What license or licenses are required to sell variable annuities?
Variable annuities are among the most common financial instruments used for retirement planning and long-term savings. They serve as tax-deferred investment accounts that provide investors with a regular stream of income after an established date. Payments from variable annuities rise and fall in value based on the market performance of included investments.
Because variable annuities are specialized products, certain licenses are required to sell them. If you’re interested in selling variable annuities, you must obtain the appropriate licenses, including your state life insurance license with a variable products line of authority, as well as FINRA’s Series 6 or Series 7 registration and, in most states, the Series 63.
This article will guide you through the license or licenses required to sell annuities, outlining the roles of the Series 6 and Series 7 qualifications. By the end, you’ll understand the steps necessary to become fully licensed and ensure compliance with both state and federal regulations.
What are variable annuities?
Before we explain the licensing requirements to sell these products, it’s important to define variable annuities. Understanding these products will provide valuable context for the licensing steps and clarify why obtaining credentials to sell variable annuities is more complex than for fixed annuities.
A variable annuity is a contract established between an individual and an insurance company. In this arrangement, the insurer agrees to make future periodic payments to the customer in return for the purchase of a variable annuity, which may be made in a single lump sum or in a series of purchase payments.
Variable annuities typically feature two main phases: the accumulation (savings) phase and the distribution (payout) phase. During the accumulation phase, purchasers can make ongoing contributions to the variable annuity contract. The insurer then invests these funds, usually in mutual funds or similar investment vehicles, and potential earnings grow on a tax-deferred basis. Investors often rely on regular reporting to monitor how their portfolios are performing, and BI consulting can help financial firms present that information more clearly. Once the distribution phase begins, the insurance company pays out regular income to the contract holder. Every variable annuity includes a predetermined commencement date specifying when the periodic payments will begin.
Variable annuity vs. fixed annuity
A fixed annuity is another kind of insurance contract that pays investors a guaranteed interest rate on contributions to a tax-deferred account. A variable annuity has no set interest rate: its value rises and falls with the investment options the owner chooses. A life insurance license is generally enough to sell fixed annuities, though states that follow the NAIC’s annuity rule also require a one-time, four-credit annuity training course first. Selling variable annuities requires a securities registration as well.
How to get licensed to sell variable annuities
Obtaining the proper licenses to sell variable annuities is a complex process. Because variable annuities are insurance products that also function as investment vehicles connected to the stock market, selling them requires more than just an insurance license. You must also secure a securities registration, which involves passing the Series 6 or Series 7 exam, administered by FINRA and overseen by the Securities and Exchange Commission (SEC). Let’s break down the steps required to obtain both your insurance and securities licenses so you’re fully qualified to offer variable annuities.
State life insurance license
Because variable annuities are insurance contracts, you need a state life insurance license, plus the state’s variable life and variable annuity line of authority, before you can sell these products. To secure your state life insurance license, you typically need to meet specific state requirements, which often include passing a life insurance exam. In many states, you must complete a pre-licensing course prior to sitting for the life insurance exam, while others allow you to take the exam without additional coursework.
Because the exact process for earning your state life insurance license and passing the life insurance exam varies by location, it’s important to review the guidelines provided by your state’s department of insurance. Visit your state’s official insurance department website for comprehensive details on licensing procedures and exam requirements.
Series 6 and 7 license requirements
Once you have successfully obtained your state life insurance license and passed your life insurance exam, the next essential step is to register with FINRA through a sponsoring broker-dealer. To legally sell variable annuities, you must hold either a FINRA Series 6 license or a FINRA Series 7 license. The Series 6 license allows life insurance agents to offer variable annuities and other limited securities products. Alternatively, obtaining a Series 7 license enables you to sell all products permitted under a Series 6 license, as well as a broader range of investment and securities offerings.
To earn your FINRA Series 6 or Series 7 license, you must also pass the Securities Industry Essentials (SIE) exam, an introductory test FINRA requires as a corequisite. You can take the SIE before or after the Series 6 or 7, but your registration isn’t official until you’ve passed both, and we recommend taking it first. Obtaining sponsorship from a FINRA member firm or a self-regulatory organization is mandatory before you can register for the Series 6 or Series 7 exam.
These securities licensing exams are challenging, so it’s crucial to prepare thoroughly, whether through self-study or by enrolling in a specialized test prep program such as Achievable. Passing your Series 6 or Series 7 exam is a key milestone that allows you to combine your state life insurance license with essential securities credentials for your financial services career.
Conclusion
Variable annuities are among the many products insurance agents and advisors can offer clients exploring long-term savings options, but their complexity requires financial professionals to obtain specific certifications. Successfully passing the life insurance exam is your first step toward securing a state life insurance license, which qualifies you to advise clients on a wide range of insurance products. Once you have also earned your securities registration and your state’s variable products line of authority, you are fully authorized to sell variable annuities and other investment-linked insurance solutions.
While embarking on the journey to obtain your state life insurance license and your securities license might feel overwhelming, mastering both credentials is essential for a rewarding career in the financial services industry. With each licensing exam completed, you’ll be one step closer to advising clients and helping them secure financial freedom well into retirement.
