Investment Funds are among the underlying investment fund possibilities listed here.
Please note that CUSIP numbers and stock tickers are not assigned to variable annuities or variable annuity subaccounts.
Northwestern Mutual Investment Services LLC (NMIS), 720 E. Wisconsin Avenue, Milwaukee, WI 53202, 1-866-664-7737, offers all securities. FINRA and SIPC member. Northwestern Mutual is the sole owner of NMIS.
Are variable annuities regulated by finra?
Deferred variable annuities are a type of hybrid investment that combines securities and insurance. FINRA and the Securities and Exchange Commission both regulate their sales (SEC). Investors can choose from a variety of complex contract features and options with these annuities.
Variable annuities are a prominent source of investor complaints to FINRA due to the complexity and ambiguity surrounding them, which can lead to dubious sales practices.
Rule 2330 (Members’ Responsibilities Regarding Deferred Variable Annuities) was created by FINRA to improve businesses’ compliance and supervisory processes, as well as give more comprehensive and targeted protection to investors who buy or sell deferred variable annuities.
Important rules governing cash and non-monetary remuneration arrangements related with variable annuity sales can be found in FINRA Rule 2320 (Variable Contracts of an Insurance Company).
