No, You Don't HAVE to Have a Securities License for Everything

Jul 31, 2016

  1. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    This has been coming up a lot lately, so here's my brief answer to all this stuff.

    Securities licenses (Series 6, 7, 63, 65, 66, etc.) are required for the following:
    - Buying recommendations and transactions of securities for clients
    - Selling recommendations and transactions of securities for clients
    - Holding securities recommendations for clients
    - Professional analysis and advice regarding securities.

    The Series 6, 7, & 63 allow you to earn commissions on the sales of securities.
    The Series 65/66 allow you to earn asset-based management fees on portfolio management platforms.

    That's it.

    If you have a life insurance and annuity license for fixed insurance business, can you do:
    - IRA rollovers? Yes, but only to those products you are licensed to sell.
    - Roth IRA? Yes, but only to those products you are licensed to sell.
    - Retirement Planning? Yes, but only to those products you are licensed to sell.
    - 401k plans? Yes, by using a non-registered group variable annuity which may be sold by a life insurance licensed professional. May be subject to further state regulations. (A business owner is considered a sophisticated investor, which means the transaction is exempt from registration.)
    - 529 plans? Unfortunately no, because these seem to only be available from mutual fund companies.

    You do NOT have to have a securities license to sell an IRA, Roth IRA, a 401k plan, or to do retirement planning.
    You DO need a securities license to do any buying, selling, holding, or analysis recommendations regarding securities.

    However, just because you CAN do something, doesn't mean you know all the considerations into doing it in the first place.

    Can a person contribute $5,500 to a traditional IRA and deduct the contribution from the current year's taxes? That depends.
    1) How much income do they have? At higher income levels, the deduction phases out. You can still do a non-deductible traditional IRA contribution... did you know that? But you had better not co-mingle this IRA with other IRA balances.
    2) Do they have a company retirement plan at work? This can limit or eliminate how much they can contribute.
    3) What about their spouses? Can a contribution be made for them? That depends on the above two questions as well.

    https://www.irs.gov/retirement-plan...yee/retirement-topics-ira-contribution-limits

    Can you tell that the question has almost nothing to do with what to sell them or what you can sell them, but rather the rules and regulations behind the decision in the first place???

    BTW, your compensation for the sale, implies that you have done this analysis before selling the product. If you haven't, or you didn't know what the factors are behind the sale... then I sure hope your E&O is paid up.


    Some of these questions that have come up recently is, in my opinion, further proof that most people should get started in a CAPTIVE agency so they can learn what they CAN and CANNOT do. When you start out as an INDEPENDENT, you don't learn these things.

    Also, I think it's a great idea that people who want to do this kind of business get securities licensed so they know what they can and cannot do with their licensing. In addition, obtaining professional designations will help with this learning curve.

    PMG Power Blog: If You

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    BTW, along these lines, Columbus Life has a great free Tax Reference App for your phone. It's a GREAT resource so you don't have to memorize everything. It's the only one I know of.

    https://www.columbuslife.com/becomeaproducer/tax.php
     
    Last edited: Jul 31, 2016
    DHK, Jul 31, 2016
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  2. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    And if you don't know any of this then you have no business selling an annuity on your own until you know all of it. Would you trust your own hard-earned retirement savings to someone that doesn't have a clue as to what they are doing?

    Just because you CAN sell something doesn't mean that you SHOULD...
     
    Last edited: Jul 31, 2016
    scagnt83, Jul 31, 2016
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  3. jbage007
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    jbage007 Guru

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    I think the response is more germane than the original post.

    Strangely ironic and perplexing that so many people in our industry (it is *Not a profession) can't figure out that if you don't understand the question, you surely cannot understand the answer.

    More to the point, if you have to ask, then the answer should be self-evident: NO (you can't do that).
    :no:
     
  4. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    The only time I recall just opening IRA accounts without doing any kind of analysis first, was at the bank as a banker. People would come in and want to open a traditional IRA and I would just do it.

    However, the biggest difference was in the consequences to the principal balance if the whole thing needed to be unraveled. A bank money market or CD has minimal to no financial penalties. But when you're dealing with mutual funds or annuities... you've got sales charges &/or surrender charge schedules. It's more of an issue, especially if you have to explain to the company why you had to undo what you just sold.

    Plus, when you're dealing with insurance or securities, it's YOUR LICENSES (and E&O) on the line. Bankers dealing with bank accounts don't require licensing.
     
    DHK, Aug 1, 2016
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  5. Golfnut2112
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    Golfnut2112 Guru

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    What kind of analysis do you do for an IRA? All you need to know is their income and what type of IRA they want, traditional or Roth. Since you only sell annuities you don't have to do a risk tolerance questionnair so I'm not sure why you make it sound so complicated. And as far as your License and E&O that is just crazy, no attorney is going to sue you for a couple hundred dollar error. But if you just ask their income you don't need to worry about it. If you forget to ask, the question will be on the annuity suitability form or the customer information form for securities.
     
  6. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    Well, if we want to talk about securities, and possible complaints - which should be dismissed by the B/D... it could become a mark on one's U4.

    It's not complicated... for those who know what they're doing. You know what you're doing. I know what I'm doing.

    Not every new independent agent knows what they are doing. Case in point:

    http://www.insurance-forums.net/forum/annuities-forum/qualified-funds-t83563.html
     
    DHK, Aug 1, 2016
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  7. dahonored1
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    dahonored1 Expert

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    thanks for that by the way.
     
  8. Golfnut2112
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    Golfnut2112 Guru

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    You are absolutely correct!!!
     
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