STUDY FOR THE SERIES 66 EXAM

NASAA publishes a Test Specifications for the Series 66 exam, and Section III (C) (1) (1.1) of these Series 66 Test Specifications includes Capital Asset Pricing Model (CAPM). Therefore, since CAPM is included, candidates for the Series 66 Exam need to know and study CAPM. A good self-test of whether you know what CAPM is about is to write a paragraph and see if you can explain it. Bob Eder in his  Study for the Series 66 Exam  discusses CAPM in Chapter 8 on Portfolio Management. Here is a sample of Bob Eder's treatment of CAPM: "The theory of Capital Asset Pricing Model attempts to establish the likely return of a portfolio, using the portfolio's beta, the expected return of the whole market, and the risk-free return of a T-bill. To arrive at a likely return, the CAPM subtracts the risk-free return, e.g., an average of the return on Treasury bills, say, for the last five years, from the expected return of the whole market. Then CAPM multiplies this net return by the beta ...

NASAA's Test Specifications for the Series 66 Exam list Digital Assets in Section  II (L) (2) , and mention characteristics, definition, and risks. This listing means that you might see questions about Digital Assets on your Series 66 Exam. Bob Eder in his  Study for the Series 66 Exam  discusses Digital Assets, and here is a sample of his treatment: Digital Assets                                                                                                             ...

Several weeks ago, Bob Eder's blog discussed RILAS or Registered Index Linked Annuities. In this blog Bob discusses the major penalties and charges that can reduce a client's return. These penalties include, but are not limited to, surrender charges; interim value adjustments and mid-term investment withdrawals; and tax penalties. This information is based on a publication of the SEC's Office of the Investor Advocate entitled "Report on Activities Fiscal Year 2023." A "RILA" has both insurance components and investment components. An investor puts money into a RILA, generally with a minimum requirement of $10,000 to $20,000.  After making this initial investment, the RILA purchaser then decides how much premium to put into investment options. These investments are relatively short-term, generally not exceeding six years.  This short-term character of RILA investments means that the investment options generally will not exceed the life of the RILA contrac...

Several blogs ago, I discussed RILAs, or Registered Index-Linked Annuities.  Recall  that NASAA's Series 66 Test Specifications specifically list Index Annuities under Section II (K) (1) (1.3), meaning that the Series 66 Exam covers these alternative investments and has questions about them.  Today on the SEC website, I see that the SEC is paying close attention to the complex structure and details of RILAs in its SEC OIAD Report on Activities—Fiscal Year 2023.  Here is just one paragraph from this SEC publication in regard to RILAs. I intend to present more segments in future Series 66 blogs from this SEC Report on RILAs. " REGISTERED INDEX-LINKED ANNUITIES (RILAs)  "What Are RILAs and How Do They Work?  "RILAs are tax-deferred retirement savings vehicles that advertise potentially reduced market risk relative to investing directly in financial markets. Like many other retirement savings vehicles, money is first added to the overall vehicle and then the in...

Taking the Series 66 in the near future? If so, be prepared to answer questions on and about Standard Deviation. How do I know this? I know this because NASAA's Series 66 Test Specifications indicate in Section I (A) (2) that you as a test candidate should be familiar with Standard Deviation. Here is a example of a question asking you to solve for standard deviation: PRACTICE QUESTION Professor Mayer has only five students in his finance class. On a weekly 10-question quiz dealing with unethical practices, the scores are 10, 8.5, 3, 6 and 7.5. Which of the following is the standard deviation for these scores? a.                     1.253 b.                     2.387 c.                      3.457 d. ...

If you plan on sitting for the Series 66 Exam, be prepared for test questions that ask about the various Share Classes for Mutual Funds. NASAA publishes Test Specifications for the Series 66 Exam that specifically list knowledge of Share Classes in Section II (H) (1). Bob Eder in his  Study for the Series 66 Exam  discusses Share Classes of Mutual Funds. Here is an example of Bob Eder's treatment:   Class C Shares                                                           II (H) (1 & 4) With Class C shares, holders pay a daily charge, based on the amount of their assets invested. This charge comes out on a daily basis as a small percentage of the value of shares that a person owns. It is called a 12b-1 charge. It usually hovers around 50 basis points or 0.005 or 0.5 percent. For example, Jason owns $100,000 of XYZ Fund'...

The Series 66 Exam covers the fiduciary obligations of I.A. reps when dealing with retail customers. Standard of care has three components and is not merely defined as putting a client's interests ahead of the rep's.  The three components are diligence, care and skill. Diligence—It takes effort and work to come to an understanding of various investments and whether the investments make sense for retail customers in general. Care—It takes care in assessing whether the investments make sense for the particular clients who are being served by the rep. Skill—And finally, it takes skill in assessing whether the investments in question are applicable for the client in view of his or her other investments and investment experience and profile. Here's how Bob Eder in his  Study for the Series 66 Exam  discusses standard of care: Standard of Care — As a fiduciary, an investment adviser must always select the choice that benefits her client. If there is any doubt, the adviser shoul...