Confusion with Series 65 Lic.?

[Gulfman]

Confused by the Series 65 lic.?

I've always been confused with the series 65 lic on a several points. After searching google, you tube, etc., i'm still confused. Can someone help me figure this out please?

I know that FINRA administers the test but other than that, my phone call to them wasn't very informative.

Regarding the 65 lic.;

1. How do you get paid (IOW; Do you to earn "commissions?" OR are all your fees paid direct by clients?)
2. What are the "Liabilities" of holding a 65 and what "can't you do or sell?"
3. How much $ does it take to "keep" this lic. active, (production, insurance, etc)?
4. What's the biggest "Caveat" to holding a series 65?
5. Other than administering the test, how else is FINRA involved with someone who holds a Series 65?

Anyway, Thanks very much for your help.


~T

 

[Stephen]

Confused by the Series 65 lic.?

I've always been confused with the series 65 lic on a several points. After searching google, you tube, etc., i'm still confused. Can someone help me figure this out please?

I know that FINRA administers the test but other than that, my phone call to them wasn't very informative.

Regarding the 65 lic.;

1. How do you get paid (IOW; Do you to earn "commissions?" OR are all your fees paid direct by clients?)
   
   You can bill clients directly, but fees are typically deducted directed from their account.
   
2. What are the "Liabilities" of holding a 65 and what "can't you do or sell?"
   
   A series 65 allows you to provide financial advice for a fee. You cannot place trades or sell investments. Most advisors partner with a third party asset management partner and basically sell the Tamp's services.
   
3. How much $ does it take to "keep" this lic. active, (production, insurance, etc)?
   Around $5k per year.
   
4. What's the biggest "Caveat" to holding a series 65?
   
   ?
5. Other than administering the test, how else is FINRA involved with someone who holds a Series 65?
   
   They are the watchdog.
   
   

Anyway, Thanks very much for your help.


~T

...........................................

 

[DHK]

Regarding the 65 lic.;

[*]How do you get paid (IOW; Do you to earn "commissions?" OR are all your fees paid direct by clients?)

1. You are either registered under someone else's RIA firm, or you set up your own firm. With those regulatory documents is something called a Form ADV Part 2. This form spells out the various ways that they pay the firm for various services - a % of AUM, project-based fees, hourly consulting fees, annual or monthly retainer fees, etc.

If there is a firm that you want to check out for how they charge their fees, you can see that here:
https://adviserinfo.sec.gov/IAPD/Default.aspx

You can search kitces.com for 'retainer' and read a few articles on the subject.

[*]What are the "Liabilities" of holding a 65 and what "can't you do or sell?"

1. The liability is that you are a fiduciary and must disclose all potential conflicts of interest (ie. how you can get paid more).

2. You are paid for ongoing advice - which means you must have a service schedule to be sure that you are providing ongoing advice in exchange for fees for advice.

[*]How much $ does it take to "keep" this lic. active, (production, insurance, etc)?

Each state will be different. If the firm you set up (or join) has AUM of $100 million or more OR registered with 15+ states, they will register with the SEC.

https://www.kitces.com/blog/registered-investment-adviser-requirements-series-65-exam-timing/

You'll have to manage the licensing fees, state securities audits, E&O for your firm or yourself, record keeping, advertising copy, etc.

You'll certainly need to know what you can and cannot put in writing.

[*]What's the biggest "Caveat" to holding a series 65?

1. The biggest caveat for insurance agents considering adding this license to their services is this: Will you adhere to a schedule of services in order to validate and justify the fees you are charging and receiving?

http://www.insurance-forums.net/for...ial-planning-aum-fees-t87666.html#post1176910

2. Every time you sell an insurance product, it may be considered a "conflict of interest" in addition to it being an 'outside business activity'. Why would it be a 'conflict of interest'? Because you are earning a commission instead of charging a fee. I think it's kinda stupid, but you need to be aware of this and document things. If you're not used to documenting your files, I'd get a CRM of some kind and get into the habit now.

[*]Other than administering the test, how else is FINRA involved with someone who holds a Series 65?

FINRA is not involved in any way with RIA-only firms... but not for a lack of trying.


