SIE, S6 & S63 Prep Class

Welcome

Patrick D. McGinley

(949) 636-7646 Cell

pfsmcg@hotmail.com

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This is YOUR TIME to “Invest the Difference” for your clients.

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Investment Facts

• 69% of Americans have less than $1,000 saved
• 50% of Men & 47% of Women born 1957-1968 have saved NOTHING for retirement.
• Only 38% of American retirees are debt-free, i.e., 62% of American retirees have outstanding mortgages, credit cards, auto loans or student loans.
• NOT STOPPING - 48% of working Americans surveyed in 2018 anticipate working past age 65, up from just 16% of workers who felt that way in 1988.

Investment Facts

• There are MORE 401(K) MILLIONAIRES - The number of 401(k) accounts worth $1+ million at Fidelity jumped 41% in 2023 from 299,000 to 422,000. The average 401(k) millionaire at Fidelity is 59 years old and has been saving for 26 years.
• But ONE IN FOUR HAVE NO CLUE - Roughly two-thirds of Americans say they’re saving for retirement, according to a 2023 TIAA Institute survey. However, nearly one in four Americans have no clue where their retirement account balances stand and how it is invested.

Living Paycheck to Paycheck

76% of all Americans are living paycheck-to-paycheck

Leave Nothing on the Table

Investments

• 12 Trillion Dollars currently in Money Market Funds, CD’s, Savings Accounts.
• $ 1,973,685,000 in 92691 ALONE! (FDIC.gov)
• Average new Social Security Benefit is $1,906 a month in January 2024 (But 48% of women & 42% of men are taking a lower SS retirement $$ at age 62).

• The three-legged stool

is broken!

Why You Are Here

SIE, Series 6 & Series 63

My goals for this class:

1) EVERYONE here could pass the SIE, S6 and the S63 exams this year and earn BIG BONUSES. Everyone here CAN do it.

• SIE Exam, 85 Questions (75 count) 70% in 105 min (74 seconds each)
• New Series 6, 60 Questions (50 count) 70% in 90 min (90 seconds each)
• Series 63, 65 Questions (60 Count) 72% in 75 min (69 seconds each)
• Series 26, 105 Q’s (100 count) 70% in 120 min
• Series 65, 140 Q’s (130 count) 71% in 180 min

My goals for this class:

2. To have you pass a test every two to three weeks. SIE => S6 => S63 => S26.
3. To have you totally believe that you are with the right company at the right time.
4. To start helping clients from Day One because you have the confidence. “I know more than you do, pay me.”

SIE, Series 6 & Series 63

Licensing Game Plan

Primerica’s Protect & Invest Mission

1. The SIE costs $80 to take (2024 price).
2. Once passed – Good for FOUR years.
3. When You Pass, Primerica Pays you...
1. Just complete the U-4 & your fingerprints and Primerica will reimburse $80, OR up to $160 in fees you paid if you took the SIE AND you scored at least 60% the 1^st time you took it, and then passed the 2^nd time within 60 days.
2. If you fail either the Series 6 or Series 63 but scored at least 60% the 1^st time, Primerica will pay for the retake if you schedule it within 60 days. See POL for procedures.

Licensing Game Plan

Primerica’s Protect & Invest Mission

3. WHEN You Pass, Primerica Pays...
3. BONUS NOW. Pass Series 63 before September 30th. Then within 90 days after receiving your appointment, submit your first $1,000 trade (even your own), then Primerica pays you a $350 bonus.

($300 for the Series 6 and $50 more for the Series 63).

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Licensing Game Plan

3. OR … WHEN You Pass, Primerica Pays...
3. FUTURE BONUS. Primerica will pay your 2025 license IF you pass the S63 between October 1^st to December 3^rd.

You must complete ALL steps by Dec 9^th:

1. Complete your Reg / DOL Best Interest Certification, BOTH Parts 1 & 2
2. Complete your DOL Fiduciary Rule training
3. Get appointed, usually 3-5 days after passing the Series 63 (automatic)
4. AS SOON AS YOU GET APPOINTED, complete a $1,000 trade NO LATER THAN Monday, December 9^th. (Use platform funds)

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Licensing Game Plan

Primerica’s Protect & Invest Mission

If you are to minimize your time and cost, this your “I WILL PASS” schedule:

1. Pass the SIE by Aug 23^rd (19 days)
2. Pass the S6 Sept 12^th (20 days) and
3. Pass the S63 by Oct 1^st (19 days)
4. Don’t Stop There! Then Pass S26 by October 21^st (20 days)

You miss & have to retake? You have time!

Licensing Game Plan

Additional facts to be aware of:

• You pass only the SIE by 12/31/24 year end? There are no additional fees due.
• If you passed the SIE and the S6 by 12/31 (but not the S63)? You must pay $175 to maintain your FINRA credit for the S6.
• You passed all 3 exams, but too late for Primerica to pay 2025? You will need to pay the $545 renewal fee for 2025!
• Passed the S63? Now get your S26 too!

SIE�LESSON 1�The Stock Market�(16%)

For internal use only. Not to be used with or distributed to the public.

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Leverage Your Money

Securities Investors Protection Corporation (SIPC)

SIPC protects investors if the Broker/Dealer is bankrupt (not related to investor losing value).

• Maximum $500,000 Cash AND Securities
• Maximum $250,000 CASH as part of the $500,000

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Cash (MMF) $ 150,000 $ 350,000

Securities $ 350,000 $ 150,000

Total $ 500,000 $ 500,000

SIPC Covers $ $

500,000

400,000

Break Time

Break Over

Economic Cycle

Expansion�(Recovery)

Trough (Bust)

Point of Maximum Financial Opportunity

Peak (Boom)

Point of Maximum Financial Risk

CONTRACTING

/ RECESSION (Slow Down)

Expansion�(Recovery)

Economic Indicators�FORECAST THE FUTURE

Leading – Before the Event Occurs (Starts the Trend)

Money Supply (M2) = Checking (M1) + Savings <$100k

Building Permits (Housing Starts)

Initial Unemployment Claims

Average Work Week in Manufacturing

Inventory of Goods (New Orders)

S & P 500 Trend (Indicates Consumer Confidence)

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Coincident – Correlates to Cycle (Confirms the Trend)

Lagging – Occurs After the Cycle Events

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International Economics�FOLLOW THE CASH

Import/Export

Import – We buy more than we sell = Trade Deficit Export – We sell more than we buy = Trade Surplus

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Currency – Value of US Dollar vs. Foreign currencies.

Strong Dollar – We can buy more foreign goods (Cash Out) so imports will increase & exports will decrease = Trade Deficit.

Weak Dollar – We buy fewer foreign currencies, so foreign goods are more expense; but US products are cheaper for them, so exports will increase (Cash In) & imports will decrease = Trade Surplus.

Economic Theories

Goals are the Same:

1) Expand the economy

2) Keep inflation & unemployment at acceptable levels

Keynesian: Fiscal Policy 1930s under Franklin Delano Roosevelt (New Deal)

Monetarist: Monetary Policy 1960s under John Kennedy & Lyndon Johnson

Supply-Side: Laissez-Faire Policy 1980s under Ronald Reagan

Federal Reserve Board�Monetary Policy

The FRB makes decisions about the Supply of Money

Primary Focus: Control Inflation

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Reserve Requirement

Keeps a percentage of (M-2) money in reserves

The percentage (%) is determined by the FRB

Discount Rate - Rate banks pay to borrow from FRB

Interest Rate is Determined by the FRB

For BOTH Reserve Requirement & Discount Rate:

Lowering % or Rate = Easy $ (More cash available)

Raising % or Rate = Tight $ (Less cash available)

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PRIMARY vs. SECONDARY MARKET

Primary Market The New Market

Securities Act of 1933

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Secondary Market Trading of Issued Securities

Securities Exchange Act of 1934

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First Market Trading of Listed Securities on Exchanges

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Second Market Trading of Unlisted Securities on OTC

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Third Market Listed Securities Trading OTC

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Fourth Market Trading of Listed Securities in Instinet

Common Stock Shares

Calculate the number of Outstanding Shares:

200,000,000 = authorized

100,000,000 = issued

20,000,000 = treasury

Issued Shares 100,000,000

Treasury Shares - 20,000,000

Outstanding Shares 80,000,000

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Ignore the Authorized Shares

New Law -- Settlement Dates

As of 05/28/2024 the Settlement Date is ONE business date after the Trade Date (T + 1).

SEC logic – Technology now allows for faster transfer of ownership

Investor Logic – Only one day to fund a trade

Mutual Funds or Pay Cash – T + 0, same day

Corporate Stocks (Regular Way) – T + 1

US Govt Securities & Options – T + 1

Regulation T – Still T + 2 AFTER Regular Way

Preemptive Rights

The RIGHT for shareholders to maintain an undiluted percentage of ownership.

