Reviewed by Michael J Boyle
Fact checked by Kirsten Rohrs Schmitt

Series 63 vs. Series 65 vs. Series 66: An Overview 

There are many things that a person who plans to enter the industry as an investment professional must consider. They must take certain qualification examinations and, more importantly, they must pass them. But there are multiple examinations that they must successfully complete before they’re prepared to fully function in their profession.

The Series 6 and Series 7 exams, which are offered by Financial Industry Regulatory Authority (FINRA), are normally among the core exams that an individual registered representative passes. After that, there’s at least one more hurdle that remains: the Series 63, 65, or 66 exams. A question in the minds of many is, “Which one do I need to pass?” In this article, we’ll show you how you can answer this question for yourself.

Key Takeaways

• An individual who wants to become an investment professional must first pass a number of exams regulated by the Financial Industry Regulation Authority.
• Those who wish to be IARs must pass the Series 66 and Series 7 exams.
• The newest of the three is the Series 66 exam, which is equivalent to taking both the Series 63 and Series 65 exams.
• There are no prerequisites for the Series 63 or Series 65 exams while the Series 7 exam is a corequisite for the Series 66 exam.
• These exams ensure that financial advisors have a firm grasp of the financial industry’s laws and best practices.

Series 63

In most states, a new registered representative must at least pass the Series 63 exam to satisfy state law registration requirements. The fee for the exam is $147. Formally known as the Uniform Securities Agent State Law Examination, this exam:

• Consists of 60 questions
• Focuses on the registration of persons and securities under the USA and ethics in the securities industry
• Has a time limit of 75 minutes

Candidates must answer 43 of the 60 questions correctly or score a 72% in order to receive a passing grade.

There are actually 65 questions on the exam. But only 60 of these count toward the candidate’s final score. The remaining five questions are pre-tested for possible inclusion in the overall question bank. These five aren’t identified and appear anywhere throughout the exam.

Interested candidates can use the Series 63 exam study guide from the North American Securities Administrators Association (NASAA) by accessing it on the organization’s website.

Important

NASAA provided candidates with the ability to use their personal camera-equipped computer to take qualification examinations. For more information, see NASAA’s website.

Series 65

The Series 65 exam was the first one created by NASAA to test the competency of individuals who wish to provide fee-based investment advisory services. It originally focused primarily on the Uniform Securities Act, NASAA amendments, and ethical practices in the securities industry. The fee to sit for the exam is $187.

Originally a 75-question exam that focused primarily on state securities laws (the Uniform Securities Act) and ethics, it became a 130-question competency exam with a time limit of 180 minutes. Like the Series 63 exam, this one has 10 experimental questions that are included in every test. The candidate must answer 94 of the 130 questions correctly (72%) to pass the exam.

In addition to questions about ethics, the exam includes questions on the subjects of economics, investment vehicles, investment strategies, analysis, and ethics.

The majority of those who take this exam are professionals in related fields within the financial services industry, such as accounting, who want to provide fee-only investment advice. This includes those who work for investment advisory firms and wish to become IARs. Securities professionals focused on the Series 7 don’t typically take the Series 65.

Series 66

The Series 66 exam is a combination of the Series 63 and Series 65 exams. But it does not include the product, analysis, and strategy questions that are a large part of the Series 65 exam. The cost to take this exam is $177.

The test is 100 questions that count toward the candidate’s score and 10 pretest questions. The time limit for the exam is 150 minutes. To pass the exam, a candidate must correctly answer 73 (73%) of the questions.

There is no prerequisite for taking the exam but the Series 7 exam is a corequisite, which means candidates must complete both successfully in order to register in their states. There’s no preference as to which one must be taken first as long as candidates successfully pass both.

NASAA assembled a committee of securities industry experts to avoid overlap with the Series 7 exam. This helped eliminated duplicate questions between the two tests. As a result, the Series 66 exam is considered by most to be an easier test. Like the Series 65 exam, it qualifies the individual to act as an IAR and fulfills the requirements for state registration.

Warning

There are exam fees for these exams that must be paid before taking them. If you work for a financial firm, it is not uncommon for your employer to cover these costs.

Exam Comparison

Special Considerations

All three of these examinations were created by NASAA and are administered, under contract from that organization, by the FINRA, formerly known as the National Association of Securities Dealers (NASD).

NASAA is an organization of securities administrators. The term administrator. refers to a generic title used to indicate the person who is responsible for enforcing the Uniform Securities Act in a state. In various states, this person is called a commissioner, director, or Secretary of State for Securities.

