For those who feel like the financial system is stacked against you, this article is for you.
If everyone is playing by the same rules, isn’t it a fair game? Sure, unless the rules single out individuals or groups and give them different rules. Guess what!? The Accredited Investor rules, quite literally, give people different rules based on how much money they make (or have). Imagine playing the game of Monopoly, but you join mid-game and if you’re not in the top 10% of asset holders, you’re prevented from buying most of the properties. But, you can still pass Go and use the Chance cards. How tough would that game be? We’re mid-game and you have joined late.
Do you want to know why you might not know about what’s behind the secret door? It’s because Rule 506(b) of Regulation D prohibits using general solicitation to market securities. Basically, issuers can’t offer it to everybody, they have to put it behind a firewall and make sure the investor is accredited first.
For years, this financial test has prevented most in the US from being able to invest in new projects like Uber, Google, Palantir, etc. before these companies became household names. Now, to be fair, it protected many from losing money in bad investments, but it also simultaneously prevented the learning process that comes from making those types of mistakes. As one who learns from my mistakes (lots of them), I don’t want this protection. This big brother type protection may have a better financial outcome for some, but a negative learning outcome for most.
So how many people did this prevent from being able to invest in new unregistered or exempt projects? To be an accredited investor you must have $1,000,000 in assets, but can’t count your primary residence towards that number. According to my friend Google, about 8% of people fall in this category of having enough wealth, but it isn’t evenly distributed. Places like MD, NJ, and CT have close to 10%, while southern states like AR, AL, LA clock in under 5%.
You’re also a member of this exclusive investing club if you make enough yearly income. If you’re single, it’s $200,000/yr. If you’re married, then $300,000/yr. About 1% in the U.S. make $300,000 or more, and that overlaps considerably with those that have a million in assets.
Ok, so what about everyone else? That’s where the secret door comes in. It is new, and it allows you to join this exclusive club through education, instead of somehow becoming wealthy without having had access to lucrative investment opportunities. You can now take one of three tests, a Series 7, a Series 65, or Series 82. Bam!, you now have access to the same risky, but potentially more lucrative opportunities that were only available to the wealthy. This new rule change is only about six months old.
So how do you take advantage of these new changes? There are three possible tests, but for two of them (Series 7 and Series 82) you have to be sponsored by a FINRA member firm, so unless you have that in your back pocket, you should choose the Series 65. It isn’t going to be easy. The test is for budding Investment Advisor Representatives. You’ll learn a lot, and that’s never a bad thing. You’ll probably even avoid some of those expensive mistakes I’m so fond of learning from.
This is not financial investment advice, but it is advice. Take the Series 65, and then take your own financial investment advice. After all, you’ll be qualified to give it.
Not ready to take the test? Start here.
Ready for the test? Start here and get at least 94 of the 130 questions right.
I’m not going to tell you what’s behind the secret door, but once you’ve passed through the secret door (Series 65), you’ll have more opportunities to invest in riskier and potentially more lucrative opportunities. And, even better, you’ll have a new set of skills to help you evaluate the ones that are worth your time and money.