AKA: RIGHTS or Subscription Rights

Short Term – Max 60 days (typically 30-45d)

They are exercised at a Discount

It is a Security – Rights may be exercised, sold, gifted or they will expire

Common Stock Only, No Preferred Stock

Voting Rights

By changing the votes from the Statutory method to the Cumulative method at a meeting, your votes will give a minority opinion a chance to be heard.

Break Time

Break Over

Preferred Stock Dividends

You own 100 shares of 8% Preferred Stock for a total of $10,000 invested. The dividends would be $200/quarter. (8% x $10,000) / 4 = $200/quarter.

$200

$200 + $200

$300 + $200

Other Types Preferred Stock

$20

$20 + $20

Callable: The Company has more control. They decide when to buy back the Preferred Stock.

Therefore: To encourage investors to buy, the company must pay HIGHER interest rates than Straight Preferred.

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Convertible: The Investor has more control. They decide when to convert the Preferred Stock to Common Stock.

Therefore: The company can offer a LOWER interest rate than Straight Preferred.

Types of Underwriting

$20

$20 + $20

Firm: Underwriter is acting as the Principal.

* Underwriter creates a Syndicate (group of other Underwriters) to share liabilities and risk.

* Income generated from the Spread (Mark-up) between the buying and selling prices.

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Best Efforts: Underwriter is acting as an Agent.

* Underwriter creates a Selling Group (group of Broker / Dealers) to sell the securities without taking on liabilities and risk.

* Income generated from Commissions earned from selling shares.

Registration Statement

Issuer Files – Underwriter Advises

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• 20-Day Cooling Off Period
• Preliminary prospectus – Red Herring
• Indications of Interest
• Tombstone ads
• Effective Date
• SEC Disclaimer
• Due Diligence
• Use of the Prospectus
• Shelf Offering Registration – Up to 3 years

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State Registrations

$20

$20 + $20

Notice Filing: Filed with the SEC only. Federal Covered Securities (Nationally traded securities on NYSE and NASDAQ). Sold in all 50 states.

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Coordination: Filed with the SEC and the State together (Coordinated). Issue is effective in the state when SEC releases.

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Qualification: NO SEC filing. Only filed with one State (Intrastate). 80% / 100% Rule.

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Qualification Intrastate Offering

Rule 147 – Sold in One State ONLY

• Must follow 80% / 100% rule.
• 80% of the Employees are in One State
• 80% of the Assets are in One State
• 80% of Proceeds must stay in the One State

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• 100% sold to residence in the One State
• Cannot resell stock to out of state investors for minimum of six months.

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Control & Restricted Stock (Rule 144)

$20

$20 + $20

Restricted Stock (unregistered)

held by a non-affiliate (non-insider)

* Six-month hold

* Sell freely thereafter with NO volume limits.

Restricted Stock (unregistered)

held by an affiliate (insider)

* Six-month hold

* Volume limits thereafter. (1% also)

Control Stock (registered)

held by an affiliate (insider)

* No hold

* Volume limits ALWAYS apply. (1% outstanding)

RULE 144

Buyer has NO holding period or volume limitations. Stock is now registered.

SIE�LESSON 2�Bonds, Options & �Investment Companies�(44%)

For internal use only. Not to be used with or distributed to the public.

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Bond Maturities Periods

Term Whole issue matures at once. Total paid back at end.

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Serial Paid back at intervals.

e.g. 25% paid in 5,10,15 & 20 yrs

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Balloon Some could be paid earlier, but major portion paid at maturity.

Bond Forms

* Bearer (coupon) – Old method with no SS# or owner name. Clip coupons for interest.

* Registered Principal – Owner’s name on Bond. Clip coupons to get interest.

* Registered – Serial # tied to owner’s name. Interest checks mailed automatically.

* Book-Entry – No certificate issued. Interest paid electronically.

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Bond Pricing / Valuations

AbbtL 7 5/8s 96 Close 99¾

99¾ = 99.75 x $10 = $997.50

Sold at a Discount

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AlaP 9s 2000 Close 100¾

100¾ = 100.75 x $10 = $1,007.50

Sold at a Premium

Bonds Pricing: 1 Point = $10.00

The Bond See-Saw

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(8%) NY/CR NY =$80 Face ($1,000)

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(10%)

Discount ($800)

Premium ($1,333)

YTM

Premium Bond = Interest Decreasing = NY > CY > YTM > YTC

Discount Bond = Interest Increasing = (YTC) > YTM > CY > NY

(YTC)

YTM

CY

YTC

(6%)

CY

The Bond See-Saw

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Face ($1,000) NY =$80 NY/CR (8%)

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Premium ($1,333)

Discount ($800)

(10%)

YTM

(YTC)

YTM

CY

YTC

(6%)

CY

THE INTEREST RATES & VALUES APPEAR ON EITHER SIDE

Bond Yields Example

An 8% corporate bond is offered on a 8.5 basis. Which of the following statements are TRUE?� I. Nominal yield is higher than YTM.� II. Current yield is higher than nominal yield.� III. Nominal yield is lower than YTM.� IV. Current yield is lower than nominal yield.

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� �

Answer: A) II and III

F

T

F

T

A) II and III�B) II and IV�C) I and IV�D) I and III

8.5%

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See You Back for Session Two

Welcome Back for Session Two

Corporate Bond Types

Secured: Mortgage Bond

Collateral Trust Certificate

Equipment Trust Certificate

Unsecured: Debentures

Subordinate Debentures

Convertible: Into Common Stock, good for Investor

Bond pays LOWER interest

Call: Company decides & Buys @ Lower interest

Refunding or Sinking Fund

Bond pays HIGHER interest

Put: Investor decides & Sells @ Rising interest

Bond pays LOWER interest

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Liquidation Priority

When:

The:

Ship:

Goes:

Down:

Serve:

Pina:

Coladas:

Wages

Taxes

Secured Debt

Gen Creditors

Debentures

Subordinate Deb

Preferred Stock

Common Stock

U.S. Government Securities

Sold at discount Sold at face,

“earn” interest “pay” interest

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Non-marketable Series EE Series HH

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Marketable T-Bills T Notes (2-10)

T Bonds (10-30)

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ALL US Government Securities are taxed at the FEDERAL level only – NOT at the State level.

U.S. Government Treasuries

Treasury Bills Weekly Auctions – Bought at discount.

Maturities are 4, 13, 26 & 52 weeks

Par Value = $10,000

Treasury Notes Monthly Auctions

Maturities are 1 – 10 years

Par Value = $1,000

Pays interest semi-annually

Treasury Bonds Monthly Auctions

Maturities are 10 – 30 years

Par Value = $1,000

Pays interest semi-annually

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U.S. Government Agency Issues

Government National Mortgage Association (GNMA)

* Buys VA/FHA mortgages and sells to investors

* Pays interest MONTHLY

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Federal National Mortgage Association (FNMA)

* Buys VA/FHA mortgages and conventional mortgages

* Publicly traded on the NYSE

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Federal Home Loan Mortgage Corporation (FHLMC)

* Buys residential mortgages

Easy Mortgages

Tax Equivalent Yield

Taxable-equivalent yield

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Muni Rate ¸ (100% – tax rate) = Corp Bond Rate

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6% ¸ 75% = 8%

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Tax-free equivalent yield

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Corp Bond Rate = 8%

25% Tax Rate < 2%>

Equivalent Muni Rate 6%

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Which is a better investment? A tax-free municipal bond or a taxable corporate bond?

Assume a 25% tax rate.

Money Market

High quality, short-term debt with a maximum of One Year or Less

Bankers Acceptance (270 days max). Facilitates Import / Export Trading

Commercial Paper (270 days max). Unsecured, short-term debt

Jumbo Certificates of Deposit (1 year max) – Minimum $100,000

Treasury Bills (1 year max)

Break Time

Welcome Back

Bulls vs. Bears

Warrants

Rights to Buy Shares at a specific price.

* Typically bundled with a Call Bond

* Offered as a “Sweetener” to sell a Non-Call bond

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Typically, 2-10 years.

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Sold by Corporation ONLY.

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Investors hope price will increase (Bullish).

Purpose is to “Sweeten” or entice an investor to buy a bond or stock.

Warrants

Exercise Price

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Buy-in Price

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Purchase Price

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$100 – expires x/x/x

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$ 80

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$ 50 – today’s price

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Options

Contract between TWO INDIVIDUALS

* One side’s profit = the other side’s loss

Buyer has Rights to Exercise at Strike Price

Writer has Obligations & MUST Respond

Strike Price = Exercise Price = Target Price

Expiration is Maximum 9 months.