The organization predates the major federal securities laws, such as the Securities Act of 1933 and the Securities and Exchange Act of 1934. It was formed in Kansas in 1919 and made its first efforts at standardizing the securities laws of the states shortly thereafter. The organization’s goals included protecting the public, and it drafted model laws. These laws could be adopted by individual states to prevent fraud and register the persons involved in the securities business.

In the early days of securities regulation, a Kansas Supreme Court justice was quoted as saying that people were coming into his state and selling schemes that had no more substance than “so many feet of blue sky.” The Uniform Securities Act has, as a result, been commonly referred to as the Blue Sky Laws.

Investment Advisor Representatives (IARs) and Investment Providers

Investment advisor representatives (IARs) are individuals employed by an investment advisor who makes recommendations or otherwise gives financial or investment advice to clients. The IAR’s relationship with the investment advisory firm is similar to that of an agent who works for a broker-dealer.

NASAA’s Memorandum of Understanding (MoU) from 1997 on this subject deals with both the federal-covered investment advisor, which is a firm registered with the Securities and Exchange Commission (SEC), and the investment advisor representatives who work for the firm.

“If an investment advisor is registered with the SEC, the states may not require registration, licensing, or qualification of the investment advisor or its supervised persons, except that states may license, register, or otherwise qualify investment advisor representatives who have a place of business located within that state.”

This MoU refers to the National Securities Markets Improvement Act of 1966 (NSMIA) and lays out the requirements for testing persons who are to be IARs. In order to avoid costly penalties, investment advisory firms must ensure their IARs are registered correctly.

After the IAR meets the registration requirements they must pass the appropriate exams before providing any client financial advice. State requirements vary on this point, however, in most cases, the IAR must pass both the Series 63 and Series 65 or the Series 66 exam and the Series 7.

Career Path and Compensation

So what happens after you successfully pass your required exams and become registered? The career path you can take depends entirely on the tests you successfully pass. You can expect to find work with banks, insurance companies, brokerage firms, investment firms, and major corporations in the following capacities:

• Series 63 Exam: Financial advisor, insurance agent, financial broker, and any other position that allows you to buy and sell securities on behalf of your clients for a fee.
• Series 65 Exam: Financial advisor, compliance officer, securities instructor, investment consultant, and any other role that allows you to provide investment advice to your clients for a fee.
• Series 66 Exam: Financial advisor, retirement account advisor, wealth management associate, risk management officer, sales manager, and any other role that allows you to buy and sell securities for a fee.

The Bureau of Labor Statistics (BLS) provides up-to-date data about different occupations in the United States. This information, which includes salaries and job outlook, is updated on a regular basis. For instance:

• Securities, Commodities, and Financial Services Sales Agents: These professionals earned an annual median salary of $62,910 in 2021 and can expect job growth of 10% between 2021 and 2031, which is faster than average. This segment includes brokers, investment bankers, investment sales agents, traders, and financial services sales agents, among others.
• Personal Financial Advisors: The median annual salary for these professionals in 2021 was $94,170. The job outlook between 2021 and 2031 for this field was 15%, which is much faster than average.
• Insurance Sales Agents: These individuals earned an average annual salary of $49,840 in 2021. The job outlook was 6% between 2021 and 2031, which is as fast as the average. People in this field work in property insurance, health insurance, and life insurance.

How Long Does It Take to Study for the Series 63, Series 65, and Series 66 Exams?

While studying needs will vary between candidates, many firms that specialize in the Series 63 exam recommend devoting anywhere from 30 to 50 hours of studying for these exams. Because the Series 65 and 66 exams are longer, many recommend devoting 80 to 100 hours to studying.

Is It Harder to Pass the Series 65 or Series 66 Exams?

While the pass/fail rate for these exams is not publicly available, many consider the Series 66 exam less difficult than the Series 65 because the latter is longer. The Series 65 contains 130 questions and the Series 66 has only 100.

What Does a Series 65 Allow You to Do Versus a Series 7?

The Series 65 enables a financial professional to give clients investment advice and analysis. If the professional wishes to sell packaged investment products or to buy and sell securities they must pass the Series 7.

The Bottom Line

Passing the Series 63 exam for registration within a state is a requirement for all registered representatives. Those who wish to be IARs must pass the Series 66 exam and the Series 7 exam. The Series 66 exam is the equivalent of taking both the Series 63 and Series 65 exams. If an individual does not already have a Series 7 and wishes to be an IAR, the Series 65 exam is NASAA’s competency exam.

Check out our free study guides for the Series 65 and Series 63 exams.

