When it comes to comparing content in your FINRA Exams vs the real world, it’s best to stick to the textbook. In other words, in order to pass your exam, it’s not always great to reference what you know about the real world.
In today’s post, we talk about the differences and what to watch out for.
FINRA Exams vs The Real World: Why Is There a Difference?
The fact that there can be a difference between what is taught in your Series 7 exam textbook, versus how you see reality play out can be frustrating. A common complaint that we hear from students is that their textbooks are different from reality.
There are many reasons for this. For instance, regulation. While FINRA technically allows you to open a brokerage account outside of the firm that you work for, your broker dealer may not.
When Robinhood was in the height of its popularity, many young people wanted an account. However, often their broker dealer stymied their dreams (perhaps for the better). Many broker dealers require you to keep accounts at your employer, or specifically designated firms.
In such a case, the overly strict regulations imposed specifically by a broker dealer, and experienced by the employee, differ from what is actually required by FINRA.
So, what do you need to know for the exam? All you really need to know is what is required by FINRA. Interestingly, the textbook does explain that broker dealers can impose more strict regulations than FINRA.
Mutual Funds and Annuities
Other parts of exams such as the SIE Exam, explain terms at very high levels. Sometimes these broad definitions miss more nuanced realities. For example, let’s discuss how mutual funds and annuities are described in the text. These may differ from how you experience, and sell these products.
For example, while the textbook claims that a sales charge is in place because mutual funds are not sold by a broker dealer – they are explained as sold directly by an open and investment company – some broker dealer employees beg to differ.
Here again, there is a nuanced reality. A sales representative from the open-end investment company may technically sell a mutual fund to a broker dealer, which may be where the sales charge is applied. However, the experience of the registered representative is once the mutual fund has been received by the broker-dealer that they then sell to their clients.
Overall, the general idea is to ignore what you experience, or believe is your experience, in the real world. Your best chance at passing is to stick to what the textbook tells you.
For most people, getting through this exam is a minor hurdle, to a much longer career. While you certainly don’t have to know everything, you do have to know enough. Get past the textbook, and you can get back to reality. If you need any help, let us know. Good luck!