Contract has Value if above the exercise price

* Intrinsic Value – “Paper” gain above exercise price

* Time Value – Difference between Intrinsic value and Breakeven Point.

Purpose of Options is to Hedge against losses OR to Create Income.

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Options

Exercise Price

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Buy-in Price

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Purchase Price

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Put - Sell-out Price

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Put - Exercise Price

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$ 60 – expires x/x/x

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$ 50

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$ 50 – today’s price

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$ 50

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$ 40 – expires x/x/x

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Call -

Call -

Sample Exam Question

Rights are a maximum of 60 days

Options are a maximum of 9 months

Warrants are 2-10 years

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ANSWER – Put them in a “ROW”:

Rights, Options, Warrants

Question: Put these securities in the order of shortest to longest:

Warrants, Options and Rights

Types of Options

Bull Market

Buy Calls

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Rights to BUY Obligation to Buy

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Rights to SELL Obligation to Sell

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Bear Market

Sell (Write) Calls

Buy Puts

Sell (Write) Puts

Options Income Strategies

← Hedge Income →

Long (Buy) Call

Max Gain = Unlimited

Max Loss = Premium

B/E = Strike + Premium

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Max Loss = Unlimited

Max Gain = Premium

B/E = Strike + Premium

Short (Sell/Write) Call

Long (Buy) Put

Short (Sell/Write) Put

Max Gain = Premium

Max Loss = (Strike – Premium) x shares

B/E = Strike - Premium

Max Loss = Premium

Max Gain = (Strike – Premium) x shares

B/E = Strike - Premium

Options Transactions – # 1

Long 1 ABC 35 Call @ $4.00

Buy or Sell a Call? Bullish or Bearish?

1 contract = ____ shares

Strike/Exercise price is $_____

$4.00 premium or $____ Total RECEIVED or PAID?

Max Gain = $_________.

Max Loss = $_______.

Breakeven is $______.

If market price is over $35, then it’s ___-the-Money.

If CMV = $38. Intrinsic Value is $__. Time Value is $__

If CMV = $35 = AT-the-Money.

If CMV = $34 = Out-of-the-Money

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Buy/Bullish

100

$35

$400 PAID

Unlimited

$400 ($4 x 100)

$39 ($35+$4)

IN

$3 & $1

Options Transactions -- # 2

Short 1 XYZ 40 Call @ $6.00

Buy or Sell a Call? Bullish or Bearish?

1 contract = ____ shares

Strike/Exercise price is $_____

$6.00 premium or $____ total RECEIVED or PAID?

Max Gain = $ _______.

Max Loss = $ _______.

Breakeven is $ ______.

If market price is over $40, then it’s ___-the-Money.

If CMV = $42. Intrinsic Value is $__. Time Value is $__.

If CMV = $40 = AT-the-Money.

If CMV = $39 = Out-of-the-Money

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Sell / Bearish

100

$40

$600 RECEIVED

$600 Premium

Unlimited

$46 ($40 + $6)

IN

$2 & $4

Options Transactions – # 3

Long 2 ABC 25 Put @ $2.00

Buy or Sell a Put? Bullish or Bearish?

2 contracts = ____ shares

Strike/Exercise price is $_____

$2.00 premium or $____ Total RECEIVED or PAID?

Max Gain = $_________.

Max Loss = $_______.

Breakeven is $______.

If market price is below $25, then it’s ___-the-Money.

If CMV = $24. Intrinsic Value is $__. Time Value is $__

If CMV = $25 = AT-the-Money.

If CMV = $28 = Out-of-the-Money

Buy/Bearish

200 = 2x100

$25

$400 PAID

$4,600 = ($25 - 2) x 200

$400 ($2 x 200)

$23 ($25-$2)

IN

$1 & $1

Options Transactions – #5

Long 1 TDY 44 Call @ $3.00

Buy or Sell a Call? Bullish or Bearish?

1 contract = ____ shares

Strike/Exercise price is $_____

$3.00 premium or $____ Total RECEIVED or PAID?

Max Gain = $_________.

Max Loss = $_______.

Breakeven is $______.

If market price is over $44, then it’s ___-the-Money.

If CMV = $46. Intrinsic Value is $__. Time Value is $__

If CMV = $44 = AT-the-Money.

If CMV = $43 = Out-of-the-Money

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Buy/Bullish

100

$44

$300 PAID

Unlimited

$300 ($3 x 100)

$47 ($44+$3)

IN

$2 & $1

Options Transactions -- # 6

Short 1 XYZ 30 Put @ $5.00

Buy or Sell a Put? Bullish or Bearish?

1 contract = ____ shares

Strike/Exercise price is $_____

$5.00 premium or $____ total RECEIVED or PAID?

Max Gain = $ _______.

Max Loss = $ _______.

Breakeven is $ ______.

If market price is under $30, then it’s ___-the-Money.

If CMV = $27. Intrinsic Value is $__. Time Value is $__.

If CMV = $30 = AT-the-Money.

If CMV = $31 = Out-of-the-Money

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Sell / Bullish

100

$30

$500 RECEIVED

$500 Premium

$2,500 ($30-5) x 100

$25 ($30 - $5)

IN

$3 & $2

Investment Company Offerings

Characteristics of �Management Companies

Diversified Requirements

i. No more than 5% Assets of the Mutual Fund in any ONE company

ii. Own no more than 10% Outstanding Stock of any ONE company

iii. 75% of the fund’s assets must be invested and follow 5% rule. Exceptions cannot > 25%

e.g. 24% of Fund’s Assets is PRI is Okay

26% of Fund’s Assets is PRI -- Must sell 1%+

iv. No more than 25% invested in any one industry

Break Time

Break Over

Changes in Net Asset Value (NAV)

NAV INCREASES:

1. Receive cash from ANY source other than purchases
2. Sell held security for a Profit
3. The held security increases in Value

The Assets (NAV) in the Fund can ONLY change value these SIX ways.

NAV DECREASES:

1. Pay out cash for ANY purpose except for redemptions
2. Sell held security for a Loss
3. The held security decreases in Value

Buying and Redeeming�Mutual Fund Shares

• Held Preferred Stock Pays Dividend

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• Fund Sells Assets at a Loss

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• Fund Pays Expenses

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• Fund Assets Go Down

• Fund Sells Assets for a Profit
• Fund Pays Capital Gains

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• Fund Pays Dividends

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• Fund Assets go up in the Market

Mutual

Fund

Balloon

Investor Purchases/Buys Fund Shares

Investor Redeems/Sells Fund Shares

Breakpoints – Quantity Discounts

Based on Deposits Made in Class A Shares

Letter of Intent (LOI)

– 13 Months total to Invest (Deposits only)

– Can be Backdated 90 Days

Rights of Accumulation (ROA)

– Total balance (Deposits + Earnings) over time

Combination Privilege

– Multiple accounts, same person.

– Multiple accounts, same household.

Exchange @ NAV within family of funds – no sales charges or fees.

It is a taxable event unless within a tax-sheltered account.

Breakpoint Sale – True Story

Putnam Funds $ 48,000

Kemper Funds $ 47,500

Money Market Funds $ 75,000

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That agent made an illegal breakpoint sale because the money invested was within 5% of the sales charge breakpoint without using a Letter of Intent (LOI).

Mutual Fund Advantages

• Guaranteed Marketability
• Redemption must be within 7 Days
• Professional Money Management
• Diversification
• 5% Rule, Avg mutual fund has 152 stocks
• Affordability
• As low as $25.00 a month
• Fractional Shares
• Allows all the money to be fully invested

Mutual Fund Advantages

• Exchange to Another Fund
• At NAV in same fund family. Taxable event.
• Automatic Reinvestment
• At NAV. Still taxable (Constructive Receipt)
• Variety of Objectives
• Stocks vs Bonds, Global vs Domestic, etc.
• Flexibility of Investments
• Lump sum, PAC, Once a Year, etc.
• Form 1099

You may live longer than you think …plan for a longer life

With the right tools, you can plan for a long life – no matter how long it is.

National Center for Health Sciences, 2004; Society of Actuaries Annuity 2000 Tables

Fixed & Variable Annuities

Retirement Plans issued by an Insurance Company to provide income. Provides income to protect against the risk of living too long without money.

