CFA vs. Series 7: An Overview

The Chartered Financial Analyst (CFA) designation is a professional credential offered by the CFA Institute. It is a globally recognized and respected credential held by more than 167,000 professionals across 165 countries, and it is regarded as the gold standard for the investment industry.

Series 7 colloquially refers to the license that enables the holder to sell all types of securities except commodities and futures. Administered by the Financial Industry Regulatory Authority (FINRA), the Series 7 exam—also known as the General Securities Representative Qualification Examination (GS)—essentially assesses the competency of an entry-level registered representative to perform their job as a general securities representative, or a stockbroker in common parlance. To obtain the General Securities Representative registration, candidates must pass the Securities Industry Essentials (SIE) exam and the Series 7 exam.

Comparing the CFA program with the Series 7 is an apples-to-oranges comparison. The CFA program is a rigorous, three-level advanced program, while Series 7 exams are meant for entry-level registered representatives. Thus, it would generally take much more time to study for the three exam levels of the CFA program—an average of 300+ hours is recommended for each exam level—than for the Series 7. The CFA exams are also notoriously difficult to pass; the average pass rate of all three CFA levels from 1963 to 2022 is 45%. FINRA does not publish pass rates for the Series 7 exams, but anecdotal evidence suggests that it is around 65% to 70%—significantly higher than the CFA pass rates, but certainly a challenging exam to pass for an unprepared candidate.

While CFA and Series 7 credentials may take you down different career paths in the financial industry, many financial industry professionals possess both. Series 7 holders are licensed to sell most securities in their capacity as financial advisors and brokers. But quite often, being involved in the financial industry sparks an interest for more in-depth learning in areas such as investment analysis and portfolio management, as well as the desire to garner a career advantage through an advanced credential like the CFA. Note that the CFA is not mandated by any regulatory agency for a financial industry position. The CFA is primarily a certification, comparable to a master’s degree, that increases the credibility of investment professionals and improves career advancement prospects.

CFA Charter

The CFA Institute issues the CFA charter to people who can pass its rigorous requirements. People sometimes compare the CFA study program to obtaining a master’s of business administration (MBA) except that it is much more specialized in the area of investments.

To enroll in the CFA Program and register for the Level I exam, candidates must have an international travel passport and meet one of the following entrance requirements: have a bachelor’s degree or be a final-year student, or have a combination of 4,000 hours of work experience and/or at least three sequential years of higher education.

To obtain a CFA, an individual must meet all of the requirements set forth by the CFA Institute, including:

• Pass all three levels of the CFA exams.
• Achieve qualified work experience—at least 4,000 hours of experience, completed in a minimum of 36 months.
• Submit two to three professional references.
• Apply to become a regular member of the CFA Institute, which requires an affiliation with a local chapter.

A breakdown of the CFA program curriculum can be found on the CFA Institute website.

CFA holders feel that the program’s most challenging facet is fulfilling the educational requirement. Candidates must pass three exams of progressive difficulty. According to the CFA Institute, on average, a typical candidate takes four to five years to pass all three exams. Successful candidates report spending more than 300 hours studying for each level, ranging from 303 hours for the CFA Level I exam to 328 hours for the CFA Level II exam and 344 hours for the CFA Level III exam. Most people may find it difficult to make that kind of time commitment.

And despite the amount of time spent studying, there is no guarantee of success. Pass rates fell to record lows for all three levels of the CFA exams in 2021, as the global COVID-19 pandemic likely affected candidates’ exam preparation efforts due to cancellations and deferrals.

All CFA exams are now administered through computer-based testing, as opposed to the in-person testing at examination centers that was the norm earlier. Level I exams are held four times per year, while Level II and Level III exams are held twice per year.

The CFA charter is considered to be one of the most specialized investment analysis certifications in the financial industry. A CFA can significantly help an individual’s career advancement, primarily in the areas of:

• Investment management
• Portfolio analysis
• Buy-side trading
• Sell-side research analysis
• Investment banking
• Academia
• Economics
• Financial advising

According to CFA Institute, the top five roles for CFA charterholders globally are:

• Portfolio manager
• Research analyst
• Chief level executive
• Consultant
• Risk manager

Series 7

The primary difference between the Series 7 and the CFA is that one is a license, while the other is a certification. A Series 7 license is necessary for individuals whose job involves the solicitation, purchase, or sale of securities—including stocks, bonds, mutual funds, exchange-traded funds, options, direct participation programs, and variable contracts. As of October 2018, passing the Series 7 exam is not the only requirement for new FINRA licensees. New licensing candidates must also pass the Securities Industry Essentials (SIE) exam.

The SIE is a 75-question, multiple choice exam. Candidates have one hour and 45 minutes to take the test. A passing score of 70 is required. The SIE exam was designed by FINRA to ensure that FINRA licensees demonstrate a thorough understanding of basic securities industry knowledge.

The Series 7 exam is managed by FINRA. It has 125 questions covering four main job functions of a Series 7 licensed representative. The test must be completed in 225 minutes.

The following are the four main job functions:

• Function 1: Seeks business for the broker-dealer through customers and potential customers
• Function 2: Opens accounts after obtaining and evaluating customers’ financial profile and investment objectives
• Function 3: Provides customers with information about investments, makes suitable recommendations, transfers assets, and maintains appropriate records
• Function 4: Obtains and verifies customers’ purchase and sales instructions and agreements, and processes, completes, and confirms transactions

Most Series 7 exam preparation courses suggest 80 to 100 hours of study time, including live practice exams and at least 1,000 practice questions. Unlike the CFA exams, which cover case studies, financial and investment theories, and quantitative math, the Series 7 exam involves memorizing U.S. Securities and Exchange Commission (SEC) regulations and some basic math. A 72% score is necessary to pass the exam.

To fully obtain the Series 7 license, candidates must:

• Be associated with and sponsored by a FINRA member firm or other applicable self-regulatory organization (SRO) member firm
• Register with FINRA
• Pass the SIE exam
• Comply with eligibility under FINRA Rule 1220(b)(2)

Key Differences

The Series 7 license and CFA certification are generally acquired for different careers within the financial industry, although many financial industry professionals possess both. Series 7 licensed representatives tend to work in financial market sales, often as a stockbroker or financial advisor. Keep in mind that a Series 7 is required to solicit, purchase, and sell stocks, bonds, mutual funds, options, direct participation programs, and variable contracts in any financial position. The Series 7 license can expire if a representative is not employed with a FINRA-registered organization for two years.

Although some Series 7 licensed investment advisors also hold a CFA charter, most careers requiring a CFA don’t require a Series 7 license. Unlike the Series 7, the CFA certification does not expire. As such, it is a certification that can be used in marketing your personal skills throughout your career. With the CFA charter and membership with the CFA Institute, charterholders have the opportunity to further their education annually through continuing education courses. In general, the CFA can be a good pathway to a higher-paying job with greater latitude for responsibility and management authority.

In terms of curriculum and difficulty, there is a big difference between the Series 7 and the CFA. The Series 7 license covers basic securities market terminology, products, and job functions through both the SIE exam and the Series 7 exam. The CFA curriculum is much more quantitative and theoretical, covering the areas of quantitative analysis, securities valuation, economics, financial reporting, accounting, ethics, and more.

The Bottom Line

Series 7 refers to the license that enables the holder to sell all types of securities except commodities and futures. Meanwhile, the CFA is primarily a certification, comparable to a master’s degree, that increases the credibility of investment professionals and improves career advancement prospects. The Series 7 license covers basic securities market terminology, products, and job functions, while the CFA curriculum is much more quantitative and theoretical.