Reviewed by Erika Rasure
Fact checked by Vikki Velasquez

Deposit Multiplier vs. Money Multiplier: An Overview

The terms “deposit multiplier” and “money multiplier” are often confused and used interchangeably because they are very closely related concepts and the distinction between them can be difficult to grasp.

The deposit multiplier provides the basis for the money multiplier, but the money multiplier value is ultimately less, due to excess reserves, savings, and conversions to cash by consumers.

Key Takeaways

• The deposit multiplier, also known as the deposit expansion multiplier, is the basic money supply creation process that is determined by the fractional reserve banking system.
• The money multiplier reflects the amplified change in the money supply that ultimately results from the injection into the banking system of additional reserves.
• The deposit multiplier provides the basis for the money multiplier, but the money multiplier value is ultimately less, due to excess reserves, savings, and conversions to cash by consumers.

Deposit Multiplier

The deposit multiplier, also known as the deposit expansion multiplier, is the basic money supply creation process that is determined by the fractional reserve banking system. Banks create what is termed checkable deposits as they loan out their reserves.

The bank’s reserve requirement ratio determines how much money is available to loan out and therefore the amount of these created deposits. The deposit multiplier is then the ratio of the amount of the checkable deposits to the reserve amount. The deposit multiplier is the inverse of the reserve requirement ratio.

A deposit multiplier minimizes the risk of a bank not having enough cash on hand to satisfy day-to-day withdrawal requests from its customers. Its reserve requirement ratio also determines how much money it has to loan out or otherwise invest.

The deposit multiplier is sometimes expressed as the deposit multiplier ratio, which is the inverse of the required reserve ratio. For example, if the required reserve ratio is 20%, the deposit multiplier ratio is (1/0.20) = 5x.

Money Multiplier

The money multiplier reflects the amplified change in the money supply that ultimately results from the injection into the banking system of additional reserves.

However, the money multiplier differs from the more basic deposit multiplier because banks tend to keep excess reserves, and bank customers tend to convert some portion of checkable deposits to savings deposits or cash.

Money that banks are not required to hold in reserve is redirected into funding loans, and the borrowed funds end up in the deposit accounts of other clients. The total amount of new deposits or new money that is created can be captured using the money multiplier formula.

The money multiplier is important in macroeconomics because it determines the money supply, which affects interest rates. It’s also important in banking because it impacts monetary policy and the stability of the banking sector.

Note

During economic uncertainty, people tend to deposit more money in banks as a safe haven, increasing reserves.

Special Considerations

Banks commonly keep excess reserves beyond the minimum reserve requirements set by the Federal Reserve Bank. This reduces the number of checkable deposits and the total supply of money that is created.

Borrowers do not spend all of the money received from bank loans. If they did, and if banks loaned out every possible dollar beyond the minimum reserve requirements, then the deposit multiplier and the money multiplier would be close to exactly equivalent.

In reality, borrowers typically transfer some of the money to savings deposits. Like banks keeping excess reserves, this limits the created money supply and the resulting money multiplier figure. Similarly, conversions of checkable deposits to currency reduce the money multiplier by taking away some amount of deposits and reserves from the system.

What Does the Money Multiplier Describe?

The money multiplier describes how much the money supply can increase given the amount of reserves held by banks. When banks receive deposits from customers, they keep a portion as reserves and lend out the rest. The lent money is deposited in other banks, whereby the process is repeated, which effectively creates more money. The size of the multiplier depends on the reserve requirement set by a country’s central bank; lower requirements lead to a larger multiplier, and vice versa.

How Do You Calculate the Deposit Multiplier?

The deposit multiplier is calculated as the inverse of the reserve ratio set by a central bank. The formula is Deposit Multiplier = 1 / Reserve Ratio. For example, if the reserve ratio is 10% (0.1), the deposit multiplier would be 1 / 0.1 = 10. This means each dollar of reserves can support $10 of deposits in the banking system. It shows how much money banks can create through lending based on their reserves.

What Is the Difference Between M1 and M2 Money?

M1 and M2 money are both measures of the money supply. M1 is money in its most liquid form, such as cash, coins, and checking account deposits, which are available for spending right away. M2 money is M1 money plus small-denomination time deposits (less than $100,000) and retail money market mutual fund shares.

The Bottom Line

The money multiplier and the deposit multiplier are important concepts to know in order to understand the money supply in a fractional reserve banking system.

While the deposit multiplier reflects the theoretical creation of money based on reserve requirements, the money multiplier accounts for practical limitations, such as banks holding excess reserves and customers converting deposits into savings and cash.

These actions decrease the money supply expansion, which makes the money multiplier a better measure of economic impact; at least a more realistic one.