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Types of Annuity Contracts

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Fixed Annuity (Includes Fixed Indexed Annuities)

• Company assumes all risks
• Company gives Guaranteed Minimum Return:
• Minimum Growth, No Principal Loss, Lifetime Payments

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Variable Annuity

• Investors assume Risk
• Investments kept in a Separate Account:
• Guarantees are Minimum Growth & Lifetime Payments

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Fixed & Variable Annuities

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Fixed Annuity Contract – Life License Only

• Guaranteed Payments to Client:
• Company takes all risks EXCEPT:
• Purchase Power Risk (Inflation)

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Variable Annuity Contract – Life + Securities

• Guaranteed Payments to Client:
• Company takes all risks EXCEPT:
• Investment Risk for mutual funds in Separate Account
• Investment choices picked by Insurance company
• Investments have NO Guarantees +
• Needs a Prospectus before or at the time of sale

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Settlement Options

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Life Only or Straight Life

• Highest Payout
• For Primary only – No Beneficiary Benefit

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Life with Period Certain

• Minimum Guarantees for Beneficiary

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Joint with Last Survivor

• Guarantees Payments for Beneficiary for Life

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Unit (Cash) Refund

• Lump Sum or Installment Refund

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Direct Participation Programs

General Partnerships

* All income and expenses flows through

* Unlimited Liability

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Limited Partnerships

General Partner manage the partnership

– Unlimited Liability

Limited Partners are passive Investors

– Limited Liability

e.g. Real Estate Limited Partnership (RELP)

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Joint Ventures

Similar to General Partnerships

Direct Participation Programs

Oil & Gas

Tax write-offs include

* Intangible drilling costs

* Depletion allowance

​

Real Estate Investment Trusts (REITs)

Undivided interest in the real estate

Buy for Appreciation – NOT tax write-offs

INCOME only passes through, no Losses or Deductions

Investment Risks

Interest Rate Risk�Bond Risk – bond values decrease when interest rates rise.

​

Inflation Risk – Overall rise in retail prices.

• Consumer Price Index (CPI) measures inflation.
• Purchase Power Risk. AKA: Constant Dollar Risk. Fixed payments lose buying power over time.

​

Systematic Risks. You CANNOT Diversify to reduce Systematic Risk

Investment Risks

Reinvestment Risk

Similar to Interest Rate Risk. Can proceeds be reinvested at former rates?

​

Market Risk

• Stock Risk due to Overall Price Decline.
• Beta measures volatility.

​

Systematic Risks, continued

Market Risk - Beta

The Beta measures the volatility of a stock or mutual fund compared to the overall market (S&P 500).

1.0 = S&P 500

1.3 = 30% more volatile

0.7 = 30% less volatile

Investment Risks

Capital Risk�Investor could lose his capital.

​

Liquidity Risk – Marketability Risk

Can the Investor buy or sell quickly? Can you find any buyers when you need to sell? (Mutual Funds and Listed Stocks are liquid.)

Non-Systematic Risks. You CAN Diversify to reduce Non-Systematic Risk

See You Back for Session Three

Welcome Back for Session Three

It’s not TIMING the market – It’s TIME IN the market.

What Does This Number Have To Do With Your Retirement?

27,375

?

₆

Here’s a Clue

The High Cost of Eating

$5 Today’s Cost Per Meal

x 3.5% Hypothetical Inflation Rate

= $10 Cost per Meal in Retirement

x 27,375 Meals During Retirement

25 Years in Retirement

x 365 Days per Year

= 9,125 Days in Retirement

x 3 Meals per Day

= 27,375 Meals During retirement

= $273,750 needed �just for food in retirement!

A Lot of Food!

Total: $612,500

If you plan to tip,

add $ 65,000

Does your spouse eat too?

Add a spouse:

$10/meal

+ 3.5% inflation

x 3 meals/day

x 365 days

x 25 years

= $547,500

You earn interest for the year: $ 200

But you pay taxes on that interest at 25%: $ 50

So your real earnings are: $ 150

Your resulting balance is: $10,150

You invest $10,000 at two percent

with your local bank

Can You Afford Safety?

If inflation is 3 percent, your buying power is reduced to $9,832.

​

You’ve earned a loss of $178 of your purchasing power! We call that going broke safely!

Your Money Works For You

Mutual funds (& variable annuities) provide the opportunity to make money three ways:

• Dividends paid from funds’ earnings (Cash)
• Capital Gains distributions (Cash)
• Appreciation for shares held (Non-Cash)

Asset Allocation

Allocate client money into multiple funds with different objectives to maximize growth and minimize risk. Now easier than ever.

​

Choose an Ibbotson Model Portfolio for any family of funds that we represent:

​

Portfolio Solutions:

• Can create a professional sales presentation in less than 3 MINUTES!
• Has pre-loaded Ibbotson Model Portfolios.
• Can create stand-alone portfolios or client comparisons. (Great for rollovers!)

PFS Investments Commissions

There are 7 ways to earn commissions from your securities accounts:

1. Initial sales into new accounts.

2. Subsequent purchases into existing accounts.

3. PAC drafts.

4. 12b-1 fees (Now Paid to all Contracts).

5. Management Fees on Managed Accounts

6. Overrides.

7. Bonuses

103

Part-time - District Leader

​

$ 20,000 rollover = $ 350 – up front

$200,000 rollover = $2,100 – up front

​

$200/mo IRA = $ 3.50/mo - renewal

10 accounts = $ 35.00/mo - renewal

100 accounts = $350.00/mo - renewal

​

$1 million AUM = $ 300/yr - residual

$10,000,000 = $3,000/yr - residual

Primerica Securities Compensation

104

Regional Vice President

​

$ 20,000 rollover = $ 620 – up front

$200,000 rollover = $3,720 – up front

​

$200/mo IRA = $ 6.20/mo - renewal

10 accounts = $ 62.00/mo - renewal

100 accounts = $620.00/mo – renewal

​

$1 million AUM = $ 1,425/yr - residual

$10,000,000 = $14,250/yr - residual

Primerica Securities Compensation

105

As a District Leader - Personal

• If you helped 5 families a month and each had 2 PAC funded Roth IRAs @ $5k each
• e.g. $10,000 in Annualized PAC per family
• $50,000/month … $600,000/year in PACs
• After 5 years of working, your MONTHLY check of recurring income would be:

$3,500

106

As a Regional Leader - Personal

• If you helped 5 families a month and each had 2 PAC funded Roth IRAs @ $5k each
• e.g. $10,000 in Annualized PAC per family
• $50,000/month … $600,000/year in PACs
• After 5 years of working, your MONTHLY check of recurring income would be:

$5,151

As a Regional Leader - Team

• If you helped 5 families a month and each had 2 PAC funded Roth IRAs @ $5k each
• And you had 3 Districts doing the same
• e.g. $10,000 in Annualized PACs per family
• $200,000/month … $2.4 Million/year in PACs
• After 5 years of working, your MONTHLY check of recurring income would be:

$8,302

Commission on 35-year-old couple�20-year term $1,000 Bonusable Premium &� $416 Monthly into Roth IRAs @ 9%

District Regional RVP

• Life Commission $ 400 $ 560 $ 760
• First 5 Years MF $ 437 $ 750 $ 902
• Years 6-10 in MF $1,132 $1,195 $ 1,744
• Years 11-15 in MF $2,375 $2,508 $ 3,660
• Years 16-20 in MF $4,321 $4,564 $ 6,659
• Years 21-25 in MF $7,281 $7,694 $11,225

Total Commissions for 1 Client $ 15,546 $ 16,711 $ 24,190

Commission over 25 years 39 times… 29 times… 32 times … MORE THAN what you would have earned on ONLY the life policy

Amazing Recruiting Tool

You would have to save $3,878 a month for 6 years at 9% to equal the same income as $6 million AUM as a DISTRICT.

​

$371,214 x 7% = $25,985

You would have to save $4,709 a month for 6 years at 9% to equal the same income as $6 million AUM as a REGIONAL.

​

$450,757 x 7% = $31,553

You would have to save $6,869 a month for 6 years at 9% to equal the same income as $6 million AUM as an RVP.

​

$657,571 x 7% = $46,030

SIE�LESSON 3�Taxes, Customer Accounts & �Prohibited Activities�(31%)

For internal use only. Not to be used with or distributed to the public.

113

Dividends – Three Types

Investors sharing Corporate Profits

1. Cash Dividends – Paid Quarterly
• Qualified Dividends – Stocks must be held for 60 days & longer
• Ordinary Dividends – All other cash dividends received taxed at ORDINARY Tax Rates.

​

​

1) Cash Dividend Dates

X

R

D

P

R

X

X

R

Dividends – Three Types

Investors sharing Corporate Profits

1. Cash Dividends – Paid Quarterly
• Qualified Dividends – stocks must be held for 60 days & longer
• Ordinary Dividends – All other cash dividends received taxed at ORDINARY Tax Rates.
2. Stock Dividends – Receive more stock

​

​

2) Stock Dividends/Splits

Stock Dividends adjust the shares and price but the TOTAL VALUE does not change.

