Benefits of Licensing
For Firms
A Sweeping Question
For firms and their decision makers, the question is broader than whether or not to license your agents with either a
Series 6 (Investment Company Products / Variable Contracts Limited Representative) or a Series 7 (General Securities
Representative) securities qualifications license. The question is really one of choosing a level of service to provide
your firm's client base.
Many of your agents have already discovered the upside potential of Indexed Annuities and in essence have already made that decision independently. Your agents know that while the annuity or insurance portion of these contracts protects a client's income stream, it is the investment portion of the contract, tied to the performance of a specific index, that provides the growth potential. Both firms and agents who are already utilizing these products know the appeal of the contracts and the benefit of asset growth potential, but they must also recognize the risk and its allocation.
This is the root of the Securities and Exchange Commission proposal for Rule 151a: there is risk, and the client underwrites that portion of the contract to which the risk is attached. More importantly, the clients of insurance agents have already demonstrated their willingness, where suitable, to assume that risk for the potential reward. Being able to offer the products has already broadened the scope of the service the firms are now providing.
So is SEC Rule 151a really the issue? Or is the level of service your firm can provide going forward the question that really needs be answered? For some firms, the answer is already obvious — regardless of Rule 151a, moving forward with securities licensing is a given and the best way to serve all of their clients financial needs. For others, recognizing that the opportunity is now will be better than recognizing that the opportunity was yesterday.
The licensing mandate as per SEC Rule 151a is only part of the question at best.
Building on the Existing Foundation
All financial service businesses, whether insurance or securities, are built on the same foundation: trust. Your agents,
using the tools and training you've provided, have worked hard to earn and maintain the trust of their clients. The foundation
is already in place, and the clients' need and desire to have access to products like Indexed Annuities is already known.
Broadening the scope and depth of the financial services your agents are able to provide is a business-building strategy for
which you have already poured the foundation. This is also the best time to consider that other providers have constructed the
same trust foundation for their clients, so their decision to expand product availability and services via securities licensing
might greatly impact the firms who wait and do only the minimum, if and when required.
About the Process
Firms need to consider that gaining the desired licenses is not meant to be the easiest of tasks. Building your firm to a one-stop
financial services provider will take some time and effort. For securities licensing, sponsorship is required from a broker / dealer.
Therefore, affiliation with or becoming a broker / dealer would be the first step.
The level of licensing, be it Series 6 or Series 7, will determine the depth and breadth of financial services your firm can provide. At a minimum, SEC Rule 151A will require a Series 6, Investment Company Products / Variable Contracts Limited Representative. As its title implies, this is a "limited" license in that it limits the financial products you are qualified to offer. By contrast, the Series 7 license, General Securities Representative, is considered to be a "full" license and allows virtually all securities products to be offered and sold. Simply put, the broader the license, the broader the potential offerings and the greater the scope of opportunity for your representatives and your firm.
The scope of benefits is different for each of the licenses. However, one viable option to consider would be to introduce your agents to the securities industry by starting with the Series 6 license first in order to comply with the minimum requirements of SEC Rule 151a. Following that, have those agents who want to expand their offering opportunities and client base attain the Series 7 license. In fact, this is often the path taken within the securities industry: first Series 6 and 63 (required for state licensing) and later Series 7.
The study process for either qualifications exam shouldn't be considered a weekend study. While each candidate is different, for most, it is necessary to spend a number of weeks during which that individual devotes a good portion of their time to a diligent study regime to successfully pass the exam. Once your firm has decided to move forward, you will want to allow your agents time to master the material and provide the tools to do it. Kaplan has proven solutions for all of the options available to you.
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Reap the reward
Once the qualifications exams have been taken and passed by a candidate, the Financial Industry Regulatory Authority (FINRA),
who is responsible for all regulatory securities industry oversight, will be notified. Your firm will file the appropriate
registration forms for each candidate, and registration will be completed.
Production and satisfying the needs of your firm's clients can begin immediately. As the level of financial service your firm offers has expanded, so too will the practice of each individual registered representative (RR) and the firm's overall business. Now your client base can turn to your firm for all of their traditional insurance product needs, such as income stream protection, as well as their wealth building and wealth management needs. As product offerings expand and client base expands with it, some of your RRs will undoubtedly begin to explore niche services and the corresponding products that will best serve their clients. For example, it is not uncommon for RRs to specialize in areas like retirement planning, nonqualified programs, portfolio hedging with options, portfolio construction using Mutual Funds, and many more. In addition, as client bases evolve and economic climates change, different and new innovative products may also come into play. Your firm will be ready and qualified to offer them.
There is no doubt that, when administered correctly with all of the required due diligence in place, the products and services the securities industry offers can be rewarding and lucrative for those individuals and firms using them to protect the financial interests of their clients.
The foundation of trust in your firm is already built. Your decision to move forward and provide all that you can for the financial well being of your firm's clients is the question at hand. Kaplan is ready to assist.