Uniform Investment Adviser Law Examination
The Series 65 exam qualifies individuals as investment adviser representatives (IARs) who provide fee-based investment advice to clients. Administered by NASAA (North American Securities Administrators Association), the exam covers economic factors, investment vehicles, client recommendations, and the laws and regulations governing investment advisers. Unlike most FINRA exams, the Series 65 does not require firm sponsorship to sit for the exam, though firm sponsorship is typically required for registration as an IAR.
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Practice Questions
Test your knowledge with these Series 65-style questions. Click an answer to check if you are correct.
1. Which of the following is considered a leading economic indicator?
Correct: C. Building permits are a leading economic indicator because an increase in permits suggests future construction activity and economic growth. The unemployment rate, CPI, and corporate profits are all lagging indicators that confirm trends already underway.
2. An investment adviser has a fiduciary duty to clients. Which of the following actions would violate this duty?
Correct: B. A fiduciary must disclose all material conflicts of interest. Recommending a product because it pays a higher fee, without disclosing that conflict, places the adviser's interest above the client's and violates the fiduciary duty of loyalty.
3. According to Modern Portfolio Theory, which of the following is the primary benefit of diversification?
Correct: B. Modern Portfolio Theory demonstrates that diversification reduces unsystematic (company-specific) risk. Systematic (market) risk cannot be eliminated through diversification -- only through hedging. Diversification does not eliminate all risk, nor does it maximize short-term gains.
4. Form ADV Part 2A must be delivered to a prospective advisory client:
Correct: B. Under the Investment Advisers Act of 1940, the firm brochure (Form ADV Part 2A) must be delivered to prospective clients not later than the time of entering into the advisory contract. This ensures clients have full information about the adviser's business practices, fees, and conflicts before engaging their services.
5. A client nearing retirement with a conservative risk tolerance asks about Roth IRA conversions. Which factor is MOST important to consider?
Correct: B. The primary consideration for a Roth conversion is whether the client expects to be in a higher tax bracket in retirement. Converting to a Roth means paying taxes now on the converted amount, but future withdrawals are tax-free. If the client will be in a lower bracket in retirement, the conversion may not be advantageous since they would pay higher taxes now than they would on future withdrawals.
Related Exams
Consider these exams if you are pursuing a career as an investment adviser representative or expanding your registrations.
Uniform Combined State Law
Combines the Series 63 and Series 65 into a single exam. Requires the Series 7 as a co-requisite. Ideal if you need both agent and adviser registrations.
Securities Industry Essentials
The foundational securities exam covering industry basics. While not a prerequisite for the Series 65, it provides essential knowledge of capital markets, products, and regulations.