Similar to changing one $100 bill

into two $50 bills (2 for 1 split)

or five $20 bills (5 for 1 split).

Stock Dividends/Splits

Stock Dividends adjust the shares but the TOTAL VALUE does not change.

1. Total Value is 100 shares x $60/sh = $6,000 total
2. 50% div of 100 sh = 50 sh + 100 sh = 150 shares OR 3 for 2 split = 100 shares ÷ 2 = 50 x 3 = 150 shares
3. $6,000 ÷ 150 shares = $40/share (Answer B)

Stock Dividends/Splits

Stock Dividends adjust the shares but the TOTAL VALUE does not change.

Similar to changing ten $10 bills

into one $100 bill (1 for 10 reverse split).

Dividends – Three Types

Investors sharing Corporate Profits

1. Cash Dividends – Paid Quarterly
• Qualified Dividends – stocks must be held for 60 days & longer
• Ordinary Dividends – All other cash dividends received taxed at ORDINARY Tax Rates.
2. Stock Dividends – Receive more stock
3. Property Dividends – Investors receive another asset, other than cash or company stock, typically an inventory item.

​

​

Taxes on Investments

Interest on Bonds –

• Calculated Annually (NY) but paid semi-annually.
• Taxed as ORDINARY Income Taxes.

​

Capital Gains (Held assets sold for a Profit)

• Held for 12 months or less - Taxed as ORDINARY Income Taxes.
• Held for MORE than 12 months – Taxed at 15%
• Capital Losses can be offset by gains – unlimited
• Maximum Net Loss $3,000 per year
• Carry-forward remaining loss indefinitely

Custodial Accounts

​

• UGMA – Assets transfer at age 18
• UTMA – Custodian sets Asset transfer at age 25
• Use Child’s Social Security Number
• “Kiddie” Tax – First $2,500 earned annually
• Parent Tax is on any income above $2,500
• Gift Tax – No tax to Donor on gifts under $18,000
• Donor names Custodian. Can name themselves
• Account ends with death of minor or Custodian

​

College – The More You Save, The Less You Borrow!!

About 34% of millennials carry student debt…and 75% of those holding debt say it is “unmanageable,” according to the Wells Fargo Millennial Survey. ThinkAdvisor AUGUST 17, 2017

A child born 22 yrs ago, started college at 18 & graduate in 2021 at 22, would have 100% college expenses paid (tuition, fees, room & board) if the parents had invested $146/mo BEGINNING at the child’s birth & earned an average of 8%, (the 2021 4-year cost was $86,320).

College Savings Plans

Break Time

Welcome Back

Account Types

Fiduciary

• Trust – Need Power of Attorney
• Estate – Must be named as the Executor

​

Business Accounts

• Corporate Resolution & Charter
• Partnership Resolution & Agreement

​

Margin Accounts

• Credit & Hypothecation agreements must be signed
• $2,000 minimum deposit

​

Discretionary Accounts – Reg Rep Trades

• Limited POA needed for Action, Amount or Asset
• Not needed for Time & Price
• Principal must initial (review & approve) Daily

​

Roth IRA vs. Traditional IRA

Traditional to Roth Conversion

Age Trad IRA Roth IRA

30 $ 10,000 $ 10,000

36 $ 20,000 $ 20,000

42 $ 40,000 $ 40,000

48 $ 80,000 $ 80,000

54 $160,000 $160,000

60 $320,000 $320,000

66 $640,000 $640,000

Client has $10,000 at age 30. Should he convert his 401(k)/Trad IRA to a Roth IRA? Assume a 12% rate of return.

Would you rather pay taxes on $10,000 or $640,000?

NOTES: ) No income limitation to convert. 2) All or PARTIAL taxable w/o penalties.

Individual Retirement Accts (IRA)

Penalties

• 6% – Excess Contributions
• 10% – Withdrawals before 59½
• Exceptions: Death, Disability, Education, 1^st-Time Homeowner,

72t withdrawals, $1,000 Emergency (once in 3 yrs. Unless repaid), $10,000 Domestic Abuse, $22,000 Federal Disaster

• 25% – Insufficient Distribution at age 73+
• Required Minimum Distribution (RMD). First distribution must be made no later than April 1^st the year turning 73. Second and all following distributions must be made by December 31^st.
• If the failure to withdraw was found & corrected by taxpayer in a timely manner (2 years), the penalty is reduced to 10%.

​

Nonallowable Investments

• Life Insurance
• Collectibles (Art, Stamps, Ancient Gold Coins, etc.)
• Margins / Short Sales / Options

Individual Retirement Accts (IRA)

Transfers

• Rollover – Client has 60 days after date of check received. Done only ONCE in rolling 12-month period.
• Trustee to Trustee Transfers are unlimited.

​

Catch-Up Contributions

• As of Age 50 – An additional $1,000 into an IRA
• In 2024 – The $1,000 catch-up is now indexed to CPI

​

ONLY Two Roth IRA 5-Year Rules

1. Must be opened for 5 years and age 59 ½ for tax-free withdrawals of earnings.
2. Principal converted from Traditional IRA/401k accounts cannot be touched for 5 years to avoid a 10% penalty.

NOTE: No 5-Year Rule to withdraw Principal at ANY age and ANY time.

​

​

Why Use the Roth IRA?

Access to Penalty-Free Money before 59½

• ALL CONTRIBUTIONS can be Withdrawn at ANY age, ANY time, WITHOUT Tax or Penalty. You cannot take the earnings without tax and penalty until age 59½.

​

After Age 59½, all money in IRA is Tax-Free

• Tax-Free for you, Tax-Free for Spouse, Tax-Free to children or ANY beneficiary named.

​

Roth Money Lasts Longer in Retirement

• $5,000/mo net is a $6,500 W/D from Trad IRA.
• $5,000/mo net is only a $5,000 W/D from a Roth IRA.
• No Required Distribution at age 73.

Know Your Customer

SEC Regulation Best Interest

• The highest standard of recommendation. SEC established a "best interest" standard of conduct for broker-dealers when they make a recommendation to a retail customer of any securities transaction or investment retirement strategy involving securities, including recommendations of types of accounts.

​

​

Suitability (FINRA Rule 2111)

• Recommendations to clients for any type of investment must be suitable for the clients' goals, needs and risk tolerance.

Market Manipulation

Pump and Dump

• Spreading false rumors to pump up the value of a stock. When stock price increases, then they dump the shares on the market before it drops.

​

Front Running

• Investors are placing orders for a hot security. You decide to place your order up front before theirs.

​

Painting the Tape

• A team of agents or brokers sell the same security amongst themselves, creating an appearance that the stock is actively trading to raise the price. When stock price increases, then they sell.

Break Time

Welcome Back

SIE�LESSON 4�Overview of the Regulatory Framework�(9%)

For internal use only. Not to be used with or distributed to the public.

137

FINRA Rules & Regs

Registered Representative (RR)

• Active license engaged in the securities business.
• Must be licensed in your and client’s state of residence and state conducting business

​

Continuing Education (CE) – New Jan 2023

• Annual Firm & Annual FINRA elements
• Failure to complete results in DEACTIVATION
• Maintaining Qualified Program (MQP) good for 5 years, IF the FINRA CE is maintained

​

FINRA Rules & Regs

​

Form U-4 (Joining a Firm)

• Need 5 years Residential history and 10 years Employment history.

​

Form U-5 (Leaving a Firm)

• Filed within 30 days of termination.
• Licenses expire or renew annually on December 31^st.
• If a new U-4 is not received within TWO years and the license expires, then the agent will need to pass the exams again. However …
• If the agent keeps their FINRA Continuing Education current through the Maintaining Qualified Program (MQP), the license will not expire for FIVE years.

​

Employee Conduct Rules

Outside Business Activity (OBA)

• Notify Principal – Prior written notice needed
• Approval NOT needed before starting work

​

Private Securities Transactions (PST)

• Offering securities not offered by your firm
• With Compensation – Firm must approve & supervise

​

Gifts & Gratuities

• Cannot be a Condition of a Sale
• Maximum $100 per person per year

​

Political Contributions

• Contributions should never be used to get business
• “Pay to Play” – two years probation if contribution paid

​

Series 6�LESSON 1�Seeking Business�(24%)

For internal use only. Not to be used with or distributed to the public.

141

Communication with the Public

Institutional

• Includes any Entity or INDIVIDUAL with $50+ million in total assets.
• Non-institutional Investors treated as Retail.

​

Retail – For Customers and Prospects

• Any written or electronic communication distributed to 25+ Investors within 30 days.

