I saw a recent news article saying that the definition of an “accredited investor” has changed to include persons who have passed one of three financial advisor exams (series 7, 65, or 82).
I saw exam prep books on Amazon but I’d prefer to learn the material for real. Except then I’m not sure what books to buy that would cover all the topics. Amazon just recommends a bunch of lay-person targeted books when I search for general finance stuff, not course study books.
Any recommendations?
What’s your goal here? Unfortunately, getting permission to take the test may be harder than actually passing it.
The tests you mentioned are called “qualifying examinations.” They are administered by the Financial Industry Regulatory Authority. To take a qualifying exam, you must first pass the Securities Industry Essentials exam. So that’s step one.
Then you have to take the qualifying exam of your choice. The purpose of the qualifying exams is to permit a person to work in the financial industry. FINRA thus only lets people take the Series 65 or 82 if they work for a registered broker-dealer. You can take the Series 7 if you work for a broker-dealer, or, in some (most? all?) states if you are a registered investment adviser or work for a registered investment adviser. So step two on your journey is to get a new job (or register yourself as an investment adviser; registering yourself as a broker-dealer is even more complicated).
Only then do you have to take and pass the exam. I used hand-me down materials from these guys to pass the Series 7 and Series 66 years ago. They are still the leaders in the industry for test prep
But you don’t seem to care about passing the test. You want to learn the material. There is a lot of ground to cover in the Series 7 examination and, frankly, the test only covers a bit of it The materials offered by Securities Training Corporation just teach to the test. Although you will likely learn a lot, it’s not a comprehensive education about all the financial topics covered on the exam.
For a really thorough understanding of everything on the exam, I would recommend that you get an MBA, focusing on finance, and spend your spare time reading the Wall Street Journal and all the prospectuses and private placement memoranda you can get your hands on. It would also help if you build a network of contacts in the financial industry to ask about specialty topics when they come up, because the financial industry in the U.S. is all about innovation and it takes a while for the latest knowledge to find its way into books.
However, if your goal is to just be able to understand a particular private placement that you are thinking of investing in, this is overkill. The first thing to do is read about basic financial concepts like the time value of money, interest rates, dividends, and discounting cash flows. Read a bit about accounting so you understand how to read financial statements. Then, read the private placement memorandum for the investment and figure out what it’s all about. You need different investment and general knowledge to evaluate a a municipal bond backed by parking garage revenues than if it were a hedge fund, a strip mall partnership, a social media startup, or a private equity fund specializing in for-profit schools. The list of private placement types is nearly endless. There are way more privately-placed securities in America than there are public companies, and no one understands them all. Very sophisticated investors usually specialize. If they don’t entirely specialize, they at least learn a lot about the particular area where they plan to make a new investment until they understand it very well. Even then, sometimes very good investors are surprised by facts or circumstances they didn’t appreciate.
But, it probably won’t matter. Even if you are technically qualified as an accredited investor, chances are, no one wants your money. If you don’t have enough money to meet the old accredited investor standard, you are unlikely to be invited to invest in a private placement. Most have minimum investments of at least $250,000. Many have minimums that exceed $1 million. The revised accredited investor definition is really intended to allow the broker-dealer selling a fund, or the junior analyst working at a hedge fund, to buy in with a reduced investment that won’t be offered to you.