American Investment Licenses: Series 3, Series 55, and Series 86/87

AAPL NewsUpon having completed the licensing process to become a financial advisor, professionals will often feel the need to continue their education so as to climb the corporate ladder. While many individuals are comfortable remaining in advisory positions, the pursuit of additional education is always valuable to supporting a level of professional expertise in a highly complex industry. Specifically, by taking the Series 3, 55, or 86/87 exam, an advisor is able to expand the breadth of their understanding by studying the more complicated products of the industry.

The Series 3 exam is usually the first stop for new advisors, because it allows them to specialize in the derivatives market for commodities and currencies. By developing a strong understanding of fundamental options pricing, an advisor is able to offer a very sophisticated subset of investment products to their clients, as well as the opportunity to reap some very attractive rewards.

However, because of just how specialized this exam is, combined with its difficulty, many advisors that complete it will proceed to specialize in the field so as to secure a comfortable position as a commodities broker. This means that we can be confident about the expertise of the individual we are dealing with in these areas if they hold a Series 3 licence.

If an advisor wishes to pursue a more analytical role in the investment industry, they may choose to focus in on the Series 86/87 (the name comes for the way in which it is a combination of exams) instead of the Series 3, so that they can learn about the different ways to research and valuate individual securities. Applicants to this program must first have a series 7 and 63 before writing, and should have a strong base of experience to leverage forward.

By taking this licence, an advisor is able to understand both the legal implications of analysis, as well as the best practices for researching securities. This means that they are now better able to conduct their own independent due diligence on assets, and understand why it is that they are promoting the products that are brought down to them from the higher-level analysts. This licence generally provides an advisor with the same level of proficiency as the first two levels of the CFA, which merits an amount of respect.

Lastly, if an advisor feels that they would rather pursue equity trading rather than client-facing dealings, they may pursue the Series 55 exam. This licence teaches professionals how to deal with assets such as convertible securities, as well as the rules and regulations surrounding electronic trading. At the end of this three hour exam, professionals are able to move into the higher offices of an investment institution, and begin handling the actual fulfillment of complicated orders that come from sophisticated clients.

While these licences all provide advisors with some very specific information that might be seen as extending beyond their actual role, it is important to recognize how it is that many independent advisors will actually pursue as many designations as possible, so as to provide clients with the same level of service as a large bank. Regardless, it is through specialization that investment professionals are able to make the most informed decisions, and help us as savers to manage our accounts appropriately.