​

Correspondence

• Written communication distributed to less than 25 Investors within the last 30 days.

​

Series 6�LESSON 2�Evaluating Customer Accounts; Financial Profiles, Investment Objectives & Retirement Plans�(16%)

For internal use only. Not to be used with or distributed to the public.

143

Know Your Customer

FINRA Rule 2111

• Must have a reasonable basis to believe that a recommended investment strategy involving securities is suitable for the customer.
• Financial Considerations
• Income and Net Worth
• Cash Flow
• Taxes Paid
• Non-Financial Considerations
• Experience, Age,
• Risk Tolerance & Investment Goals
• Long-Term or Short-Term

​

Power of Attorney (POA)

FULL Power of Attorney

Authority to Buy, Sell or Withdraw Money

​

Limited Power of Attorney

Can make trading decisions (Buy, sell, which investments and dollar amount) but CANNOT Withdraw money

​

Durable (Full or Limited) Power of Attorney

Survives Mental Incompetence, but NOT death

Retirement Plan Rules

Governed by ERISA

• Non-Discrimination
• Plans must be adequately funded
• Vesting is 100% for employees and Maximum seven years for employer's contribution
• Tax deductible contributions & grows tax deferred
• Employee names Beneficiaries for the account
• ALL DISTRIBUTIONS ARE TAXED AT ORDINARY INCOME TAX RATES
• Age 59½ minimum without 10% penalty
• Age 73 RMD rule. 25% penalty for failure to withdraw.

​

Retirement Plan Rules

• Defined Benefit Plans (100% Employer Funded)
• Pensions are based on a % of Pre-retirement income
• Employee Benefits are known
• Employer Contributions are unknown
• Employer contributions are calculated by actuaries
• Older employees benefit the most

​

• Defined Contribution Plans
• Contributions are known but Benefits are unknown
• Profit Sharing Plans and 401(k) Plans
• Younger employees benefit the most

​

401(k) In-Service Distributions

Why Roll a 401(k) into an IRA?

​

1. You Control Your Money and Choices – Not Your Former Employer
2. 7-Day Rule to Access Funds – 401(k)s Can Take Months
3. Consolidate Multiple 401(k)s and IRAs
4. Convert to Roth IRA for Tax-Free Distributions for You and Your Heirs

Small Business Plans

• SEP-IRA
• 100% EMPLOYER paid up to tax filing. Tax deductible.
• Maximum 25%. Up to 3 years eligibility to participate.
• As of 2023, Employee can make a Roth contribution.

​

• SIMPLE IRA (Small company 401k)
• Mandatory Tax-deductible Match of 3% or 1%.
• Additional 15% penalty if withdrawn within 2 years

​

• Individual 401(k) – Roth or Traditional contributions
• Self-employed only with No full-time employees.
• Contributions by both “employee” and “employer”

Small Business Plans

See You Back for Session Four

Welcome back for Session Four

Last Class – Will I Pass?

Series 6�LESSON 3�Customer Information; Risk & Suitability; Product Information�(50%)

For internal use only. Not to be used with or distributed to the public.

154

Customers’ Investment Objectives

• Preservation of Capital
• Money Market Funds
• Current Income (Cash Flow)
• Generate Dividend or Interest Income
• Capital Growth
• Common Stock or Equity Mutual Funds
• Tax Considerations
• Municipal Funds, Retirement Plans or Annuities
• Liquidity
• Mutual Funds or Listed Stocks on an Exchange

Asset Allocation - Rebalancing�How to Buy Low & Sell High

For Broker Dealer Use Only.

Changes in the percentages do not indicate a gain or loss of market value, but simply a shift in the allocation amounts

Types & Objectives of Mutual Funds

• Stock Funds
• Aggressive / Foreign / Sector / Global
• Large Cap / Blend Core / Growth & Income / Index
• Value Funds / Equity Income
• Income / Asset Allocation Funds
• Bond Funds
• Corporate
• Municipals
• U.S. Agencies
• U.S. Government Securities
• Balanced Funds
• Money Market Funds

​

Which Objective Do You Use?

1. Growth = Stock Funds
2. Income = Bond Fund
3. Safety of principal = Government Bond Funds
4. Immediate liquidity = Money Market Funds
5. Aggressive growth = Tech Funds / Small Cap
6. Conservative growth = Blue Chip Stock Funds
7. Highest possible income with little concern for risk = Corporate Bond / Junk Bond Funds
8. High tax bracket seeking income = Munis
9. Income producing stock = Blue Chip Stock, Preferred Stock or Utility Stock Funds
10. Mirror performance of stock market overall = Index Funds

Net Investment Income

Calculate Net Investment Income:

$10,000 = dividends

$ 5,000 = interest

$ 3,000 = expenses

$ 5,000 = capital gains

Dividends $10,000

Interest $ 5,000

Expenses -$ 3,000

Net Investment Income $12,000

Ignore the Capital Gains

Tax Treatment - FIFO

Purchase PRI Price

2010 $ 15/sh

2012 $ 26/sh

2013 $ 33/sh

2014 $ 45/sh

2017 $ 84/sh

2018 $ 96/sh

2019 $130/sh

Sold in 2021:

Sales Price $162/sh

Cost ____

Taxable Gain

=====

FIFO – First In, First Out. That means the first stock into your portfolio is the first out of your portfolio.

$ 15/sh

$147/sh

Capital Loss Carry-forward

Purchased stock for $50,000

Sold stock for $35,000, loss of $15,000.

Scenario #1 – No offsetting gains in future years.

Scenario #2 – Gain of $20,000 in 2^nd year (2019).

Loss $15,000

2018 < $ 3,000>

c/f loss $12,000

2019 < $ 3,000>

c/f loss $ 9,000

Loss $15,000

2018 < $ 3,000>

c/f loss $12,000

2019 < $20,000>

Tax gain $ 8,000

Capital Losses can ALWAYS be offset against Capital Gains in current or FUTURE years.

Cost Basis of Shares Transferred

Shares Inherited:

The Cost Basis for the heirs is calculated as the Fair Market Value (FMV) on the date of death. The new cost basis has a “Step-Up” from the original cost basis of the deceased.

Gift of Securities:

To Individuals – Donor’s original Cost Basis REMAINS with the gifted shares.

To Charities – Donor’s cost basis remains with the gifted shares. However, Donor’s Charitable Tax Deduction is the FMV at the time of the gift.

Dollar Cost Averaging

Invest $100/mo

​

Month 1 = $10/share

Month 2 = $ 5/share

Avg Cost? $15

$15 ¸ 2 = $7.50/share?

That’s the average PRICE.

x 2 = $200

= 10 Shares

= 20 Shares

30 Shares

¸ 30 = $6.67/share

That’s the average COST!

The average cost will always be lower than average price because you buy more shares when the price is down (on sale).

Clients use this systematic investment strategy by investing monthly with a PAC.

Systematic Investing

Investor A = $1,792.80 Investor B = $2,453.44 (37% more)

Contractual Plans

Type of non-fixed Unit Investment Trust (UIT)

Lifetime Sales Charge (SC) is 9%

Act of 1940 Act of 1970

45-day free look 45-day free look

Max 50% SC in 1 year Max 20% SC in 1 year

Partial Refund (over 15%) Max 16% 4-year average

if cancelled within 18 mos

Rule of 90:

1940 + 50% = 90 1970 + 20% = 90

​

Contractual Plans

1940 ACT --- FRONT END LOAD

Maximum Sales Charge (Life) = 9% or $1,800

Maximum Sales Charge in One Year = 50% or $500

Year Invested $ S. Chrg. Net Assets

1 $ 1,000 $ 500 $ 500

2 $ 1,000 $ 500 $ 500

3 $ 1,000 $ 500 $ 500

4 $ 1,000 $ 300 $ 700

5 $ 1,000 $ 0 $ 1,000

: $ 1,000 $ 0 $ 1,000

20 $ 1,000 $ 0 $ 1,000

Totals $20,000 $1,800 $18,200

Investment = $1,000/year for 20 years. Total Invested = $20,000

Contractual Plans

1970 ACT --- SPREAD LOAD

Maximum Sales Charge (Life) = 9% or $1,800

Maximum Sales Charge in One Year = 20%

Maximum Sales Charge in Four Years = 16%

Year Invested $ S. Chrg. Net Assets

1 $ 1,000 $ 160 $ 840

2 $ 1,000 $ 160 $ 840

3 $ 1,000 $ 160 $ 840

4 $ 1,000 $ 160 $ 840

5 $ 1,000 $ 160 $ 840

..12.. $ 1,000 $ 40 $ 960

20 $ 1,000 $ 0 $ 1,000

Totals $20,000 $1,800 $18,200

Investment = $1,000/year for 20 years. Total Invested = $20,000

Contractual Plans

1940 ACT --- FRONT END LOAD

Maximum Sales Charge (Life) = 9% or $1,800

Maximum Sales Charge in One Year = 50% or $500

Year Invested $ S. Chrg. Net Assets

1 $ 1,000 $ 500 $ 500

If the Contractual Plan is cancelled after 12 months, how much do they receive?