I'd pick up a copy of this ebook as a simple way to get your introduction to having a Series 65:
Independent Financial Advisor

Also, for most other questions, I'd search on www.kitces.com. Michael Kitces is an industry researcher (and very much a self-proclaimed 'nerd') when it comes to this stuff.

 

[Gulfman]

2. Every time you sell an insurance product, it may be considered a "conflict of interest" in addition to it being an 'outside business activity'. Why would it be a 'conflict of interest'? Because you are earning a commission instead of charging a fee. I think it's kinda stupid, but you need to be aware of this and document things. If you're not used to documenting your files, I'd get a CRM of some kind and get into the habit now.

Wow...so if i sell a life policy, health policy, med.sup, etc., i have to disclose that to every client and "GET THEM TO SIGN" a paper saying they understand how i get paid???

???

 

[DHK]

I don't know if they have to SIGN anything, but you would certainly have to document it in your client files.

If you have a fiduciary relationship with a client with AUM or on a retainer basis, and you want to sell them a LTC policy (as an example) and as part of the client engagement... you would need to disclose the fact that you are earning a commission on the sale of that insurance policy. You may need to disclose what the commission would actually be as well.

Most of this would be contained in a supplemental ADV Part 2 disclosure - that you sell insurance as an outside business activity and earn commissions as a result of that activity.

Regardless of that disclosure, you would need to still show your fiduciary duty in how that insurance policy (whatever it is) is in your client's best interest. If your client overrides your professional judgment and declines to apply or chooses something else, then you should get something signed to that effect for your files - a good discipline as an insurance agent anyway.

 

[cellardoor452]

Why do you want your 65?

 

[Gulfman]

Why do you want your 65?

????
Interesting question?

----------

I don't know if they have to SIGN anything, but you would certainly have to document it in your client files.

If you have a fiduciary relationship with a client with AUM or on a retainer basis, and you want to sell them a LTC policy (as an example) and as part of the client engagement... you would need to disclose the fact that you are earning a commission on the sale of that insurance policy. You may need to disclose what the commission would actually be as well.

Most of this would be contained in a supplemental ADV Part 2 disclosure - that you sell insurance as an outside business activity and earn commissions as a result of that activity.

Regardless of that disclosure, you would need to still show your fiduciary duty in how that insurance policy (whatever it is) is in your client's best interest. If your client overrides your professional judgment and declines to apply or chooses something else, then you should get something signed to that effect for your files - a good discipline as an insurance agent anyway.

And there it is....the other shoe. Hows does anyone "know" that this policy (whatever it is) is "the best" one for their client/prospect? There may be other plans that the agent is ignorant of....that could be better.
???

 

[Stephen]

Wow...so if i sell a life policy, health policy, med.sup, etc., i have to disclose that to every client and "GET THEM TO SIGN" a paper saying they understand how i get paid???

???

It is not that big of a deal. You simply list your insurance activities as an outside business activity and if you happen to move qualified money into an insurance product then you follow the compliance guidelines that will be provided to you.

 

[DHK]

And there it is....the other shoe. Hows does anyone "know" that this policy (whatever it is) is "the best" one for their client/prospect? There may be other plans that the agent is ignorant of....that could be better.
???

And that's where you read too far into my post.

Remember how I told you that you'd have to disclose that insurance was an OUTSIDE business activity? I only told you that you'd have to disclose that you earned a COMMISSION for the sale of insurance and that commission is considered a 'conflict of interest'.

Your policy does need to fit the client's situation, but does it have to be the 'absolute best' out there? No. That may be impossible to determine. It SHOULD be the best of the companies you DO represent (and that's not unreasonable and you should be doing that anyway).

 

[Gulfman]

And that's where you read too far into my post.

Remember how I told you that you'd have to disclose that insurance was an OUTSIDE business activity? I only told you that you'd have to disclose that you earned a COMMISSION for the sale of insurance and that commission is considered a 'conflict of interest'.

Your policy does need to fit the client's situation, but does it have to be the 'absolute best' out there? No. That may be impossible to determine. It SHOULD be the best of the companies you DO represent (and that's not unreasonable and you should be doing that anyway).

Thank you DHK !

Did i just read you correctly? "Writing someone an insurance policy is a "conflict of interest????" How does that work? How do you explain that to a prospect?


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