Master the FINRA Series 7 Exam: Harnessing the Power of Flashcards and Effective Strategies

Master the FINRA Series 7 Exam: Harnessing the Power of Flashcards and Effective Strategies

Jul 23, 2023

Understanding the FINRA Series 7 Exam and Preliminary Preparation

The Financial Industry Regulatory Authority (FINRA), also known as the General Securities Representative Exam (GSRE), is a requisite for anyone looking to enter the field of securities trading. With its extensive range of topics and demanding requirements, the exam is known for being challenging. However, armed with the right knowledge and tools, you can ace this exam and fast-track your career in the securities industry.

What is the FINRA Series 7 Exam?

Administered by FINRA, the Series 7 Exam assesses the competency of entry-level General Securities Representatives. The exam measures their understanding of securities trading, sales, and the regulatory framework within which these activities occur.

Passing the exam is a requirement for many entry-level roles in finance, such as full-service brokers and financial advisors, and it qualifies an individual to solicit, purchase, and sell all types of securities products.

Content Breakdown

The Series 7 Exam is a multiple-choice test consisting of 125 questions, which you have 225 minutes (3 hours and 45 minutes) to complete. The exam covers four main functions, each contributing to a different percentage of the total score:

  1. Seeks Business for the Broker-Dealer through Customers and Potential Customers (7%): This function involves prospecting for and contacting potential customers, providing customers with information on investments, and making suitable recommendations.

  2. Opens Accounts After Obtaining and Evaluating Customers' Financial Profile and Investment Objectives (9%): This function involves understanding different types of accounts, various regulations concerning those accounts, and knowing how to evaluate customer profiles.

  3. Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets, and Maintains Appropriate Records (73%): This is the largest function on the exam. It covers everything from providing information about investments and making recommendations to keeping accurate records and processing, confirming, and settling transactions.

  4. Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions (11%): This function involves processing and completing transactions, including verifying the customers' instructions and reporting the transactions.

Preliminary Preparation

1. Set a Study Schedule

Planning your study schedule is the first step in preparing for the Series 7 Exam. Given the complexity of the content, it's recommended to start preparing at least two months before the exam date.

2. Get the Right Study Materials

While there's no shortage of study resources for the Series 7 Exam, not all are created equal. Look for comprehensive textbooks that align with the latest FINRA guidelines and exam content outline. Some recommended resources include:

  • FINRA's Content Outline: This resource provides a breakdown of the different functions tested in the Series 7 Exam and can be a useful guide in your studies.

  • Comprehensive Textbooks: Books from STC or Kaplan Series 7 offer in-depth information and helpful study tips.

  • ExamFX: They offer a comprehensive set of resources to help prepare for the series 7.

3. Use Flashcards for Active Recall

Incorporating flashcards into your study routine can help reinforce your memory and boost active recall of key concepts. Active recall, the practice of bringing information to mind from your memory, has been shown to be one of the most effective study techniques.

You can create flashcards for definitions, regulations, formulas, and any other piece of information that requires memorization. For instance, you could write "What are the characteristics of common stocks?" on one side and the answer on the other. Review these cards regularly, particularly those containing information you find challenging.

Flashcards are also great for studying on the go. If you have some spare time, whether it's on your commute or during a lunch break, you can quickly run through a few cards.

4. Join a Study Group

Joining a study group can be highly beneficial. It allows you to discuss difficult topics, share study materials, and learn from others' perspectives. Additionally, explaining concepts to others is a great way to reinforce your understanding and identify any gaps in your knowledge.

You can either start a study group with your friends, classmates or colleagues preparing who are also preparing for the series 7 exam or look on forums for other students interested in starting an online study group.

In-Depth Study for Each Function

Each function in the Series 7 Exam requires a unique approach. Below are tailored strategies to help you tackle each one effectively:

1. Seeks Business for the Broker-Dealer (7%)

This function centers around customer interaction and sales strategies. It requires a good understanding of different types of investments and their potential benefits for customers. Review customer profiles and investment strategies, and practice how to pitch these products in different scenarios.

Using flashcards can be very effective here; make a set of cards with different types of investments on one side and their key features and suitable customer profiles on the other.

2. Opens Accounts (9%)

This function requires a solid grasp of regulations and an ability to analyze customers' financial profiles. Focus on understanding different types of accounts, compliance requirements, and the process of evaluating customer profiles.

Flashcards come in handy again; write a regulation or account type on one side and its description or related compliance requirements on the other.

3. Provides Customers with Information and Makes Recommendations (73%)

Given its weightage, this function demands a significant portion of your study time. Knowledge of a wide range of investment products, their characteristics, risks, and benefits, along with rules and regulations, is vital.

Flashcards can be incredibly useful to remember the specifics of each investment type, and regularly testing yourself will reinforce this knowledge. For example, you might create a flashcard with "Mutual Funds" on one side and list its characteristics, risks, and benefits on the other.

4. Obtains and Verifies Customers' Purchase and Sales Instructions (11%)

This function involves the procedural aspects of securities trading. It's essential to understand the different steps involved in processing transactions, including verification, reporting, and compliance.

Create flashcards with a step or procedure on one side and its description on the other. Regularly reviewing these flashcards will ensure these processes become second nature.

Approaching Practice Exams

After covering the exam content, practice exams should be your next priority. These not only test your knowledge but also acclimate you to the exam format and timing. Treat practice exams seriously; simulate real exam conditions and time yourself.

Analyzing your performance on practice exams is equally crucial. Identify areas where you struggled and review these topics again. Don't be disheartened by low scores on initial tests – use them as a tool to measure progress and guide your studies.

There are numerous websites offering free practice exams for the series 7 exam, here is one such free practice resource.

Exam Day Tips

On the day of the exam, ensure you're well-rested and have a nutritious meal. Arrive at the exam center early to familiarize yourself with the environment and reduce anxiety.

During the exam, time management is key. Don't spend too much time on difficult questions; it's better to make an educated guess and move on rather than risk not finishing the exam. Remember, there's no penalty for wrong answers, so make sure you answer all questions.

The Series 7 Exam demands focused and strategic preparation. Understand the functions, obtain high-quality study materials, and leverage active recall tools like flashcards to reinforce your knowledge. By following this comprehensive guide, you'll be well-prepared to tackle the exam and embark on your journey in the securities industry.

Here's to your success in the FINRA Series 7 Exam!

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