$ 850

They get their $500 plus $350 Sales Charge

Investment = $1,000/year for 20 years. Total Invested = $20,000

Break Time

Welcome Back

Why We Need Annuities

PICKLES

Assumed Interest Rate (AIR)

AIR is a benchmark (expected ROR) for comparison, used in computing annuity payouts.

Example of AIR = 4%:

Jan Feb Mar Apr May

4% 5% ­ 4% 3% 4%

$1,000 $1,020 $1,020 $1,005 $_____

​

1,005

Factors to Determine Payout

Factors determining amount of payout in an annuitized contract.

• Account Value * At annuitization.
• Age * At annuitization (mortality statistics).
• Sex * Gender
• Pay-out option selected * Life Only more than Joint & Survivor, etc.
• ROR of SA vs. AIR * Amount of payment varies.

NOTE: Not Marital Status

​

Taxation of Annuities

30 years x $2,000/yr $ 60,000

Earnings $ 40,000

Total Annuity Value $100,000

LIFO – Last In, First Out. For Annuities, Principal is ALWAYS first, Earnings are ALWAYS last.

Annuitization

Exclusion Ratio

60% $ 600

40% $ 400 tax’b

$1,000

Withdraw $40,000 – how much is taxable?

Earning 10%, w/d $10,000/yr – how many years taxed?

Variable Annuities Pay More

Transaction amount $ 100,000

A Share Sales Charge @ 3.50%

Dealer Reallowance % x 2.75%

Dealer Reallowance $ $ 2,750

District Leader % of DR x 35.0%

Commissions received by DL $ 963

Mutual Fund

Annuity

$100,000 @ 0%

x 5.0%

$ 5,000

x 35.0%

$ 1,750

Why Some Get Life Insurance

Life Insurance Comparisons

Life Insurance? Educate !

Series 6�LESSON 4�Customers’ Purchase & Sales Instructions; Processing Transactions�(10%)

For internal use only. Not to be used with or distributed to the public.

179

Function of Agent vs. Principal

Agent Transactions: Principal Transactions:

​

BROKER DEALER

​

√ Facilitates for Clients √ Executes Trades for Firm

√ Agent – No Inventory √ Principal – From Inventory

√ Commission √ Mark-up

√ No Risk √ Risk

Series 63�LESSON 1�Definitions and Regulation of Persons�(40%)

For internal use only. Not to be used with or distributed to the public.

181

Uniform Securities Act (USA)

Purpose of the Uniform Securities Act (1956):

• To Protect the Investing Public
• To Unify State Securities Laws

​

The USA Created the Administrator:

• The Person or the Office has complete responsibility to administer the securities laws of the state
• To Unify State Securities Laws
• Has Powers to make rules and issue orders
• Jurisdiction over the Registration of Agents/Brokers
• Can deny, suspend or revoke registrations

​

USA Act Definitions

Administrator's Powers Granted:

• To Conduct Investigations and Issue Subpoenas.
• Cease and Desist Orders. Applies to Registered Persons, not the Securities.
• Stop Orders. Applies only to Securities, not Persons.

​

Persons (an individual, aka: Natural Person):

• Can be Individuals, Corporations, Estates, Business Trusts, Government Body, Political Sub-division.
• DOES NOT INCLUDE minors, individuals declared mentally incompetent and deceased individuals because they cannot legally enter into a contract.

​

Agents and Broker/Dealer

Agents:

• Represents the B/D attempting to purchase or sell securities
• Referred to as a Registered Representative (RR)
• Does NOT include:
• Individual representing the issuer selling exempt transactions
• Employees of the issuer and receives no compensation
• Individual representing issue of Federal Covered Securities
• Clerical & Admin staff of a B/D with no sales functions

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Broker/Dealers:

• Any person or entity engaged in the business of effecting security transactions (either the Broker or Dealer)
• Does NOT include Agent, Issuer, Bank or Trust Company
• Office in the state? Registration is ALWAYS REQUIRED.

Investment Advisor (IA)

Three Prong-Test for an Investment Advisor:

• Gives Advice or analyses concerning securities
• Occurs with Regularity
• Receives Compensation (direct or indirect)

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IAs Includes Financial Planners & Sports Agents

Investment Advisors Do NOT include L.A.T.E. (Lawyers, Accountants, Teachers or Engineers)

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Investment Advisers (IAR)

• Works with IA and receives compensation for advice

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Differences Between Broker/Dealers and IAs:

• BDs earn commission & Mark-ups for transactions
• Investment Advisors are compensated for giving advice

General Registrations

All Registrations expire on December 31^st.

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Federally Covered Investment Advisers (IAs)

Must register with the Securities and Exchange Commission (SEC), if assets under management is $110 million or more. Plus pay state fees. 

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State Registered Investment Advisers (IAs)

Assets under management less than $100 million - still under the regulatory control of the SEC but you must register with each State Securities Commission in which they have business.

General Registrations

Broker/Dealers are exempt from registration who have no place of business in the state if:

1) They only transact business with other BDs, Issuers, financial institutions or

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2) They are licensed in their home state and only make offers to existing clients temporarily in another state where the BD is not licensed.

Break Time

Welcome Back

Series 63�LESSON 2�Regulations of Securities and Issuers�(5%)

For internal use only. Not to be used with or distributed to the public.

190

Definition of Security

Four Parts to a Security:

1. An Investment where money is made in …
2. A common Enterprise where …
3. A Profit is anticipated …
4. Through efforts of Third-Party management

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Federal Covered Securities

Nationally Traded Securities (NYSE, NASDAQ, Preferred stocks and bonds)

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Series 63�LESSON 3�Remedies and Administrative Provisions�(10%)

For internal use only. Not to be used with or distributed to the public.

192

Authority of the Administrator

Rules and Orders:

1. Rules apply to ALL
2. Orders apply to those so ordered

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Investigations & Subpoenas:

1. Administrator can subpoena. Failure to appear is punishable as contempt of court.
2. Jurisdiction on ANY offers in State
3. Customer or Agent residents
4. Can Deny, Suspend or Revoke registrations
5. May issue Stop Orders, Cease & Desist

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Authority of the Administrator

Scope of Liability:

1. Actual seller of the security is NOT the only person liable for the violation. Every person who directly or indirectly controls the person is also liable to the same extent. (Think RVP)
2. If officers or partners were irresponsible, action can be taken against them too.

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Right of Rescission:

1. If a person has affected an illegal transaction, they can offer to rescind the contract.
2. Purchaser has 30 days to accept or reject.
3. After 30 days, purchaser no longer file a lawsuit

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Series 63�LESSON 4�Communications with Customers and Prospects�(20%)

For internal use only. Not to be used with or distributed to the public.

195

Required Disclosures

1. Disclosures by Broker/Dealer
1. Brokers must disclose commissions
2. Dealers must disclose mark-ups
2. Disclosures by Investment Advisor (IA)
• Agents and B/Ds complete transactions
• IAs are paid for advice, not complete transactions
3. Disclosures of Conflict of Interest
• Do what’s best for client
• Must disclose if they could benefit financially
4. Disclosures by Broker/Dealer Fees
• Reasonable fees are permitted, but must be disclosed

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Performance Guarantees

Third Party Guaranteed Security:

1. Guarantee from OTHER than issuer
2. Guarantees Principal, Interest & Dividends but NOT profits or gains.

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No Guarantees of Profit or No Losses

1. Agent cannot agree to buy back the security at the original price.
2. If justified, a BD may correct a bona fide error.

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Social Media & Emails

Regulatory Concerns:

1. More concerned about content than method of delivery
2. Agents CANNOT discuss securities in ANY electronic format, including emails & texts.

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Series 63�LESSON 5�Ethical Practices and Obligations�(25%)

For internal use only. Not to be used with or distributed to the public.

199

Ethical Practices

Fraud:

1. Any deliberate concealment, lie or half-truth used to deceive someone for personal gain Whether OR Not a transaction resulted.
2. No one and nothing is exempt from anti-fraud provisions

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Fraudulent Practices:

1. Making untrue statements.
2. Failing to state material facts.
3. Recommending unsuitable transactions for customers

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Dishonest & Unethical Practices

Unsuitable Recommendations:

1. If a client refuses to give financial information, you only can accept unsolicited orders because there’s no basis for recommendations.
2. A securities professional may not:
1. Induce transactions solely to generate commissions
2. Give blanket recommendations

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Commingling – Cash is always commingling

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TIPS & TECHNIQUES�Pass the first time.�(100%)

For internal use only. Not to be used with or distributed to the public.

202

by Patrick D. McGinley

Let’s Talk About The Exam

Tips

• Remember, you must study the material in order to pass; but you only want to have to take this test once. EVERYONE HERE CAN PASS!!!
• I Believe that many agents KNOW enough to pass but they don’t know HOW to take a test. These are tips and techniques to help you take the test and PASS. You know enough to PASS!
• You MUST take & pass the SIE first. Remember, as you study for the SIE, because of the overlap, you are also studying the same Information on all the Exams.

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Tips

• After passing the SIE, pay fingerprint fees totaling $45.25, and complete U-4 thru POL (License Manager/SLIC). Call HQ for help. Receive SIE bonus.
• Once completed, wait for an email from Primerica to schedule the Series 6. That should be received within 48 hours after received by PFSI.
• Each test should only take 2-3 weeks of study.
• FINRA has ONE 75 Question SIE practice exam online. Take that exam multiple times until you score 80%+. You’ll see 3-6 of those questions on the real SIE exam.
• Join the Primerica Facebook Study Group for SIE, S6, S63, S26, & S65 exams. Get pointers, tips & support to raise the number of Primerica agents getting licensed. https://www.facebook.com/groups/297349527401202

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Tips

• Find a “study buddy” or two, not more than three. (Use Chat) Read questions out loud & explain the answers to each other. Chances for an “Uh-Ha” moment.
• Start with the class workbook first. If you don’t understand a section, then go to the Kaplan books for more explanations. ONLY if needed, watch a single Kaplan video about that one topic.
• Listen to the audio vocabulary terms (in Dropbox & Telegram). There are many definitions on all exams.
• Read the FULL question. Avoid jumping down to read the answers too quickly. One missed word changes the question. Always read ALL the answers, even if the first answer looks right.

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Tips

• For “A” types - Read the questions “out loud”. Missing only ONE WORD could change your understanding of the question and you could pick the wrong answer. Of course, only lip-sync it at the test center.
• If you see three short answers and one very long answer, the long answer is frequently the right answer because they give you all the facts.
• Always select the option to see the explanation after EACH question. Read the explanation, even if you got it right. You might have guessed right & not know why the answer was right. You should get 80%+ if you expect to get 70% or 72% on the exam.

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Warning! You WILL Have to Study!

Tips

• Study all Units at once, but only FOCUS on one topic/Unit at a time, not multiple subject tests. Take each 10 question Unit quiz separately, 2-3 times daily. Four units x 10 Qs = A 40 Question practice.

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• One hour a day will not be enough effort to pass. You will have to build Studying Stamina. Before the exam, Min study = 30 hours in 1 week or 20 hours for 2 weeks.

Tips

Other Primerica Review Options:

* Watch the Dave Fagen SIE exam prep (42 min) found on POL at Training & Development > On Demand > Licensing > SIE Accelerated Exam Prep

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EDGE VIDEOS: Find on POL > Training & Development > Licensing > Securities Licensing > SIE, S6, S63, S26, S65

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* Kaplan now has live Webinars. The 2023 schedule offers evening webinars for both EST and PAC time zones. To access the Kaplan Exam Prep Webinars Schedule:

• Go to POL > Other Licensing > Kaplan Securities Exam Prep. Under Additional Study Resources click on “SIE, 6 and 63 Kaplan Live Exam Prep Webinar Schedule.”

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Tips

Another technique: Print out the 125 questions from the class Dropbox/Telegram in NOTES format. Focus on reading the question and only read the right answer.

e.g. Question: All of the following are exempt securities under the Uniform Securities Act EXCEPT:

a) Securities issued by Great Britain

b) Securities listed on the Canadian national stock exchange

c) Securities issued by a federal savings and loan association

d) Securities issued by an insurance company

Ignore (don’t read) the wrong answers. Just reinforce the right answer in your mind to help the subconscious find it.

EVERY exam has questions on Rules & Regulations. That’s good because they are the SAME Rules and Regulations.

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Tips

• If you like a technique, you must PRACTICE it before getting to the test center. Make it a habit to help you pass the exam.

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• Beware of changing answers. Only change an answer if you realize you didn’t read the question right the first time or found additional facts in another question. Your first guess is usually the best guess.

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Patricia Ramirez-McGurn Tip

• For “EXCEPT” questions and multiple-multiple choice questions, mark each part as a separate T or F question.

Q. A 5-year certificate of deposit at the bank has which of following risks?

T I. Purchasing power risk

? II. Interest rate risk

F III. Business risk

? IV. Reinvestment risk

• Now review the choices and match them to the T or F results from above.

a) II and III Eliminated as III is False

b) II and IV Not sure

c) III and IV Eliminated as III is False

d) I and IV Right answer as ONLY choice with I was True

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Tips

The Mical Pyeatt, SNSD Study Tip:

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• You need to take LOTS of practice tests in a short time frame; a minimum of 30 Hours in one week.
• Study for Five Hours a Day for Six Days … or …

Six Hours a Day for Five Days

PLUS

Study from the Quick Facts provided at the end of each section in your workbook.

Tips

The Santi McMannis Study Tip:

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The key to passing the test is to NOT stretch the studying period out too long.

• Have an intense study of the practice questions over a 7 to 10-day period covering more than 1,000 questions (e.g. 200 a day: 100 in the morning and 100 at night)
• Lots of test questions will give you a solid chance of passing with a 70% or greater.

Tips

What would I do to study?

I don’t like to read. Therefore, I would…

• …use The Quick Facts & the Workbook as my study guide.
• …take LOTS of session quizzes. Each quiz has 10 questions, getting instant answers, each unit separately.
• …take quizzes in the order of the worse score the last time to the best score last time. Take EVERY chapter quiz (40 Qs) once in the morning and (40 Qs) in the afternoon and (40 Qs) again at night.
• …take the FINRA 75-Question test online to get 80%+.
• …watch The Edge videos 7-10 days before the exam.
• …take the full Master Exam 4-6 days before the exam.

Get Yourself Moving!

• Remember, you will pass. Don’t be the one in your own way. If you convinced yourself you will fail, you will fail. Believe in yourself. Be your own cheerleader. If you study, you will pass. Many need your help.

Tips

NEW Limited English Proficiency (LEP) RULES!! No extra time for SIE!

• LEP candidates must complete an LEP Request Form (available on POL).
• Have the form signed by your RVP.
• Fax to Primerica at (508) 599-6157.
• You MUST wait until you notified by Primerica before you schedule an exam.
• Therefore, complete and submit the form as soon as your window is open.

Tips

• Get a good night sleep before any exam. No three-hour KTs the night before. No cramming until 3 am. A rested brain will help you more.
• Arrive 60-90 minutes before the test. Review the Quick Facts to fill in your short-term memory. Quick Facts are at the end of each section in your workbook.
• You need a photo ID.
• Leave your cell phones in the car!!!!

Tips

• Do a “memory dump” of key information you want to remember on the blank paper or slate given to you before starting the test. e.g. Bond See-Saw, the Two Options charts, Current Yield & Parity formulas.
• Technically, you must start the test before writing down anything on your slate. The test does not start until you start the test, so quickly fill out your page.
• There’s an example on the next slide shared by a former student. I would have used the Option charts and Bond See-Saw in the workbook but use what you feel comfortable with. Practice the memory dump before you take the test.

Tips

Track Your Questions

M/F Ann Stk Bnd Opt VUL Ord Muni InvCo

1 7 5 12 16 20 2 4 6

15-I 8 17 25 18 22-I 3 9 26

19 32 40 36 35 41 10 11 27

48 39-I 42 65 54-I 53 74 63-I 78

55-I 75

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1. Track your answers by subject.
2. All “Except” questions have 3 true facts (Information).
3. Circle questions you have guessed.
4. When going back for a review – FOCUS one subject at a time.
5. First read the I questions for free facts, then look at the questions you had guessed.

Multiple Attempt Rules

Retest? If for whatever reason you don’t pass the S6, S63 or S26, reapply and get your money in right away to schedule a new 120-day window.

If you fail any FINRA exam, you have a 30-day waiting period before you can take the exam again. If you fail the same exam three times, there is a 180-day waiting period before you can retake the exam … but you still must pay ASAP!

You must IMMEDIATELY pay the retake fee for the exam to avoid being purged.

If You Don’t Pass the First Time…

…Don’t Ever, Ever Quit on Yourself!!!

Thank You and Good Luck!� ���Patrick D. McGinley